West Marine reports 44 percent net income increase in Fiscal Year 2016

West Marine, Inc. (NASDAQ:WMAR) reported financial results for the fourth quarter and fiscal year ended Dec. 31, 2016 (“fiscal 2016”).

Net income and earnings per diluted share were $6.5 million and $0.26, respectively, compared to net income and earnings per diluted share of $4.5 million and $0.18, respectively, last year, representing a 44.6 percent increase in net income.

Net revenues for fiscal 2016 were $703.4 million, a decrease of 0.2 percent compared to fiscal 2015. Comparable store sales increased by 0.8 percent in fiscal 2016.

Income before income taxes was $11.6 million, an increase of 59.1 percent compared to fiscal 2015. Earnings before interest expense, income tax expense, depreciation and amortization (“EBITDA”) increased to $34.0 million, compared to EBITDA of $28.3 million last year. Cash and cash equivalents totaled $76.1 million at the end of the year.

“I’m pleased with how the team has continued to execute on our strategies while driving higher profitability. Of note, our overall pre-tax profits increased 59 percent on flat sales,” said Matt Hyde, West Marine’s CEO. “These results reflect our vigilance in improving the customer experience, increasing our margins by closing under-performing stores, implementing targeted expense structure improvements, focusing on waterlife store expansion and improving our omni-channel business.”

Progress on the company’s growth strategies for fiscal 2016 was as follows:

  • Sales from West Marine’s eCommerce websites increased by 19.7 percent compared to last year and represented 11.4 percent of total sales, compared to 9.5 percent for the same period last year, showing progress toward the company’s goal of 15 percent of total sales.
  • Sales through waterlife stores were 50.1 percent of total sales compared to 46.0 percent last year. This year-over-year increase resulted in the company achieving its goal to deliver 50 percent of total sales through these stores that have been optimized to offer a broader selection of merchandise than its traditional stores that focus on core boating products.
  • For fiscal 2016 compared to fiscal 2015, sales in merchandise expansion product lines, which include footwear, apparel, clothing accessories, fishing products and paddlesports equipment, increased 2.0 percent, while core product sales declined by 1.0 percent.

Net revenues for the 52 weeks ended Dec. 31, 2016 were $703.4 million, a decrease of 0.2 percent, compared to net revenues of $704.8 million for the 52 weeks ended Jan. 2, 2016. For fiscal 2016, comparable store sales increased by 0.8 percent, which was offset by store closures during the year.

Gross profit for fiscal 2016 increased 1.8 percent from $202.0 million in fiscal 2015 to $205.7 million in fiscal 2016, while SG&A expenses decreased 0.3 percent from $194.3 million to $193.6 million.

Pre-tax profit margin improved by 0.6 percent, to 1.6 percent for fiscal 2016, as compared to 1.0 percent last year. This change primarily was driven by a 0.5 percent increase in gross profit margin.

Net income for fiscal 2016 was $6.5 million, or $0.26 per diluted share, compared to net income of $4.5 million, or $0.18 per diluted share, last year.

Results for the fourth quarter of 2016

Net revenues for the 13 weeks ended Dec. 31, 2016 decreased by $0.7 million, or 0.5 percent, to $129.5 million compared to $130.2 million for the 13 weeks ended Jan. 2, 2016. Comparable store sales decreased 1.0 percent when comparing the fourth quarter 2016 with the fourth quarter 2015.

Gross profit for the fourth quarter 2016 increased 0.5 percent from $28.0 million in the fourth quarter 2015 to $28.2 million in the fourth quarter 2016, while SG&A expenses decreased 6.8 percent from $48.3 million to $45.0 million.

Net loss for the fourth quarter was $9.8 million, or $0.39 per basic share, compared to net loss of $11.1 million, or $0.45 per basic share, for the fourth quarter of 2015.

Fiscal 2017 outlook

The company expects net revenue to increase by 1 percent to 2 percent in fiscal 2017.  This revenue growth, combined with continued expense control, is expected to improve profitability, and the company expects pre-tax profits to be up from $11.6 million in 2016 to a range of $13.0 to $16.0 million in 2017.

“We are looking forward to 2017 as a number of our initiatives continue to produce results for the company overall. We project an increase in profitability driven by cost controls, incremental revenue gains and improvements in margin management,” said Hyde.

West Marine held a conference call and webcast on Thursday, Feb. 23, at 4:30 p.m. Eastern Time to discuss its fourth quarter and fiscal year 2016 results. An audio replay of the call will be available through March 2, 2017 at 11:59 p.m. Eastern Time. The replay number is 855-859-2056 in the United States and Canada and 404-537-3406 for international calls. The access code is 66546939.

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