Gander Mountain Reports Record 2006 Sales and Operating Income

Sales increase 16 percent for the fourth quarter – Operating Income reaches $29.2 million.

For the fourth quarter, sales increased 16.4 percent to $326.9 million. Comparable store sales increased 0.4 percent on a 14-week comparable basis. Income from operations was $29.2 million, an increase of 12.1 percent. For the quarter, the company reported net income of $15.3 million, or $0.85 per diluted share, compared to net income of $22.2 million, or $1.45 per diluted share, in the fourth quarter of 2005. Income for the 2006 fourth quarter includes a pre-tax non-cash charge of $9.0 million or ($0.50) per diluted share related to a previously announced fourth quarter transaction as described below.

On December 12, 2006, Gander Mountain Company announced that David C. Pratt had entered into an agreement to purchase 5,701,255 newly issued shares of common stock at a price of $8.77 per share for a total purchase price of $50.0 million. The purchase price in the equity financing was paid with $30 million in cash and the surrender and cancellation of the company's $20 million note originally issued to a Pratt family trust. The non-cash charge of $9.0 million is due to technical accounting requirements related to the conversion of debt to equity securities. It is a one-time, non-cash charge and has no impact on total shareholders’ equity or cash provided by operations.

For the fiscal year ended February 3, 2007, Gander Mountain reported sales of $911.4 million, an increase of 13.3 percent over 2005. Comparable store sales declined 1.1 percent on a 53 week comparable basis. Income from operations improved to $15.0 million from a loss of $2.2 million for fiscal 2005. The company reported a net loss for the fiscal year of $13.2 million, or ($0.88) per diluted share, compared to a net loss of $13.3 million, or ($0.93) per diluted share for fiscal 2005. In addition to the non-cash charge discussed above, which was ($0.60) per share on a diluted basis, the results for fiscal 2006 include a $1.4 million pre-tax gain from the insurance settlement related to the flooding of the company’s Binghamton, N.Y. store in June 2006. The results for fiscal 2005 include a pre-tax payment to Gander Mountain of $2.5 million related to the termination of the company's previous co-branded credit card agreement.

"I am pleased to report a good year at Gander Mountain, with record sales and operating income," said Mark Baker, president and CEO. "The December equity transaction positions us for stronger performance with increased financial flexibility to support profitable growth. Our investment in 13 new stores in the coming year will continue to diversify our geographic base."

Fourth Quarter and Full Year 2006 Financial Highlights:

• The company opened eight stores on the year, bringing the total number of stores operated at year end to 105, including one relocation. The company plans to open 13 stores in fiscal 2007, including three relocations.
• For the year, operating income increased to a record $15.0 million. For the quarter, operating income increased to a record $29.2 million.
• Gross profit increased 16.8 percent to $224.7 million in fiscal 2006. As a percent of sales, gross profit increased 80 basis points to 24.7 percent. For the fourth quarter, gross profit increased 19.6 percent to $90.8 million and as a percentage of sales, increased 80 basis points to 27.8 percent.
• In fiscal 2006, store operating expense increased 8.4 percent to $167.5 million. As a percent of sales, store operating expenses decreased from 19.2 percent to 18.4 percent. For the quarter, store operating expenses increased 23.5 percent to $50.6 million. As a percent of sales, store operating expenses increased from 14.6 percent to 15.5 percent as planned efforts designed to drive sales resulted in increased advertising and labor costs.
• General and administrative expense (G&A) increased 12.2 percent in fiscal 2006 to $40.4 million, but declined as a percent of sales from 4.5 to 4.4 percent. For the year, G&A was affected by approximately $900,000 of stock option expense resulting from the adoption of FASB 123(R) at the beginning of fiscal 2006. For the fourth quarter, G&A increased 23.6 percent to $11.0 million. As a percent of sales, G&A increased to 3.4 from 3.2 percent.
• Borrowings on the credit facility at year end were $168.5 million, with availability of $51.3 million at the end of the period.

“Thanks to the hard work and enthusiasm of our associates, we have built the Gander Mountain brand and expanded our network of retail stores. In 2006, we were encouraged by successful new stores openings in markets like Florida, Texas, Tennessee, and Alabama, which support our strategy of regional diversification,” said Baker. “In the coming year, as we build on the consistent execution in merchandising we saw in the second half of 2006, our customers will see new products and services from Gander Mountain, including great new offerings like Tracker boats, improved apparel assortments for women and children, and new presentations in hunting and fishing.”

Conference Call Information
A conference call to discuss these results will be held today at 4:00 p.m. Central Time. The conference call will be Webcast from http://www.gandermountain.com/. To register for the event, please go to the Web site at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, an archived Webcast will be available shortly after the conclusion of the call, and remain available on http://www.GanderMountain.com for approximately 90 days. The transcript will be posted on the site as well.

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About Gander Mountain Company
Gander Mountain Company (Nasdaq: GMTN), headquartered in Saint Paul, Minnesota, is the nation's largest retail network of stores for hunting, fishing, camping, boating, marine and outdoor lifestyle products and services. Since 1960, the Gander Mountain brand has offered an expanding assortment of competitively priced outdoor equipment, technical apparel and footwear, as well as gunsmith, archery, ATV and marine services. The stores feature national, regional and local brands as well as the company's owned brands. Focused on a "We Live Outdoors®" culture, Gander Mountain dedicates itself to creating outdoor memories. There are currently 105 conveniently located Gander Mountain outdoor lifestyle stores in 22 states. For the nearest store location call 800-282-5993 or visit http://www.gandermountain.com/.

Cautionary Note Regarding Forward-Looking Statements
Any statements in this release that are not historical or current facts are forward-looking statements. All forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the "Risks and Factors Affecting Current and Future Results" section of the company's Annual Report on Form 10-K for fiscal 2005 and other required reports, as filed with the SEC, which are available at http://www.gandermountain.com/ and at the SEC's website at http://www.sec.gov/.

Contact: 
Gander Mountain
651-325-4300
investorrelations@gandermountain.com