Foolish Forecast: Not Much to See on Gander Mountain

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Sporting-goods chain Gander Mountain (Nasdaq: GMTN) will report second-quarter 2008 financial results tomorrow. Let's take a gander at what investors can expect to find on the mountain.

What analysts say:

• Buy, sell, or waffle? Of the five analysts surveying the landscape, none believes that the retailer will be reaching any summits this quarter. Four rate it a hold and one says sell, er, "underperform."
• Revenue. Sales are expected to rise 15% to $202.6 million, based on the $70 million December acquisition of Overton's, an Internet and catalog marketer targeting recreational boaters.
• Earnings. That won't be enough to move the company into the black, though. Gander Mountain is still expected to post a $0.60-per-share loss, though that will be narrower than the $0.68 hole it found itself in last year.

What management says:
Gander Mountain needed something to turn its performance around, and with the Overton acquisition, it's heading back to its roots as a catalog merchandiser -- much as rival Cabela's (NYSE: CAB) and privately held Bass Pro Shops also are.

The Mountain sold its last catalog business back in 1996, but in April, it sent out 2 million catalogs featuring merchandise from Overton's, Gander Mountain, and other fishing- and camping-equipment vendors. Yet with so many competitors to choose from, it's going to be hard to make a case that recreational boating -- particularly in times of high fuel prices -- will be what rights Gander's ship.

What management does:
As Foolish colleague David Meier pointed out last year, Gander Mountain isn't doing nearly as well as Cabela's is in getting productivity out of its stores. That disadvantage might explain why it's moving away into mail order. In fact, Gander Mountain's sales per square foot of store space have fallen an additional 6% to $165 as of this past February. Cabela's was down, too, by some 5% at year's end, but that still doesn't make Gander Mountain any more compelling.

	2/07	5/07	8/07	11/07	2/08
Gross	24.7%	24.9%	24.8%	25.2%	24.8%
Operating	1.5%	1.5%	1.2%	0.7%	(0.5%)
Net	(1.5%)	(1.4%)	(1.6%)	(2.3%)	(3.3%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Although gross margin has remained fairly steady for Gander Mountain, operating and net margins continue to slide. That's partly a product of the economy right now: With fuel prices soaring, most people find driving to, and spending their extra dollars at, a sporting-goods store to be a tough proposition. A catalog might help ameliorate that reluctance somewhat, but the industry niche Overton's has for itself doesn't hold out much hope for promise right now.

You might find some good deals at Gander Mountain, but to this Fool, its stock isn't one of them.

Related Foolishness:

• Gander Mountain Doesn't Stand Out
• The Underperform Case for Gander Mountain
• Dirty Deeds Done Dirt Cheap