West Marine Q2 Saved by E-commerce

By Charlie Lunan

West Marine, Inc. (Nasdaq:WMAR) reported net revenues dipped 0.6 percent in the second quarter ended July 2, despite growing comparable stores sales of 1.1 percent thanks to torrid e-commerce growth.

The California-based retailer, which operated more than 250 stores in 38 states at quarter’s end, reported sales of $251.6 million. Pre-tax income slipped 1.9 percent to $36.4 million compared to the second quarter of 2015. Earnings per diluted share increased a penny to 86 cents.

“We are pleased with the progress of our growth strategies, including a 27-percent increase in e-commerce and solid increases in our Waterlife store sales,” said CEO Matt Hyde. “These results were in contrast to a challenging retail environment and unfavorable weather patterns seen earlier in the quarter. We believe that our growth strategies have us on track to deliver our 2016 sales and profit targets.”

E-commerce sales reached 10 percent of total sales, compared to 7.9 percent for the same period last year, but still below the 15 percent the company is targeting. Sales through Waterlife stores, which offer a broader selection of apparel, footwear, accessories, fishing products and paddle sports, accounted for 48.6 percent of sales, up from 45.1 percent last year. Sales of those targeted categories increased 3.3 percent compared to the same period last year, while sales of core boating products slipped 1.7 percent.

Gross margin slipped 30 basis points to 35.5 percent, while selling, general and administrative expense decreased by $800,000, in part thanks to a partial settlement from the Deepwater Horizon Settlement program. Net income was $21.6 million, or 86 cents per share, compared to $20.9 million, or 85 cents per share, in the second quarter of 2015.

The company ended the period with 1.7 percent less inventory and $45.4 million more in cash and cash equivalents, or $89.6 million, compared to a year earlier. West Marine reiterated full-year 2016 guidance of total revenue growth in the 1 percent to 4 percent range, and pre-tax profit growth of 50 percent over 2015 full-year results.

Photo courtesy West Marine