West Marine reported comp store sales fell 6.6 percent in the first quarter under a new formula implemented to align the companys performance with CEO Matt Hydes omni-channel strategy. Hyde, who joined West Marine last year from Recreational Equipment Inc., called the results disappointing and West Marine lowered its guidance for 2013.


The company, which operates 296 stores in 38 states, Puerto Rico and Canada, reported net revenues of $114.2 million in the first quarter ended March 30, a decrease of 5.9  percent compared to net revenues of $121.5 million for the 13 weeks ended March 31, 2012.

The company now includes sales from its direct-to-consumer and Port Supply wholesale businesses when calculating comp store sales. The companys comp base still includes results from stores that commence their 14th full month of operations during the reporting period and still excludes stores that were closed or substantially remodeled (i.e., resulting in an increase or decrease of 40  percent or more of selling square footage) during the period. When measured under its new formula comps grew 34. Percent in the first quarter of 2012 compared to the 4.3 percent reported using the old formula.

Net loss for the first quarter was $9.0 million, or 38 cents per share, compared to net loss of $6.2 million, or 27 cents per share for the first quarter last year.

Total inventory at March 30, 2013 was $243.9 million, a $3.1 million, or 1.3  percent, increase versus the balance at March 31, 2012, and a 3.9  percent increase on an inventory per square foot basis. Inventory turns for 2013 were down 3.8  percent versus the first three months of last year.

Return on Invested Capital (“ROIC”) for the 52-week period was 6.9  percent, which compares to 7.2  percent adjusted ROIC for the 52-week period ended March 31, 2012. ROIC based on GAAP net income was 17.4  percent for the 52-week period ended March 31, 2012.

“We are disappointed in our first quarter sales results which were impacted by a much colder spring hitting many parts of the country compared to last year, said Hyde.  With boats remaining under snow in the northeast and wind conditions stalling usage in the southeast, the launch of our season is starting much later than expected. On the other hand, I am pleased to report that we were able to partially offset these weak results by solid growth in the regions where spring weather has been more typical.

Under Hyde, West Marine has changed the way in which it views and manages business by making organizational changes, integrating systems and concentrating its strategic focus on omni-channel retailing. As a result, beginning in this fiscal year, the company will no longer report results for its three segments – Stores, Port Supply (wholesale) and Direct-to-Consumer (eCommerce, catalog and call center transactions).

Hyde said that companys strategies of expanding e-commerce and categories and store optimization continued to drive strong growth.
We remain cautiously optimistic for the upcoming months, and we stand ready to serve our customers once the weather breaks and the season kicks into high gear,” he said.Segment Reporting Change

2013 guidance
As a result of the lower than expected sales results in the first quarter, West Marine  lowered its previously-issued earnings guidance for fiscal year 2013. The company now expects pre-tax income in a range of $24.0 million to $27.0 million, approximately $1.5 million lower than previously forecast.

This will result in diluted earnings per share of approximately $0.60 to $0.67. Comparable store sales for full-year 2013 are now anticipated to be flat to up 2.0  percent using the companys new definition, with total revenues now expected to be in the range of $675 million to $690 million, $25 million lower than our previously-communicated guidance. Capital expenditures for fiscal 2013 to be in the range of $25 million to $29 million unchanged from our prior guidance.