West Marine disappointed with 1Q results

WATSONVILLE, Calif. – Shares of West Marine, Inc. fell nearly 15 percent yesterday as the boating retailer reported net sales for the quarter ended April 2 were down 3.0 percent – to $125.3 million, from net sales of $129.2 million in 2004.

In a release yesterday, West Marine said its net loss for the quarter was ($5.5 million), or ($0.26) per share, compared to a net loss of ($3.1 million), or ($0.15) per share, a year ago.

“The first quarter results are disappointing, primarily because boating season activity was delayed in markets from the mid-Atlantic states up into the northeast and across to the Great Lakes,” Peter Harris, West Marine’s chief executive officer since the beginning of this year, said. “Clearly, customers are not inspired to start boating when it still looks and feels like winter. Put into context, however, the first quarter typically is less than 20 percent of our annual revenue and also our weakest quarter.”

West Marine’s comparable store net sales for the first quarter decreased 6.8 percent, as compared to the same period a year ago. In the first quarter last year, comparable store sales increased 10.2 percent.

Comparable store sales by region for the first quarter were as follows:
– Northeast down 22.4 percent.
– Southeast up 1.3 percent.
– Western down 4.8 percent.

Net sales and comparable store sales for the first quarter of 2005 were slightly lower than previously reported results due to adjustments for our newly implemented customer rebate program.

New initiatives

Harris said West Marine was going to begin several new initiatives, designed to improve inventory turnover, increase comparable store sales and strengthen operations.

“[The initiatives] reflect my time spent listening to and learning from our customers and our associates, as well as reviewing statistical information produced by our strong infrastructure,” Harris said.

The company said its new initiatives are designed to:

  • Lower our inventories without reducing merchandise in-stock levels for our customers by reducing inventory purchases in 2005,
  • Increase customer traffic, expand our market share and strengthen customer loyalty by refocusing on value pricing in certain key merchandise areas.
  • Increase store sales by increasing associate hours in our stores during peak selling periods.
  • Expand our efforts to build sales through the Internet channel.
  • Delay some stores that we planned to open during the key boating season, shifting out the schedule for opening the remaining new stores this year.
  • Restructure our merchandising organization to add accountability and allow for more assortment strategy and analysis.
  • “We designed these far-reaching initiatives with a view toward long-term growth and we believe they will have a negative effect on our earnings in the short term,” Harris said.

    He went on to provide an updated 2005 guidance.

    “Based on our analysis of first quarter results and the initiatives outlined above, we now believe that earnings for 2005 will be in the range of $1.10 to $1.15 per share. We are projecting net sales in 2005 ranging from $717 million to $722 million, based upon relatively flat comparable store sales and opening 50 to 53 new stores during the year. In the long-term, we believe these new initiatives will create a stronger West Marine that will outperform previously anticipated results over several years.”

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