West Marine Inc. significantly raised its full-year guidance for comparable store sales growth Thursday after reporting same-store sales rose nearly 6.0 percent in the third quarter ended Oct. 3 after adjusting for the timing of Fourth of July sales.
The Wastonville, CA-based retailer, reported net revenues declined 1.1 percent and comparable store sales dipped 0.7 percent compared to the quarter ended Sept. 27, 2014 due primarily to a shift in its fiscal calendar that moved the selling period leading up to July 4th to the second quarter this year, as compared to the third quarter last year. Adjusting for the shift, comparable store sales were up 5.7 percent compared with the third quarter last year.
Gross margin slipped 80 basis points to 28.9 percent, driven primarily by greater than expected clearance sales. SG&A declined to 24.4 percent of revenues from 24.7 percent.
WMAR ended the quarter with 13 percent more inventory per square foot of retail space, with about 45 percent of the increase attributed to stocking in anticipation of holiday sales growth and 40 percent to the retailers expansion into new categories that are posting double-digit year-over-year growth rates and which are expected to draw greater holiday traffic this year.
Since hiring former REI executive Matt Hyde as its CEO in mid-2012, WMAR has been expanding the selection of higher margin and quicker turning categories such as apparel, footwear and accessories and brought in more paddle sport gear to appeal to a broader range of water-based lifestyles. It has also been closing many stores, expanding and upgrading others to reflect its broader assortments and expanding its omni-channel integration.
The company closed 16 stores and opening two in the third quarter and is now fulfilling online orders from about 200 of its 265 stores. It has upgraded 120 of those so far this year and plans to open two new stores and close four others in the fourth quarter.
With comparable store sales up 4.9 percent through the first three quarters of the fiscal year, WMAR on Thursday raised its guidance for fiscal year comps growth to 3.5-to-5.5 percent from 1.0-to-4.0 percent forecast July 30. It lowered narrowed guidance for pre-tax income downward to $6-to$8 million, however, from $6-to-$11 million due to higher than expected clearance sales tied to the company's ship-from-store initiative, increased inventory shrinkage and an undisclosed product quality issue that has cost roughly $500,000 so far this fiscal year. The company expects to increase its spending on digital media by 20-to-25 percent through the holidays.
