West Marine Narrows Q1 Loss Despite Comps Decline

West Marine, Inc. reported that first quarter net revenues were $101.0 million, down 10.9% from last year. Comparable store sales were down 6.8%. Pre-tax operating results improved by $11.0 million compared to the same period last year.

 

Pre-tax loss for the thirteen weeks ended April 4, 2009 was $14.4 million, an $11.0 million improvement compared to a pre-tax loss of $25.4 million last year. Net loss was $(0.67) per share after-tax compared to $(0.81) per share after-tax last year.

 

Geoff Eisenberg, Chief Executive Officer of West Marine, commented, “We are pleased to report these considerably improved operating results, despite a sales decline which reflects market and industry conditions. While we’ve always experienced a loss in the first quarter due to seasonality in our business, this quarter’s operating results reflect changes we have made to strengthen the company in the face of current economic conditions. We also continue to improve our balance sheet by increasing cash flow, reducing debt and maintaining unused credit facility availability of over $86 million.”

 

Net revenues for the thirteen weeks ended April 4, 2009 were $101.0 million, compared to net revenues of $113.3 million for the thirteen weeks ended March 29, 2008. Comparable store sales declined 6.8% versus the same period a year ago.

 

Gross margin improved by 270 basis points. Gross profit for the thirteen weeks ended April 4, 2009 was $22.9 million, an increase of $0.4 million compared to 2008. As a percentage of net revenues, gross profit increased by 2.7% to 22.6% compared to gross profit of 19.9% last year. The increase in gross profit as a percentage of revenues primarily resulted from better product margins due to a reduction in promotional and clearance activity, and a shift in sales mix to higher margin product categories. Additionally, we experienced lower inventory shrinkage and delivered efficiencies in our buying and distribution channels, which partially was offset by deleveraging of store occupancy on lower revenues.

 

SG&A expenses for the quarter were $36.9 million, a decrease of $9.9 million, or 21.2%, compared to $46.8 million for the same period last year, and expenses as a percentage of revenues decreased by 4.9% to 36.5%. The expense savings included: a $7.4 million reduction in payroll, marketing and other variable expenses, reflecting lower revenues, reduced store count and lower professional services expenses; and a $1.6 million reduction in costs related to the SEC investigation. Interest expense in the first quarter was $0.3 million, a decline of $0.5 million from last year due to lower interest rates and reduced debt levels.

 

Income taxes provided significantly less benefit than last year as a result of the impact of a full valuation allowance against our net deferred tax assets.

 

Compared to the corresponding period last year, cash from operating activities improved by $4.9 million, and at the end of the quarter, long-term debt was $75.8 million, which is a decrease of $13.2 million, or 14.8%, from this time last year.

 

West Marine, Inc.
Condensed Consolidated Statements of Operations
(Unaudited and in thousands, except per share data)
			13 Weeks Ended									13 Weeks Ended
			April 4, 2009									March 29, 2008
Net revenues			$		100,965							$		113,263
Cost of goods sold					78,106									90,778
	Gross profit				22,859									22,485
Selling, general and administrative expense					36,884									46,821
Store closures and other restructuring costs					77									–
Impairment of long lived assets					–									266
	Loss from operations				(14,102)									(24,602)
Interest expense					331									846
	Loss before income taxes				(14,433)									(25,448)
Provision (benefit) for Income taxes					371									(7,787)
	Net loss		$		(14,804)							$		(17,661)
Net loss per common and common equivalent share –
	Basic and diluted		$		(0.67)							$		(0.81)