West Marine Comps Rise 4.9 Percent in Third Quarter

Income before taxes was $17.0 million, up $4.3 million, or 33.9 percent, compared to last year. Diluted earnings per share (“EPS”) were 43 cents, as compared to 33 cents adjusted to exclude the tax benefit recorded during the second quarter of 2011. Reported diluted EPS for the third quarter of 2011 was 48 cents.

Third quarter liquidity improved substantially versus last year, with cash increasing 55 percent to $68.3 million. The company remained debt-free with $102.5 million in available credit on its revolving line.

Net revenues for the 13 weeks ended Sept. 29 were $191.9 million, an increase of 6.5 percent compared to net revenues of $180.3 million for the 13 weeks ended Oct. 1, 2011. Revenues in the Stores segment were $175.0 million, up $11.2 million, or 6.8 percent, compared to the same period last year. Comparable store sales grew by 4.9 percent over the same period last year.

 

Third quarter Port Supply revenues, representing sales to our wholesale customers through our distribution centers, were $6.7 million, a decrease of $400,000, or 5.0 percent, compared to the same period last year. Net revenues in our Direct-to-Customer segment for the quarter were $10.3 million, an increase of $900,000, or 9.1 percent, compared to the same period last year.

Net income for the third quarter was $10.3 million, or 43 cents per diluted share, compared to net income of $7.7 million, or 33 cents per diluted share, adjusted to exclude the tax benefit of the valuation allowance release last year. Reported diluted EPS for the third quarter of 2011 was 48 cents.

Net revenues for the 39 weeks ended Sep. 29, 2012 were $557.0 million, up 5.1 percent compared to net revenues of $530.0 million for the 39 weeks ended Oct. 1, 2011. Comparable store sales grew by 3.5 percent for the first nine months of 2012 versus the same period last year.

Diluted EPS for the first nine months was $1.12 compared to diluted EPS of $1.05, adjusted to exclude the large tax benefit recorded during the first nine months of 2011. Reported diluted EPS for the first nine months of 2011 was $1.88. 

Total inventory at Sept. 29, 2012 was $213.1 million, a $1.6 million, or 0.8 percet, increase versus the balance at Oct. 1, 2011, and a 1.5 percent increase on an inventory per square foot basis. Inventory turns for 2012 were up 5.0 percent versus the first nine months of last year.

We are re-affirming our previously-issued earnings guidance for fiscal year 2012, which calls for pre-tax income in a range of $23 million to $26 million, an increase of 8 percent to 23 percent versus the prior year. Total sales are expected to be in the range of $670 million to $680 million, with comparable store sales growth of 2.0 percent to 3.5 percent. We anticipate capital expenditures for fiscal 2012 to be approximately $19 million.

Looking ahead to 2013, we remain focused on three of our previously discussed strategies that are expected to drive future sales and profitability growth.

 

First, our store optimization strategy of moving to fewer, larger stores that provide us with an environment to execute our second strategy of offering expanded merchandise assortments to a broader group of customers. This includes core product categories, such as watersports and fishing, as well as the soft goods categories, such as footwear, apparel and accessories.

 

Our third strategy centers on maximizing our e-commerce website to provide our customers with an improved shopping experience. The company will be investing significant resources in support of these strategies, including a 40 percent to 50 percent increase in our capital investment over 2012 to support sales growth and to upgrade our infrastructure. These strategies and investments support our shift to an omni-channel retail model designed to provide a seamless customer experience and to better position us to deliver incremental sales and operating margin improvement over time.

 

“Our store teams did a great job driving a comparable store sales increase of 4.9 percent and we were effective at delivering these dollars to the bottom line,” said Matt Hyde, West Marine's CEO. “Looking a little deeper into the numbers, we enjoyed a healthy core business with impressive contributions from our growth strategies. As we turn towards the end of the year, we are focused on inspiring our customers during the gift-giving season and we are excited about our strategies propelling us forward.”

 

Condense consolidate statements of income

Unaudited and in thosuands, except for per share data

 

13 Weeks Ended
		September 29, 2012		October 1, 2011
Net revenues		$ 191,924	100.0%	$ 180,269	100.0%
Cost of goods sold		131,628	68.6%	125,578	69.7%
Gross profit		60,296	31.4%	54,691	30.3%
Selling, general and administrative expense		43,121	22.5%	41,789	23.1%
Restructuring costs (recoveries)		4	0.0%	(10)	0.0%
Impairment of long lived assets		—	0.0%	22	0.0%
Income from operations		17,171	8.9%	12,890	7.2%
Interest expense		217	0.1%	226	0.2%
Income before income taxes		16,954	8.8%	12,664	7.0%
Provision for income taxes		6,682	3.4%	1,448	0.8%
Net income		$ 10,272	5.4%	$ 11,216	6.2%
Net income per common and common equivalent share:
Basic		$ 0.44		$ 0.49
Diluted		$ 0.43		$ 0.48
Weighted average common and common equivalent shares outstanding:
Basic		23,383		22,788
Diluted		23,813		23,268
		39 Weeks Ended
		September 29, 2012		October 1, 2011
Net revenues		$ 556,964	100.0%	$ 530,049	100.0%
Cost of goods sold		381,315	68.5%	365,831	69.0%
Gross profit		175,649	31.5%	164,218	31.0%
Selling, general and administrative expense		130,439	23.4%	123,252	23.3%
Restructuring costs (recoveries)		159	0.0%	(107)	0.0%
Impairment of long lived assets		—	0.0%	50	0.0%
Income from operations		45,051	8.1%	41,023	7.7%
Interest expense		661	0.1%	666	0.1%
Income before income taxes		44,390	8.0%	40,357	7.6%
Provision (benefit) for income taxes		17,749	3.2%	(3,257)	-0.6%
Net income		$ 26,641	4.8%	$ 43,614	8.2%
Net income per common and common equivalent share:
Basic		$ 1.15		$ 1.92
Diluted		$ 1.12		$ 1.88