West 49 Inc. reported its fourth-quarter loss widened to Canadian $8.5 million ($6.9 million) from C$1.2 million ($968,000) a year earlier, and warned that it was in violation of one of its bank covenants at the quarter's close. The action sports chain, based in Burlington, Ontario, negotiated a waiver, but said it may be in violation of another covenant at the end of its current quarter.
The latest quarter included a $0.7 million charge to close its three remaining Duke's stores. The quarter also included an asset-impairment charge of $12 million as result of the depressed capital markets and the current macroeconomic environment and resulting impact on the company's performance. Excluding special items in both periods, normalized earnings were down 50% to C$1.1 million ($884,000), or C2 cents a share.
Sales increased 3.8% to C$64.8 million ($52.1 million). Comps dipped 0.5% but were up 0.3% at its West 49 banner. Gross margin declined 270 basis points to 25.2% primarily due to lower product margins and higher supply chain costs. SG&A expense decreased 30 basis points to 20.1% of sales.
In the full year, West 49 incurred a net loss of C$2.6 million ($2.1 million), or C4 cents a share, in the year compared to net income of C$1.5 million ($1.2 million), or C2 cents, a year earlier. After special items, the net loss of C$12.3 million ($9.9 million) compared with a deficit of C$2.4 million ($1.9 million) a year ago. Sales rose 2.7% to C$210.4 million ($169.4 million) but slipped 0.4% on a comparable store basis.
