WATSONVILLE, Calif. – While West Marine’s sales and profits were down in the second quarter ended July 2, compared to last year, CEO Peter Harris suggested its new initiatives would start to positively impact the retailer’s financial results in 2006 and have an even larger impact in 2007.
West Marine reported its earnings yesterday, and Harris, who has been on the job for six months, commented on them during the company’s earnings conference call.
Harris said the opening of five of the stores West Marine had originally planned for this year will be postponed to next year as they will become testing grounds for new strategies. That means the company is on track to open 30 more stores this year, most of which are traditional stores, not express, because the company has been able to secure some great deals on larger spaces, he explained.
He also updated listeners on the progress made on new strategies introduced as part of the company’s first quarter earnings report. The majority of the six new initiatives Harris has previously detailed are based around a focus on the customer, something he is very passionate about.
“Great shopping is theater,” he explained. “People will ultimately think of West Marine as a wonderful place to go just to experience their connection to boating.”
For those who are skeptical about the company’s new “soft strategies,” Harris reassured them that the new initiatives are “rooted in making more money for shareholders.”
Weather impacts second quarter results
While Harris says the company anticipated that some of its new strategies would impact earnings in the short term, poor weather conditions, particularly in the Northeast, was the most significant factor impacting results during the second quarter, according to the company.
West Marine, Inc.’s (Nasdaq:WMAR) net income for the second quarter ended July 2 was $22.8 million, or $1.07 per share, compared to net income of $25.2 million, or $1.17 per share, for the second quarter of 2004.
Net sales for the second quarter of 2005 were $253.5 million, compared to net sales of $252.6 million a year ago. Comparable store sales for the second quarter of 2005 decreased 3.5 percent, versus an increase in comparable store sales of 4.6 percent reported for the same period a year ago. Comparable store sales are defined as sales from stores that have been open at least 13 months and where selling square footage did not change by more than 40 percent in the previous 13 months.
Net income for the 26 weeks ended July 2 was $17.3 million, or $0.81 per share, compared to net income of $22.1 million, or $1.04 per share, for the same period a year ago. Net sales for the first six months of 2005 were $378.9 million, compared to net sales of $381.8 million for the same period last year. Comparable store sales for the first six months of 2005 decreased 4.6 percent versus an increase in comparable store sales of 6.2 percent reported for the same period a year ago.
"As we reported in our sales release a few weeks ago, poor weather in April and May on both coasts dampened second quarter results, especially when compared to the great spring weather we enjoyed last year,” said Harris. “We also explained that while a poor second quarter for us has sometimes been followed by a better third quarter, not achieving a rebound early on could result in a reduction in our earnings forecast for the full year.
"As we started to see in June, sales in July continued to improve with better weather, although not enough to offset lower sales earlier in the year. Based on results for the first three weeks in July, we now believe that earnings for the 2005 fiscal year will be in the range of $0.95 to $1.00 per share, as we indicated in our sales release earlier this month."
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