WATSONVILLE, Calif., — West Marine, Inc. (Nasdaq:WMAR) today reported unaudited financial results for the fiscal year ended December 28, 2013.
- Net revenues were $663.2 million, a decrease of 1.8% compared to last year.
- Comparable store sales also decreased by 1.8%.
- Pre-tax income was $15.3 million, compared to pre-tax income of $24.5 million last year.
- Direct-to-consumer sales increased by 15.7% over last year, driven by our strategic investments in eCommerce.
- Sales in our merchandise expansion categories (which include footwear, apparel, clothing accessories, fishing products and paddle sports equipment) were up 6.1%, with sales of core usage-related products declining by 2.9%.
- The company remained debt-free at year-end and had $98.8 million available on its revolving credit line at the end of the period.
Fiscal Year and Fourth Quarter Financial Highlights
Net revenues for the fiscal year ended December 28, 2013 were $663.2 million, a decrease of 1.8% compared to net revenues of $675.3 million for fiscal year 2012.
In line with our omni-channel focus, beginning in the first quarter of 2013, we changed our definition of comparable store sales to include sales from our direct-to-consumer and wholesale channels. As before, store sales are included in comparable store sales in the fiscal period in which they commence their 14th full month of operations. Stores that were closed or substantially remodeled (i.e., resulting in an increase or decrease of 40% or more of selling square footage) are excluded. Using this new definition, comparable store sales for 2013 decreased by 1.8% when compared to the same period last year. For 2012, we previously reported a 3.3% increase in comparable store sales. Using the new definition, our 2012 comparable store sales increased 3.1%.
Matt Hyde, West Marine’s CEO, commented: “I would characterize 2013 as a challenging year due to the unusually cold, rainy and windy weather in many of our markets during the first half of the year. We were disappointed in the results, but we have continued to make great progress with our three key growth strategies: eCommerce development; merchandise expansion; and store optimization. Our growth strategies continue to evolve West Marine into a waterlife outfitter by offering broader product selections, a more appealing in-store experience and ease of shopping options.”
Net income for fiscal year 2013 was $7.8 million, or $0.32 per diluted share, compared to fiscal year 2012 net income of $14.7 million, or$0.62 per diluted share. Excluding the impact of the $1.7 million valuation allowance recorded during the second half of this year, which resulted from a California tax law change, net income for full-year 2013 would have been $9.5 million, or $0.39 per diluted share.
Net revenues for the fourth quarter increased by $0.6 million, or 0.5%, to $118.8 million compared to $118.2 million for the fourth quarter of 2012. Comparable store sales increased by 0.5%. Net loss for the fourth quarter was $11.2 million compared to a net loss of$11.7 million for the fourth quarter of 2012.
Total inventory as of December 28, 2013 was $203.0 million, a $13.7 million, or 7.2%, increase compared to the balance at December 29, 2012, and a 6.4% increase on an inventory per square foot basis. Inventory turns for 2013 decreased by 1.1% versus last year.
The accompanying financial statements have been revised, primarily to reflect immaterial corrections of certain cash consideration received from our vendors that were previously recorded as a reduction of advertising in selling, general and administrative expense and are now reflected as a reduction to cost of goods sold. The revision included a decrease of $9.4 million to cost of goods sold and an increase of $9.3 million to selling, general and administrative expense which resulted in a $0.1 million increase to pre-tax income for fiscal 2012.
Fiscal 2014 Guidance
Our key financial projections for full-year 2014 are in the following ranges (note that fiscal 2014 is a 53-week fiscal year for West Marine):
- Net revenues of approximately $695 million to $710 million, an increase of 4.8% to 7.1% over 2013
- Comparable store sales growth of 3.5% to 6.0%
- EBITDA of $35.0 million to $37.5 million
- Pre-tax income of $16.0 million to $18.5 million
- Earnings per share of $0.39 to $0.45
Reflected in the above guidance is the initial implementation of our “15/50 plan.” This three to five year plan accelerates investments in our strategic growth initiatives, including capital expenditures in 2014 of $30 to $34 million. Successful execution of this plan, supported by our merchandise expansion strategy, should deliver incremental sales and operating margin improvement. The first number in the 15/50 plan refers to our objective to grow our eCommerce business to 15% of total sales. The second number reflects our expectation that sales derived from consolidated or revitalized stores will grow to 50% of total sales. The 15/50 plan represents the diversification of West Marine, positions us to realize higher profitability, and to be less seasonal and weather dependent, and allows us to serve our customers’ lives more completely as a waterlife outfitter.
Share Repurchase Program
Under our previously-announced share repurchase program, we repurchased 608,530 shares of our common stock in open-market transactions for $8.1 million during the fourth quarter of 2013 and the first seven weeks of fiscal 2014 at an average price of $13.37 per share. As of February 14, 2014, we had $1.3 million remaining under our current share repurchase authorization.