West Marine Says Warm Weather Boosted Q1 Store Sales

Revenues in the Stores segment were $108.1 million, up $7.9 million, or 7.9 percent, compared to the same period last year. Comparable store sales grew by 4.3 percent versus the same period last year.

The company reported higher sales in all core categories during the first quarter, especially maintenance-related products, which it attributed to the dry, warm weather and early Spring experienced across most its markets. West Marine also saw growth in soft goods categories, reflecting the success of its merchandise expansion strategy.

Revenues from stores opened or expanded in 2011 and the first three months of 2012 contributed $13.8 million to   Stores segment. The impact of stores closed during these same periods effectively reduced revenues by $9.2 million. The majority of the closures were a result of ongoing real estate optimization strategy to evolve into having fewer, larger stores.

Port Supply segment revenues, representing sales to  wholesale customers through  distribution centers, for the first quarter of 2012 were $6.3 million, a decrease of $0.2 million, or 3.6 percent, compared to the same period last year.  

The company’s real estate optimization, including adding hubs in store locations that target and cater to Port Supply customers, continues to shift revenue from the Port Supply segment to the Stores segment.

Net revenues in  Direct-to-Customer segment for the quarter were $7.1 million, a decrease of $0.1 million, or 0.7 percent, compared to the same period last year.   domestic sales demonstrated solid growth. This growth was offset, however, by lower sales to international customers.

Gross profit for the first quarter was $29.5 million, an increase of $4.8 million compared to 2011. As a percentage of net revenues, gross profit increased by 2.6 percent to 24.3 percent, compared to gross profit of 21.7 percent last year. This increase was driven primarily by a 1.7 percent improvement in raw product margins, due to less promotional and clearance activity.

There also was a sales mix shift away from higher-priced, but lower margin items, such as electronics, to higher-margin maintenance-related items. We attribute this shift to the mild and dry weather, which prompted customers to prepare their boats earlier in the season this year.

The increase in gross profit as a percentage of revenues also resulted from   leveraging of relatively-fixed occupancy expense by 1.1 percent on the higher sales and a 0.1 percent improvement in shrink results. Gross profit margin improvements were partially offset by a 0.3 percent increase in unit buying and distribution costs incurred this year.

Selling, general & administrative (“SG&A”) expense for the quarter was $39.9 million, an increase of $3.0 million compared to the same period last year. As a percentage of net revenues, SG&A expense increased by 0.5 percent to 32.9 percent, on higher sales. Drivers of the higher SG&A expense included: $1.0 million in higher accrued bonus expense, reflecting performance above budgeted expectations; $700,000 in higher store payroll to support the higher sales and for training related to new point-of-sale system; $700,000 in higher store project expense reflecting the opening of three flagship stores during the first quarter this year compared to one flagship store last year; and $400,000 in higher information technology spending.

Pre-tax loss for the quarter was $10.6 million, a $1.7 million, or 13.5 percent, improvement from pre-tax loss of $12.3 million last year. Net loss per share was 27 cents per share, a 50.9 percent improvement compared to a net loss per share of 55 cent per share last year.

Total inventory at the end of the first quarter was $240.9 million, a $6.8 million, or 2.7 percent, decrease versus the first quarter of last year, and a 4.3 percent decrease on an inventory per square foot basis. Inventory turns for 2012 were up slightly versus the first quarter of last year.

The company confirmed its full-year guidance.