West Marine reports disappointing results

WATSONVILLE, Calif. – Boating supplies retailer West Marine, Inc.’s (Nasdaq:WMAR) preliminary results for the fourth quarter and fiscal year ended Dec. 29 are a reflection of market conditions, the company suggested in a statement Wednesday.

Not only were the company’s net losses up dramatically, its revenues declined further than expected. Analysts also noted that the company’s earnings estimates for 2008 were “disappointing.”

Excluding the impact of certain events outlined below, West Marine’s adjusted pre-tax income for the fifty-two weeks ended Dec. 29 was $6.9 million, compared to $3.6 million last year, the company reported in a statement Wednesday.

Net loss for the year was $50.2 million, or $2.31 per share, compared to a restated net loss of $7.7 million, or $0.36 per share, a year ago.

The company suggested the following “significant events” greatly impacted fourth quarter and full year results:

  • An updated assessment of goodwill in the fourth quarter which resulted in a non-cash impairment charge of $56.9 million pre-tax, or $2.25 per share after-tax. The after-tax, per share equivalent of this impairment charge reflects the non-deductibility for tax purposes of certain goodwill components;
  • Continued cooperation with the previously-announced SEC investigation resulted in expenditures of $2.7 million pre-tax, or $0.08 per share after-tax;
  • The departure of our former chief executive officer resulted in related severance costs in the fourth quarter of $1.3 million pre-tax, or $0.04 per share after-tax; and
  • Management’s ongoing evaluation of individual store performance resulted in a non-cash asset impairment charge of $0.9 million pre-tax, or $0.02 per share after-tax.
  • An additional factor impacting comparison to prior year was: costs relating to West Marine’s store closure and restructuring in 2006, which affected both years, the company added.

    “The previously-reported pre-tax expense impact was $14.5 million in 2006, or $0.46 per share, and there was an additional $0.6 million, or $0.02 per share, in 2007 as we adjusted store closure reserves to reflect revised market information,” the company said.

    Net sales for the year were $679.5 million, compared to net sales of $716.6 million in 2006. Comparable store sales decreased 1.9 percent compared to the same period a year ago.

    “West Marine’s financial results for 2007 reflected a challenging year in our industry,” said Geoff Eisenberg, West Marine CEO. “Within this climate, we have focused on managing the business to weather this downturn and emerge as an even stronger company. We will continue to pursue initiatives and strategies that we expect to drive growth and profitability in the medium and long term.”

    Net loss for the fourth quarter ended Dec. 29 was $65.7 million, or $3.00 per share, including the impact of the significant events. This compares to a net loss of $12.8 million, or $0.60 per share for the fourth quarter last year, which reflected $9.4 million, or $0.30 per share in store closure and other restructuring charges. Comparable store sales decreased 3 percent for the quarter. Net sales were $118.3 million, a decrease of 4.6 percent from net sales of $124.0 million for the same period a year ago. West Marine operated 372 stores during the fourth quarter of 2007, compared to 377 stores during the fourth quarter of 2006.

    For fiscal year 2008, West Marine currently estimates earnings ranging from $0.02 to $0.09 per share and a decrease in comparable store sales ranging from (5.0 percent) to (3.5 percent). Net sales are expected to range from $660.0 million to $670.0 million for fiscal year 2008. This earnings estimate does not reflect expense relating to the ongoing SEC investigation, according to the company.

    That compares to analysts’ expectations of 24 cents a share, excluding exceptional items, on revenue of $678.9 million, Reuters reported on Wednesday. It noted that shares of the company had lost more than 55 percent of their market value in the last 52 weeks. Since then, the stock has dipped even lower.

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