Outdoor financials: Sospenders sells to K2, plus Johnson Outdoors, Gander Mountain, Dick's

WaterMark sells Sospenders to K2 Stearns
WaterMark has sold all the assets of its Sospenders inflatable personal flotation device (PFD) business to K2 Inc. Sospenders will now operate under the Stearns division. K2 Stearns will honor the published warranty for the SOS products the company acquired. SNEWS® View: This really comes as no surprise. Sospenders was operating like a lost child at Watermark and was not performing for either Sospenders or for Watermark as it should. With Stearns, Sospenders becomes part of an established division that knows how to manufacture, sell and market PFDs and already has a strong distribution network in place for the sale of PFDs. By divesting itself of Sospenders, Watermark is now free to focus entirely on boats, paddles, paddling accessories and sport racks — its core businesses.

Johnson Outdoors Inc. 4Q sales up, profits down
During a Nov. 18 conference call to report fourth-quarter and year-end results, Johnson Outdoors’ (NasdaqNM: JOUT) CEO Helen Johnson-Leipold reported that while fourth-quarter sales were up 9 percent to $75.6 million, operating losses were 28 percent higher than last year to $4.6 million. For the year, net sales for the company increased 12.5 percent to $355.2 million, thanks in large part to military tent sales which boosted the performance of the Outdoor Equipment Business unit by 40.8 percent. Take away the military tent sales, which Johnson said is likely for 2005, and the outdoor business unit remained flat.

Watercraft sales dipped 4.5 percent for the year. Johnson-Leipold blamed the fourth-quarter losses on several factors, including seasonable products impacted negatively by cool and rainy weather in the Northeast and the Midwest, as well as hurricanes in the Southeast and watercraft restructuring to remove production costs and complexity, increase flexibility, and allow the company to invest in the development of new products. During the conference call, the company reported that it expected the Watercraft division to be stronger in 2005, citing the fact that 30 percent of boat sales were from newly introduced product designs and products in the last quarter — an indication it said that dealer response to its innovation efforts has been well-received.

Margins for the company were reported at 37.3 percent for the fourth quarter, off the nine-month pace, but expected in the fourth quarter as that is a historically slower sales period. Operating profit for the company for the year was $19 million, up from $11 million in 2003.

Gander trades high despite earnings drop
Despite an earnings drop, Gander Mountain’s (Nasdaq: GMTN) stock was up as the retailer’s profit for the third quarter came in ahead of analyst predictions.

For the quarter ended Oct. 30, 2004, Gander’s earnings decreased 52 percent to $2.1 million, or 14 cents per share, from $4.4 million, or 26 cents per share, a year ago. Analysts had predicted earnings of just 6 cents per share. Gander management said earnings were down because of the cost of opening 14 stores that quarter. Pre-opening expenses were $4.6 million, compared with $1.4 million in the third quarter of 2003.

Total sales for the third quarter increased 24.4 percent, or $34.9 million, to $178.1 million. Comparable store sales, though, decreased 7.5 percent after a 12.5 percent increase in the third quarter of fiscal 2003.

“While we are disappointed in the slower-than-expected growth in sales for the recent quarter, we proactively managed our business to minimize the impact on profits,” said CEO and President Mark Baker.

With the quarter’s new stores, Gander has 82 stores compared to 64 at the end of the third quarter of fiscal 2003. The company entered five new states in 2004 and now operates stores in 14 states. It anticipates opening 18 to 22 stores in fiscal 2005, including two or three relocations. To further 2005 revenue growth, Gander said it plans to expand its assortment in the marine and boating categories.

For fiscal 2004, the retailer said it expects to earn $8 million to $13 million before taxes on sales of $640 million to $670 million, a revenue growth of more than 30 percent. Gander Mountain predicted that same-store sales will fall 1 percent to 3 percent.

According to reports, Gander shares were changing hands at three times the average daily volume by late morning on Nov. 17. The stock was up 68 cents, or 5.2 percent, trading as high as $15.48. It closed the day at $13.57. Shares have fallen steeply in November after trading most of the year around $20 following the company’s IPO in April.

Dick’s reports 3Q net loss
With the merger costs related to the Galyan’s acquisition in July, Dick’s Sporting Goods (NYSE: DKS) reported a net loss for the third quarter of $1.8 million, or $(0.04) per diluted share, as compared to 2003’s net income of $4.7 million, and earnings per share of $0.09 per diluted share. The retailer reported net income for the third quarter ended Oct. 30, 2004, excluding merger integration and store closing costs, of $2.9 million, or $0.05 per diluted share as compared to earnings guidance provided in August of $0.03 to $0.04 per diluted share before merger costs.

Total sales for the quarter increased 60 percent over last year to $541.0 million due to a comparable store sales increase of 1.5 percent, the opening of new stores and the inclusion of Galyan’s operations in this year’s quarterly results. Galyan’s stores will not be included in the comparable store base until 13 months after the completion of the re-branding and re-merchandising effort expected to occur by the end of the first half of 2005.

Dick’s said it expects total merger integration and store closing costs of approximately $70 million pre-tax to be incurred of which $7.7 million was incurred in the third quarter. It estimates future merger costs of $35 million in the fourth quarter of 2004, $17 million in 2005 with the balance in 2006 and beyond.

During the third quarter, Dick’s opened 14 new stores and closed two stores, one replaced by a new store which opened last year and the second due to performance. Its year-to-date new store openings are 22. It intends to close nine stores — six Dick’s stores (one of which closes in 2005) and three Galyan’s stores.

For FY2004, Dick’s anticipates reporting EPS for the full year of $1.37 to 1.39 per diluted share excluding merger integration and store closing costs. The most recent guidance had been $1.35 to 1.37. With merger integration and store closing costs, it anticipates reporting $0.89 to 0.91 per diluted share. This compares to full year 2003 EPS of $1.05. Comparable store sales are expected to be approximately 2 percent to 3 percent.

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