Gander Mountain enters new territory with Florida store

ST. AUGUSTINE, FLA. —The name Gander Mountain may seem out of place in this pancake flat part of the country where seagulls and pelicans are the most common waterfowl, but customers visiting the retailer’s first store in northeastern Florida didn’t seem to notice.

Their pick-up trucks and sport utility vehicles filled the store’s parking lot the afternoon of May 13 for the 65,000-square-foot store’s soft opening. And although it was Mother’s Day, a circular in the local newpaper and a blaze orange billboard set amid the lush vegetation along northbound I-95 let the region’s avid outdoorsmen know they had a new place to buy guns, fishing gear, marine accessories, archery equipment, all-terrain vehicles and related apparel and footwear.

“It’s always a good sign when you see people in the store on their cell phones calling their friends,” said Gander Mountain president and ceo Mark Baker. He was on hand the following week for the store’s grand opening and during the company’s first-quarter earnings call last month he described the opening as the best ever in its traditionally weak first quarter and the third best opening overall. That’s saying something because even though Gander Mountain ended last year with only 105 stores, half of those units have opened since early 2004.

Beyond healthy customer traffic in a new market, which Baker attributed to the region’s lack of strong local competition for the categories of goods Gander Mountain offers, the store was interesting on several other levels. The new unit is reflective of a broader strategy to achieve greater geographical diversity of a store base historically concentrated in the Midwest. By opening more stores in warmer southern states Gander Mountain should be able to insulate itself from seasonal factors that influence sales of outdoor retailers. The St. Paul, Minn.-based company’s roots are in the Midwest, but a few years ago it began extending south and west with its first stores in Texas and Colorado.

In addition, the St. Augustine store is a larger format size for the company, which enabled it to include the sale of opening-price-point boats through a deal with the Tracker Marine division of Bass Pro Shops. Roughly half of the company’s stores are now in the larger format and boats are sold at 34 locations.

A more geographically diverse store base will enable Gander Mountain to minimize the impact of seasonal issues on its business results, but it also creates a new set of operational challenges. Sporting goods retailers in general and outdoor retailers in particular have long struggled with maintaining seasonally, geographically and climatically correct product assortments because hunting, fishing and other outdoor activities are heavily influenced by local conditions.

“This is our closest store to the beach,” Baker said, “so we added 10,000 extra saltwater fishing SKUs and we will be adding another 4,000.”

The company last fall also implemented a new buying structure that saw the addition of three regional buyers with two more to be added this year.

The addition of regional buyers and the increased presence of stores in Southern states are needed to help the company improve its sales results. Despite rapid growth the past few years and a young store base, same-store sales growth has been relatively weak and the overall productivity of selling space is low. Same-store sales during the first quarter increased 1% and sales per square foot totaled $175. Overall, sales grew 13% to $175 million and Baker highlighted the fact that the company’s losses were less than the prior year, although only marginally so. The first-quarter operating loss declined to $18.9 million from $19 million while the net loss totaled $22.8 million compared to $23 million.

“Though the gains were small, this is the first time as a public company that Gander Mountain has improved operating performance in the first quarter versus the prior year,” Baker said. “We were pleased by the regional strength in our growing number of southern stores and by initial performance in our new offering of Tracker Marine Group boats at selected stores. Both of these trends are evidence of the operating momentum we are gaining from our merchandising initiatives and geographic diversification strategy.”

A total of 13 stores are slated to open this year, including three relocations, and eventually Baker believes the company has the potential to operate 300 stores with sales of $3 billion.