The Sportsman's Guide (NASDAQ:SGDE) is a catalog and Internet retailer of clothing, outdoor gear, and general merchandise aimed at the hunter, camper, outdoor enthusiast, and, more recently, the golfer. I've liked this company ever since I first read about it here on the Fool in 2002. Listening to last Thursday's conference call didn't change my mind, but I do have a couple of concerns.

After suffering seven straight quarters of losses, the company worked itself out of a jam beginning in September 2001. It had a great fourth quarter that year and hasn't lost money since.

In fact, it has earned money in bucketfuls. Since 2001, Sportsman's Guide has grown sales at a compounded annual growth rate of 11% and increased net income at a compounded annual growth rate of 40%. It has also doubled its net profit as a percentage of sales, from 1.6% back in 2001 to 3.3% in 2004.

The company owes this success to several successful strategies. First, it reduced the number of catalogs mailed to noncustomers and focused on sending out issues that generated sales. Second, it continued building its Internet retail site, which has grown from accounting for less than 1% of sales in 1998 to making up 42% of sales in 2004. Third, the company has started a buyers' club that gives members a 5% to 10% discount on their purchases and the option to spread out payments interest-free for up to four months. Membership now stands at just more than 380,000 loyal customers.

The company also purchased The Golf Warehouse in late June, and so far, it's been a great fit. The company's annual sales have jumped by more than 19% year over year. Annual administrative costs have gone down 1.3 points from 2003 for a 4.6% drop. And of the $35 million purchase price, Sportsman's Guide owes only $5 million, with more than enough cash on hand to pay the debt off.

But now, the concerns. For starters, management has not extended the benefits of the buyers' club program to Golf Warehouse customers, and there doesn't appear to be a move to do so. There's also the matter of a 3-to-2 stock split that the company board announced will take place next month for shareholders of record on March 25. It's nice public relations, but it has absolutely nothing to do with value. The only thing the split might do is to increase liquidity: There will be just more than 7 million shares outstanding instead of the current 4.7 million.

A more serious concern, though, is the company's number of stock options. Management granted 250,000 options in 2001 and in 2002, or about 5.2% of the outstanding shares each year. In 2003, that number dropped to 184,000, or about 3.8%. That was an improvement, since excessive grants are a surefire way to destroy shareholder value. How the company handled options in 2004 won't be known until the annual report is released, and given that CEO Greg Binkley said last Thursday that he wanted to continue to improve shareholder value in 2005, the numbers bear watching.

In the meantime, I'll continue to go camping or golfing and will also check out Sportsman's Guide to see how my hopes -- and concerns -- for this company are playing out.

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Fool contributor and sometime golfer Jim Mueller has owned shares of Sportsman's Guide since 2002. He has written previously about this company but decided to skip the puns this time. The Motley Fool has a disclosure policy. For related discussion, check out the Sportsman's Guide and Foolish Golf Tips discussion boards.