West Marine's second quarter earnings managed to beat Wall Street
estimates as tight inventory and cost controls offset weak sales. In
June, the company had cut its 2007 earnings and sales outlook, citing
softness in the Southeast, particularly the key boating market of
Florida. Sales fell 6.3% to $247.8 million and comparable store sales
fell 2.9%. Gross margins improved to 34.7% from 33.9%; SG&A
expenses were lowered to 21% from 22.6%. The year-ago period also
included a pretax charge of $3.5 million (9 cents a share after-tax)
for store closings.
Net income rose 42% to $20.1 million, or 92 cents a share, from $14.2
million, or 66 cents a share, a year ago. The U.S. boating market has
been hit by rising interest rates, higher fuel prices and housing
market woes, hurting profits at the world's largest boat maker,
Brunswick Corp., and the world's largest boat retailer, MarineMax Inc.
as well.
With the peak boating season behind, West Marine does not expect weak
sales trends in the boating and boating accessories market to change in
the short term.
Peter Harris, West Marine's chief executive officer, stated, “The
positive earnings progress this year is a direct result of last year's
expense restructuring actions, as well as operating disciplines applied
this year. Inventory management, yielding increased productivity while
maintaining record assortment levels in stores, has combined with
earnings growth to produce continued strong operating cash flow.”
