West Marine reports closures

WATSONVILLE, Calif. – In an effort to contain costs, boating supplies retail giant West Marine plans to close its distribution center in Hagerstown, Md., its call center in Largo, Fla., and 25 to 30 underperforming stores, it reported in SEC form 8-K/A last week.

“In the first quarter of 2008, our net sales were 10-percent lower than the comparable period in 2007,” the company explained in the document. “Management recognized that its ongoing cost containment initiatives were not sufficient, and we undertook a comprehensive review of our operations to determine how to best position the company to weather this down cycle and to emerge as a strong competitor.”

Therefore, the company’s management proposed and its board of directors approved several initiatives, including the closures, late last month. West Marine’s management expects the Maryland distribution center closure will reduce costs and increase operating efficiency by increasing capacity utilization and decreasing duplicative inventory stock, the company stated. Distribution activity previously handled by the Maryland facility will be absorbed by its remaining two distribution centers in California and South Carolina.

Most of the Maryland distribution center’s 41 employees will be offered employment at West Marine’s distribution center in Rock Hill, S.C., the company said. The Maryland distribution center's closure is expected to be completed by the end of this fiscal year, and employees not electing to relocate will then be terminated, it reported.

West Marine expects to record aggregate charges of approximately $2.9 million to $4.0 million in the second half of 2008 related to the closure of the Maryland distribution center.

West Marine also said it expects the closure of the Florida call center and relocation of these operations to a virtual call center will result in annual cost savings of approximately $0.3 million to $0.5 million. The company added that “we believe the majority of our Florida call center associates will be offered the opportunity to work from their homes” as part of this virtual center. West Marine estimates that the aggregate costs associated with closure of the call center will be from $1.0 million to $1.5 million, which it expects to recognize in the second half of 2008.

The estimated cost of closing underperforming stores are in the range of $5.0 million to $6.6 million, most of which will be cash charges, the company stated.

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