Shares of Gander Mountain Co. lost 20 percent of their value Tuesday, as costs related to the company's exit of its power-sports business led to a much wider second-quarter loss.
Yet, the St. Paul-based outdoor goods retailer put a positive spin on an otherwise bleak quarter, noting that store traffic increased and sales in its "core" categories -- such as guns, ammunition, fishing gear and camping accessories -- grew from a year ago, despite consumers cutting back on discretionary spending.
What's more, Gander has yet to see the full benefits of a significant increase in its advertising budget -- an area that was not a focus for the retailer earlier in the decade as it was opening dozens of stores a year. Gander, with 116 stores nationwide, about doubled its spending on TV, print and radio ads in the second quarter. In the Twin Cities, it recently rolled out more than 30 billboards with slogans such as, "Hunt for Game, Not Gear."
"We're making progress," said Bob Vold, chief financial officer, in an interview Tuesday. "It's not always smooth. There may be a few bumps in the road. But we need to continue going along this same path."
Stock in Gander has fluctuated wildly since its previous CEO, Mark Baker, resigned unexpectedly a year ago and board chairman David Pratt took over as interim CEO. Pratt hired Mike Owens, a 27-year veteran of Anheuser-Busch, as chief operating officer, and declared in June that "we are building a new Gander Mountain." Their return-to-basics strategy consisted of increased advertising, simpler in-store signs, and a withdrawal from its big-ticket, power-sports business that included motor boats and all-terrain vehicles.
Investors, betting that those changes would result in a quick turnaround for the company, drove the stock price up from $1 in November to as high as $6.42 in June. But Tuesday's weak results suggest that a turnaround may be farther off than some had hoped. Shares fell $1.13 to close at $4.49.
Gander said it lost $7.3 million, or 30 cents a share, compared with $4.9 million, or 20 cents a share, a year earlier. About $3.2 million of that loss came from costs associated with the company's exit of the power-sports business and increased advertising expenditures, the company said. Overall sales fell 2 percent to $248 million from $253 million a year ago.
Sales at stores open at least a year fell 2.4 percent. But excluding the company's power-sports business, which saw a 4.2 percent decline, same-store sales grew 1.8 percent.
One weak spot in the second quarter was the online and catalog business. Its sales fell 5.4 percent to $37.6 million from $39.7 million a year earlier.
But Gander never has made a profit in the first or second quarters. Indeed, the retailer generates two-thirds of its sales in the final half of the year, when hunting season starts and holiday shoppers hit the stores.
Vold said Gander left the power-sports business at just the right time. "These are big-ticket, glamorous items that just don't make much of a margin," he said. "It was absolutely the right decision."
Chris Serres • 612-673-4308
