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Outdoor financials: Gander reports Q2 loss and declining same-store sales, plus VF Corp., Dick's, Johnson Outdoors, Sport Chalet, Sportsman's Guide, Outdoor Channel, Wellman

Gander reports Q2 loss and declining same-store sales, Analyst upgrade boosts VF stock, Dick's hits rocky patch as it slashes full-year guidance, Johnson Outdoors' Q3 net income takes a hit, Same-store sales increase boosts Sport Chalet's Q1 '06, Q2 sales for Sportsman's Guide up 61.2 percent, Outdoor Channel reports Q2 earnings, Wellman board declares dividend

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Gander reports Q2 loss and declining same-store sales
Gander Mountain (Nasdaq: GMTN) shares dropped more than 10 percent after it reported a second-quarter loss more than double a year ago and said that same-store sales will probably be flat for the year. Previously, the company’s guidance had anticipated a comparable store sales increase of at least 2 percent.

Gander said it lost $10.4 million, or $0.73 a share, for the 2005 second quarter, even worse than $3.9 million, or $0.27, it lost in 2004. Sales came in at $173.6 million, up 35.5 percent from $123.1 million, with the help of new-store openings, it said. But same-store sales fell 4.2 percent after an increase of 1.8 percent in the second quarter of 2004. The average estimates of analysts were for the company to lose $0.16 a share on sales of $173.9 million.

“While we were disappointed in our comparable store sales performance and loss, we had anticipated incurring a loss in the second quarter because of the seasonality of our business,” said Mark Baker, president and CEO, in a statement. “With nearly two-thirds of our business for the year still ahead of us as we enter the important fall hunting and holiday seasons, we believe that our broad assortment of goods and services and the knowledge and experience of our store associates position us well to meet the needs of outdoor enthusiasts.”

The company also said that it still sees total sales for the year to exceed $850 million, and maintains its outlook for income before taxes of more than $16 million.

In the 2005 second quarter, Gander Mountain opened four new stores, bringing the total store count to 91 at the end of the quarter. The company expects to open 19 stores during the year, including three store relocations and consolidations.

The company’s shares fell $1.11, or 10 percent, to $10.15 on the Nasdaq, where it was among the top percentage decliners in trading on Aug. 17.

In other Gander Mountain news, the retailer said it raised $20 million from a private placement of floating rate convertible subordinated notes with private investor David Pratt to help drive growth. Pratt, who owns 1.4 million shares of the company’s common stock, now has a seat on the board of directors, bringing the retailer’s total to eight.

The company said the convertible subordinated notes have an initial conversion price of $16 per share and bear interest at 7 percent for the first two years. After the first two years, the rate would float with the federal funds rate to a maximum rate of 8.5 percent. The notes would mature on Aug. 16, 2010, and may be prepaid without penalty at any time after Aug. 16, 2007, the company said.

Analyst upgrade boosts VF stock
A UBS analyst gave VF Corp. (NYSE: VFC) the thumbs-up — raising his rating from “neutral” to “buy” — based on an upbeat outlook for the company’s jeanswear business, its biggest division, and continuing strength in its outdoor segment. VF’s shares rose nearly 5 percent on Aug. 17 after the news.

Following a meeting with jeanswear management, analyst Jeffrey Edelman said he came away “impressed” by VF’s prospects and believes the company can “comfortably sustain low single-digit growth in the segment.” While jeanswear accounts for most of VF’s revenue, Edelman added that weakness in that division had been overshadowing strong growth in newer brands such as The North Face, and that the fast-expanding outdoors segment remains an important part of VF’s plans.

“Though jeanswear prompted our upgrade, the outdoors segment is still the fastest-growing part of the business and a critical component of the company’s overall strategy to migrate towards a portfolio of lifestyle brands,” Edelman wrote in a research note. “A number of the brands in this division — estimated to be 21 percent of 2005 sales — are expected to trend in the teens.”

Edelman also lifted his target price from $63 to $71. He also boosted his earnings per share estimates by $0.03 to $4.68 for 2005, and by $0.04 to $5.02 for 2006.

VF shares jumped $2.70, or 4.7 percent, to $59.91 in afternoon trading on the New York Stock Exchange, nearing a July 52-week high of $61.61. The stock is up about 9 percent so far this year.

Dick’s hits rocky patch as it slashes full-year guidance

Although its second-quarter profit was up 24 percent, Dick’s Sporting Goods (NYSE: DKS) cut its outlook for the year, subsequently causing its stock to fall. Higher revenue and added sales from its 2004 acquisition of Galyan’s stores didn’t save Dick’s from losing as much as 16 percent on the New York Stock Exchange, closing at $32.90 on Aug. 16. The stock has traded in a 52-week range of $26.75 to $40.42.

Dick’s net income grew to $22.1 million, or $0.41 per share, from $17.9 million, or $0.34 per share, a year ago. Excluding merger and store closing costs, earnings were $24.2 million, or $0.45 per share, in line with the company’s estimates. Revenue rose 50 percent to $622 million from $416.1 million last year, boosted by added revenue from Galyan’s stores and a same-store sales increase of 0.5 percent. Analysts expected earnings per share of $0.45 on revenue of $654.3 million.

Reverting to an older guidance for the year, Dick’s said it’s forecasting third-quarter earnings per share of $0.06 to $0.08. It lowered its full-year outlook to $1.70 to 1.75 per share — its guidance from June coinciding with the announcement of the Galyan’s acquisition — from its most recent guidance of $1.82 to 1.87. Excluding merger expenses and other one-time charges, the company expects full-year earnings per share of $1.27 to $1.32. Analysts expected earnings per share of $0.17 for the third quarter and $1.85 for the year.

Dick’s said the reason it cut sales expectations is that stores acquired in the takeover of Galyan’s have lagged.

“We still think it was the right move to buy them as it allowed us to get into a number of markets that would have been extremely difficult and expensive to get into, or we wouldn’t have gotten into them at all,” Ed Stack, Dick’s chairman and CEO, said in a conference call with analysts.

During the second quarter, Dick’s opened three stores and relocated one store. As of July 30, the company operated a total of 239 stores.

Johnson Outdoors’ Q3 net income takes a hit
Third-quarter net sales for Johnson Outdoors (Nasdaq: JOUT) were up 1.1 percent to $122.4 million, boosted primarily by its Humminbird brand. Net income for the quarter, however, didn’t fare as well and was down to $6.8 million, or $0.77 per diluted share, compared to $7.5 million, or $0.85 per diluted share, in 2004. The company said that favorable one-time items in the prior year contributed largely to the unfavorable comparison in net income for the quarter. Total company operating profit declined $1.9 million in the third quarter versus the same period last year.

Johnson’s watercraft division, which includes Old Town, Necky and Ocean Kayak, posted a 7.8 percent gain in revenue resulting in its highest sales quarter in two years. The company said the increase was a result of growth in revenues and improved manufacturing efficiency. Despite its $15.9 million urgent need order for military tents in May, third-quarter revenues in outdoor equipment did not reflect delivery against this order. Johnson said it continues to expect military sales to decline up to 25 percent in 2005 versus fiscal 2004, as sales in this segment declined 32.5 percent versus the prior year quarter, and accounted for the majority of the revenue decline in the outdoor equipment segment.

Same-store sales increase boosts Sport Chalet’s Q1 ’06
Sport Chalet (Nasdaq: SPCH) saw its first-quarter 2006 sales increase 17.2 percent from last year’s $61.5 million to $72.1 million this year. The retailer said the increase is the result of opening five new stores as well as a same-store sales increase of 4.9 percent — boosted by strong performance in the footwear category.

Net income increased $252,000, or 183.9 percent from $137,000, or $0.02 per diluted share for the quarter ended June 30, 2004, to $389,000, or $0.06 per diluted share for the same quarter this year. Gross margin increased from 28.9 percent to 29.5 percent, primarily due to the increase in same store sales, which reduced the need for markdowns, it said.

Q2 sales for Sportsman’s Guide up 61.2 percent

The Sportsman’s Guide (Nasdaq: SGDE) second-quarter net sales jumped a whooping 61.2 percent boosted by higher net sales and the inclusion of net sales from its Golf Warehouse acquisition. Net sales were $63.8 million compared to $39.6 million in 2004. Net earnings for the quarter were $2.5 million, or $0.31 per fully diluted share, a 102 percent increase over the $1.2 million, or $0.16 per fully diluted share, reported for the same period in 2004. For the first two quarters of 2005 net earnings were $4.8 million, or $0.59 per fully diluted share, compared to $2.5 million, or $0.32 per fully diluted share for the first six months of 2004. The earnings per share numbers for 2004 have been restated to reflect the company’s recently announced change in accounting policy for Buyer’s Club revenues and adjusted to reflect the 3-for-2 stock split, distributed April 15, 2005.

Outdoor Channel reports Q2 earnings
Outdoor Channel Holdings (Nasdaq: OUTD) total revenues for the second quarter increased 4.8 percent to $10.0 million from $9.6 million in the prior-year period. Advertising revenue, principally generated from the sale of advertising time on The Outdoor Channel, amounted to $5.3 million for the current second quarter, compared with $5.4 million a year ago. The company said the decline is attributed to its replacement of certain infomercial inventory with a program to promote its newly launched high definition network, Outdoor Channel 2 HD. Net income was $512,000, or $0.02 per diluted share, based on 22.5 million weighted average shares outstanding, compared with $844,000, or $0.04 per diluted share, based on 15.6 million weighted average shares last year.

Subscriber fees increased 21.0 percent to $3.9 million from $3.2 million last year. Membership income totaled $863,000, compared with $986,000 in the same period a year earlier. Total expenses for the second quarter of 2005 rose 17.5 percent to $9.2 million from $7.8 million in 2004. As of August 2005, Nielsen Media Research estimated approximately 25.2 million homes subscribe to or receive The Outdoor Channel.

Wellman board declares dividend
Wellman’s (NYSE: WLM) board of directors declared a quarterly dividend of $0.05 per share on the outstanding shares of the company’s common stock. This dividend is payable on Sept. 15, 2005, to stockholders of record as of the close of business on Sept. 1, 2005.

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