It's been a year since I last took a close look at outdoor-equipment and merchandise-closeout specialist Sportsman's Guide (NASDAQ:SGDE), a company that, once upon a time, was one of the star picks of the old Motley Fool Select investment newsletter (a precursor to Motley Fool Hidden Gems). But with the company's earnings out yesterday, now looks like as good a time as ever to check in and see how the catalog and Internet retailer is doing.
Back in August 2004, SG posted six months of lackluster sales growth. Through increased efficiency in closing those sales that it did make, however, the company had managed to grow its profits per diluted share by 25%. One year later, the situation has taken a turn for the better. Through a combination of organic sales growth, and a healthy boost to total sales gained from its acquisition of The Golf Warehouse in Q3 2004, SG grew its fiscal first-half sales by 52% year over year. What's more, the company is continuing to work not just harder, but smarter as well, leveraging its Internet site to grow low-cost sales, and as a result posting 92% profits growth over the first half of 2004.
The quality of the company's sales also appears to be high. Although both accounts receivable and inventories are up from one year ago, neither metric has grown as fast as sales. In fact, the company's inventory management and quick bill collection are beginning to make their marks on SG's cash flow statement. Granted, the company still remains cash flow negative, which puts in question the value of all the generally accepted accounting principles, or GAAP, profits that SG has been racking up lately. Still, net cash outflows at the company have declined from the $11.2 million that washed away in the first six months of last year, to a relative $5.2 million trickle this year -- a 54% decrease.
Finally, hearkening back to a string of columns that our Foolish staff of number-crunching pen wielders have, er, penned in recent months, SG management finally seems to have kicked the stock options habit. Over the past year, stock dilution has been relatively tame -- the share count has risen just 3.2%. That's a bit higher than the average in U.S. public markets, but much better than things could have turned out.
Read more about SG's stock option shenanigans in:
- The Game Is Off
- Their Greed Knows No Bounds
- Sportsman's Guide's Red Flag
- Sportsman's Guide to Growth
- Sportsman's Guide to Insider Selling
Fool contributor Rich Smith does not own shares of The Sportsman's Guide, but he is a customer.
