Like a deer in hunting season, The Sportsman's Guide
Because this company usually preannounces results, there are typically few surprises in its earnings releases' actual numbers. For the fourth quarter, sales were up 4.5% as reported, in line with guidance, and up about 10% if you correct for an extra week in the year-ago period. Profit growth was a bit better: Operating income climbed more than 16%, and net income rose more than 21%.
Management compensation is a hot-button issue at Sportsman's Guide, and this quarter won't change that. The company would have reported an extra $0.08 per share in earnings this quarter (and $0.20 for the full year) were it not for the impact of in-the-money exercisable options. Now, I'm all for giving management its due -- and its money -- when it performs well, but the executives already take home a nice wad of cash with their salaries. I'm not too thrilled to see them getting a pile of options as well.
Still, there are things to like about this company. Since the company operates as a catalog and Internet retailer, capital expenditures are minimal. Sportsman's Guide produced slightly more than $12 million in free cash flow this year, nearly doubling the year-ago level. The company also generates a roughly 27% return on its invested capital base, if my back-of-the-envelope calculation is right.
Numbers like that make me feel a little better about Sportsman's Guide's competitive position, especially in such a crowded market. Let's face it: Everyone from Cabela's
The stock looks somewhat like a bargain, but prospective investors will have to accept management's seemingly outsized hand in the cookie jar. I guess I'm also a little torn on this business's ultimate prospects. Though I recognize the healthy market for outdoor gear, clothing, and sporting goods, the low-priced end of this particular market can be a tough place to play.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).