Sportsman's Guide Finds Good Hunting Online

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The upward trajectory that has marked the stock price of The Sportsman's Guide Inc., South St. Paul, MN, shows no signs of changing course.

The marketer of outdoor gear and general merchandise achieved a closing price of $10 per share April 28, a 25.7 percent rise from $7.95 achieved March 31. It reached a new 52-week high of $10.25 on April 7 before closing at $9.59 that day. A little more than two years ago it could've been bought for less than $1.

The company last week reported that sales in the first quarter totaled $43.7 million, up 5 percent from the same period last year. Net earnings were $957,000, a 22 percent increase from $784,000 posted last year. For the fiscal year ended Dec. 31, net sales rose 6 percent to $180.3 million as net income increased 46 percent to $4 million.

Main, specialty and Buyer's Club editions of The Sportsman's Guide catalog are published.

"They have had a tremendous run, and it's not just on the earnings growth, but it's also on the top-line sales in a really tough economy," said Rommel Dionisio, senior equity analyst with Roth Capital Partners, Newport Beach, CA.

"The top-line growth is more impressive with other companies cutting back," he said. "They are also benefiting from moving more of their sales to the Internet through improved merchandising and improved advertising. And they are achieving a significant cost savings by processing orders over the Internet versus over the phone."

Internet sales rose from 27 percent of all sales in the 2002 first quarter to 34 percent in first-quarter 2003.

"In addition, catalog sales increased slightly over the same period one year ago despite a planned reduction in catalog circulation," Gregory R. Binkley, president/CEO, said in a statement.

Its Web site includes shopping departments such as hunting; fishing and marine; camping and hiking; home and outdoor living; automotive; gifts and gadgets; shooting, knives and ammo; and government HQ.

"They are a value-priced retailer in an environment where the consumer places a great deal of emphasis on value," Dionisio said. "They've had a number of quarters where they've exceeded expectations. What's most impressive is how they've done so well in this environment when so many of their competitors are missing their numbers."

Despite the good news, Dionisio downgraded the company's stock from strong buy to buy on April 30. The strong buy rating had been in effect since July 2002 when the stock was around $7, he said.

"The stock price had risen from the $6 to $7 range to about $10 over the past couple of months, and so the valuation was no longer as compelling at current levels," he said. "The fundamentals are very strong, but the stock has come to reflect that already. We continue to believe that the company's fundamentals are very much intact, and the outlook continues to be very good for continued sales and earnings growth."


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