West Marine weathering market conditions

WATSONVILLE, Calif. – Boating supplies retailer West Marine, Inc. (Nasdaq:WMAR) saw its losses widen and its sales decline during the first quarter of 2008, compared to the same quarter last year.

“Our operating results were mostly in line with our internal expectations, reflective of market softness and weak sales previously announced for the first quarter,” said Geoff Eisenberg, West Marine CEO. “While we’ve always experienced a loss in the first quarter, we have taken significant steps to ensure that West Marine remains very strong financially during this current industry downturn. We believe that our present inventory position, our reduced capital spending plan, and our roughly $100 million credit availability will allow us to make appropriate strategic investments and weather current market challenges.”

Pre-tax net loss for the 13 weeks ended March 29 was $25.4 million, compared to a pre-tax loss of $18.4 million last year.

Net sales for the 13 weeks ended March 29 were $113.3 million, compared to net sales of $125.8 million for the 13 weeks ended March 31, 2007. Comparable store sales decreased 9.4 percent compared to the same period a year ago.

Gross profit for the quarter was $22.5 million, a decrease of $4.6 million compared to the same period last year. Gross profit as a percentage of net sales was 19.9 percent, a decrease of 160 basis points compared to 21.5 percent last year. Due to their relatively fixed nature, occupancy expenses as a percentage of net sales increased by almost 200 basis points on the declining sales, driving this reduction in gross profit percentage, according to the company. Product margins improved slightly year-over-year.

Selling, general and administrative expense for the quarter was $46.8 million, an increase of $2.8 million compared to $44.1 million for the same period last year. The company attributed the increase primarily to expenses associated with the ongoing SEC investigation of $1.6 million, higher marketing expenditures of $0.9 million which reflected a change in timing, and foreign exchange losses with an impact of $0.6 million.

As of March 29, long-term debt was $89.0 million, which is down $6.6 million, or 6.9 percent, from this time last year, and is down 40.0 percent from the same period two years ago.

“The boating season in North America is just starting to move into high gear, and while we don’t see a dramatic turnaround in customer activity, we are pleased to see a recent slight improvement in sales compared to first quarter results,” commented Eisenberg. “We remain cautiously optimistic and believe excellent execution of our key strategic initiatives will position West Marine very well for the future.”

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