West Marine CEO disappointed in 3Q

WATSONVILLE, Calif. – Marine retailer West Marine, Inc. today reported earnings of $0.29 per share for the third quarter ended Oct. 2, and said net income was $6.2 million in the quarter, compared to net income of $8.1 million, or $0.39 per share one year ago.

West Marine’s net sales for the third quarter were $183.1 million, a decrease of 4.6-percent versus sales of $191.9 million last year. Comparable store net sales for the third quarter decreased 7.7-percent compared to the same period a year ago, according to a company press release. Comparable store sales are defined as sales from stores that have been open at least thirteen months and where selling square footage did not change by more than 40 percent in the previous 13 months.

Net income for the 39 weeks ended Oct. 2 was $28.2 million, or $1.33 per share, compared to net income of $21.7 million, or $1.08 per share, for the same period a year ago

Net sales for the first nine months of 2004 were $564.9 million, an increase of 5.4 percent over sales of $536.0 million for the same period last year. Comparable store net sales for the thirty-nine weeks ended Oct. 2 increased 1.1 percent compared to the same period a year ago, the marine retailer reported.

"Although we achieved our mid-September earnings guidance, the third quarter was a disappointment to us,” said John Edmondson, West Marine's chief executive officer. “While we had already noted the continuing softness in customer spending that we first observed in the latter part of June, September sales were lower than we expected. Contributing factors were: the calendar shift from 53 weeks in 2003 to 52 weeks in 2004, rising fuel prices that may have detrimentally affected sales nationwide due to reduced boating participation, and four hurricanes that had a more pronounced and widespread impact than we had anticipated.

"For October, month-to-date comparable store sales are consistent with our previous fourth quarter guidance of flat to –2 percent. Our guidance for the fourth quarter remains the same: we estimate sales ranging from $119 million to $121 million and a loss per share ranging from ($0.11) to ($0.08). For the full year 2004, we currently expect to report sales ranging from $684 million to $686 million and earnings per share ranging from $1.25 to $1.28."

Looking ahead to the fourth quarter, Edmondson said the company entered into a new, five-year, $190 million credit agreement with a group of lenders in mid-October that offers West Marine lower fees, more liberal covenants and fewer restrictions on our business activities, such as making acquisitions, than the prior, 3-year, $175 million loan agreement.

“At West Marine's option, the new credit facility provides up to $50 million in additional financing, which could be used for making acquisitions,” Edmondson said. “We expect that the $1.2 million charge for accelerated amortization of loan costs, which we booked in the third quarter, will be mostly offset by gains on real property that we plan to sell during the fourth quarter this year.”

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