The camping, hunting, and all-around fun stuff retailer Sportsman's Guide
Sales were $56.6 million, a 37% increase year over year. Net earnings were $1.1 million, or $0.20 per diluted share, a 55% increase over last year. For the core business, sales were up 8% year over year while Internet sales rose to become 41% of total sales for the quarter, a five-point increase from 2003. Management forecasts revenue of $225 million to $228 million for the year, with earnings expected to be between $1.38 and $1.40 per diluted share.
So far, this purchase seems to have been a good fit. Just more than 20% of the past quarter's sales came from the new division. Sales, general, and administrative expenses went down two points to 25.7%, and overall Internet sales were up, keeping the online part of the business above 40%. The only downside is that the new merchandise has a lower gross margin than Sportsman's Guide's usual fare.
Since Sportsman's Guide has been quite successful in using the Buyer's Club to drive repeat business to its core business, I would love to see it extend this program to The Golf Warehouse. A quick call to the latter's call center revealed that this has not happened yet, but the person answering the phone did indicate that several changes were in the works, especially around January. Maybe the Buyer's Club will be one of them.
On a slightly different trajectory (a slice?), I had hoped to hear Marc Bettinger of Whitaker Securities ask some questions. In August's conference call covering the second quarter's results, he really pushed management, asking several questions about revenue growth rate projections with and without The Golf Warehouse. He sounded really skeptical that management could meet its forecasts. Unfortunately, he has stopped following this company and probably did not listen to the earnings call this time.
Now, I am not a fan of companies who make forecasts and then try their darnedest to meet them. I would rather management keep its eye on the ball and run the business without worrying what Wall Street thinks. So far, Sportsman's Guide does not seem to be falling into the "please the analysts" trap. It has not always met analysts' earnings projections over the last five quarters, and in last August's call, it refused to be drawn into a more detailed discussion of its projections, despite repeated attempts by Mr. Bettinger.
But to follow up on Mr. Bettinger's concern, Sportsman's Guide seems to be doing what it said it would back in August. If The Golf Warehouse contributes a similar $12 million for this final quarter, then the core business has to grow 7% over last year to match management's projections. This is certainly doable, given the history of this company.
As for continuing the integration of The Golf Warehouse, we will just have to wait and see. If things continue as they have been, though, then this purchase could very well turn out to be a hole in one.
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Fool contributor Jim Mueller hasn't played golf since moving to the Midwest, and he hasn't camped since his Boy Scouts days, but that doesn't stop him from owning shares in Sportsman's Guide.
