West 49 posted a net loss of Canadian $1.2 million ($1.15 million) in the fourth quarter due to sluggish sales and a C$3.4 million ($3.1 million) pre-tax goodwill impairment charge. Net sales for the Canadian operator of action sports stores increased 0.8% to C$62.4 million ($61.7 million). Comps were down 4.5% on a consolidated basis and declined 2.4% at its core West 49 banner.


 


The loss compares to a profit of $2.9 million ($2.7 million) a year ago.


Gross margins in the quarter decreased 150 basis points to 27.9% due to higher occupancy costs. SG&A expenses also grew due to the opening of 12 new stores and the relocation and/or expansion of nine others last year. As of January 26, it operated 134 stores under the banners West 49, Billabong, Off The Wall, Amnesia/Arsenic, D-Tox, and Duke's Northshore, and the www.boardzone.com website.


Normalized EBITDA for the quarter was C$4.7 million ($4.64 million) compared to C$7.1 million ($7.02 million) a year ago.


For the fiscal year, net sales increased 4.9% to C$204.9 million ($202.6 million). Comparable stores sales decreased 1.3% on a consolidated basis and increased 0.5% for the company's core West 49 banner. Gross margins declined 180 basis points to 25.6%.


Normalized EBITDA for the year was C$8.8 million ($8.7 million) compared to C$13.0 million ($12.9 million), normalized, in the prior year. Normalized net income for the year (excluding the after-tax impact of the restructuring costs, and the non-cash, goodwill impairment charge) was C$1.5 million ($1.48 million), or two cents a share, compared with normalized net income of C$4.6 million ($4.55 million), or seven cents, the prior year.


With its new D-Tox store opened in the Oshawa Centre in Oshawa, Ontario during the fourth quarter, the company opened 12 new stores and relocated and expanded nine others during the year, achieving its fiscal 2008 objectives for new store openings, relocations and expansions and growth in square footage.


“Given the challenges of our current environment, we are sharpening our focus on strategies to improve gross margin, leverage expenses and drive comparable store sales growth,” said Baio. “We will be more prudent and opportunistic with regards to real estate projects for fiscal 2009, as rapid expansion over the last few years has driven up our occupancy costs, which have dragged on our profitability. However, we continue to see the benefits from our relocation and expansion projects and will review opportunities as they become available on a case-by-case basis. While we remain confident in our future potential for expansion, we are focused on maximizing returns from our existing operations first. We have a strong team and I am confident in our
ability to execute.”


Baio added: “When we acquired Off The Wall we bought a strong regional business that we felt represented significant potential for national expansion. While we have had some growing pains and a few missteps since acquiring this banner, we are confident that we have Off The Wall on the right track once more. Importantly, we remain steadfast in our belief in the banner's potential and in its strategic fit within our Company. We continue to restock our Off The Wall stores with merchandise that is moving and in demand, and we are confident that the turnaround process already underway will soon yield positive comparable store sales and improved margins.”