The following excerpts give us an idea why Zacks senior retail sector analyst Robert Plaza, CFA decided to downgrade Gander Mountain Company (GMTN), a specialty retailer from Hold to Sell:

'We are downgrading Gander Mountain from Hold to Sell. The company's third quarter sales were much weaker than we expected, and its earnings per share were well below our forecast. We are once again lowering our estimates for fiscal years 2007 and 2008.

'All told, we are concerned with the difficult consumer spending environment as well as Gander Mountain's soft sales trends and weak balance sheet. What's more, the company is going to scale back its store expansion plans for 2008, and that will also pressure its sales growth rate. We are lowering our target price from $5.00 to $3.00, which is 10x our fiscal 2009 EPS estimate.

'We are currently modeling that Gander Mountain will have net losses during fiscal year 2007 and fiscal year 2008. However, we are forecasting a profit of $0.30 per share in fiscal year 2009. As such, GMTN shares are trading at about 18.3x our fiscal year 2009 EPS estimate. We note that Gander Mountain is trading 0.6x book value and 0.1x sales. We think this depressed valuation level points to weaker results in future quarters.

'As the company scale back its store expansion plans to focus on store operations, its growth will likely slow a great deal. In this difficult retail environment, we would avoid GMTN shares until they traded at a level that priced in the risks associated with owning GMTN shares.'