Gander Mountain downgraded on bleak consumer spending outlook
Investors are punishing shares of Gander Mountain Co. (Nasdaq: GMTN) after William Blair & Co. downgraded the specialty retailer of outdoor lifestyle products to “market perform” from “outperform” on what looks to be languishing economy and lackluster consumer discretionary outlook.
“Sales have remained vulnerable to weather trends and, overall, to the negative impact of a weakening economy on consumer discretionary spending, wrote William Blair analyst Bob Simonson in a research note today.
Despite the small cap’s legal battle triumph, which permitted the company to reenter the direct sales channel, coupled with successful efforts to enhance its management team and redirect its expansion program to southern markets with less volatile seasonal sales, the lackluster consumer spending outlook will take the forefront as the major driver behind the stock’s performance, according to Simonson.
“We suspect Gander’s same-store sales will struggle to achieve positive comparisons for at least several quarters, frustrating, at least temporarily, management’s turnaround plans and ability to convince investors that it is capable of achieving substantially higher margins and returns,” Simonson wrote.
Simsonson lowered his 2007 estimate to a loss of $0.05 per share from previously estimated earnings of $0.35 per share on account of a reduction in same-store sales to declines in a low- to mid-single-digit range from 3% to 5% gains in the second half. The consensus of eight analysts surveyed by Thomson Financial is for EPS of $0.02 per share.
The analyst also downwardly revised his third-quarter estimate to a loss of $0.02 per share from $0.21 per share, compared with $0.08 per share for the same quarter last year. Eight analysts surveyed by Thomson Financial are on average forecasting earnings of $0.06 per share
For fiscal 2008, Simonson said he believes consumer spending, especially for big ticket discretionary products and services, is likely to deteriorate even further making 2008 a tougher retailer environment than 2007. The analyst lowered his EPS estimate to $0.35 from $0.75. Eight analysts polled by Thomson Financial are projecting EPS of $0.26.
Shares of Gander Mountain (GMTN) lost $0.44, or 8.84%, to $4.54 at 1:21 p.m. Shares of Gander Mountain have been trading in the range of $4.30 to $16 for the past 52 weeks.
