West Marine, Inc. (Nasdaq:WMAR) today reported financial results
for the first nine months of fiscal 2015 and for the third quarter
ended October 3, 2015.
2015 Year-to-Date Results
- Net revenues for the first nine months of fiscal 2015 were
$574.6 million, an increase of 5.2% compared to last year.
- Adjusted comparable store sales increased by 4.9%.
- Pre-tax income was $27.6 million, an increase of 20.1% compared
to pre-tax income of $23.0 million last year.
- Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) year-to-date were $43.1 million, compared to EBITDA of
$36.5 million last year.
- Net income and earnings per share were $15.6 million and $0.63,
respectively, compared to net income and earnings per share of
$12.2 million and $0.50, respectively, per share last year, a 27.4%
increase.
- Fiscal 2015 comparable store sales are expected to range from
3.5% to 5.5% and pre-tax profit is expected to range between $6.0
million and $8.0 million.
- Remained debt-free at quarter-end with $115.8 million available
on our revolving credit line at the end of the period.
Matt Hyde, West Marine’s CEO, commented: “The West Marine
team is delivering strong results, with good top line sales from
our strategies flowing through to double-digit earnings growth
year-over-year. As we wrap up the core boating season, our
associates are now focusing on expanding our holiday presence, with
new gift items and compelling offers for our customers recreating
on or around the water.”
Progress on the company’s growth strategies year-to-date was as
follows:
- Sales from our eCommerce website increased by 25.1% compared to
last year and represented 8.3% of total sales, compared to 7.0% for
the same period last year, showing progress towards our end of 2019
goal of 15%.
- Sales through our optimized stores were 40.8% of total sales
compared to 36.1% last year. This year-over-year increase supports
our end of 2019 goal to deliver 50% of our total sales through
optimized stores.
- Merchandise expansion: Sales in these product lines,
which include footwear, apparel, clothing accessories, fishing
products and paddle sports equipment, increased 15.2%, and core
product sales were up 2.8%, compared to last year.
Results for the Third Quarter of 2015
Due to the impact from the calendar shift compared to 2014, our
net revenues for the third quarter decreased by $2.1 million, or
1.1%, to $194.4 million compared to $196.5 million for the third
quarter of 2014. Comparable store sales decreased by 0.7% for the
third quarter. Sales comparisons were negatively impacted this year
from a shift in the fiscal calendar following a 53-week fiscal year
and decreased sales by approximately 6%. This calendar shift
affected our key selling season, moving the selling period leading
up to July 4th to the second quarter this year, as compared to July
4th being part of the third quarter last year.
Pre-tax profit margin declined by 0.6% of revenues to 4.4% for
the third quarter compared to 5.0% for the third quarter last year.
This change primarily was driven by a 0.8% decrease in gross profit
margin resulting from deleveraging of raw product cost of goods, as
well as, a 0.3% decrease in selling, general and administrative
expense.
Net income for the third quarter was $4.9 million, or $0.20 per
diluted share, compared to net income of $4.9 million, or $0.20 per
diluted share, for the third quarter of 2014.
Results for the first Nine Months of 2015
Net revenues for the 39 weeks ended October 3, 2015 were $574.6
million, an increase of 5.2%, compared to net revenues of $546.3
million for the 39 weeks ended September 27, 2014. Comparable store
sales increased by 5.5% for the first nine months of 2015. Adjusted
comparable store sales increased 4.9% as sales comparisons
benefitted this year from a shift in the fiscal calendar following
a 53-week year and increased sales by approximately 0.6% as
compared to the first nine months last year.
Pre-tax profit margin improved by 0.6% at 4.8% for the first
nine months of 2015 as compared to 4.2% for the first nine months
last year. This change primarily was driven by a decrease in
selling, general and administrative expense as a percentage of
revenues of 0.6%.
Net income for the first nine months was $15.6 million, or $0.63
per diluted share, compared to net income of $12.2 million, or
$0.50 per diluted share, for the first nine months last year.
Total inventory at the end of the third quarter was $237.0
million, a $21.8 million, or 10.1%, increase versus the balance at
September 27, 2014, and a 13.4% increase on an inventory per square
foot basis, primarily to support Q4 holiday sales. Inventory turns
for 2015 decreased by 1.2% versus the first nine months of last
year.
2015 Guidance
We are updating our previously announced full year guidance:
- Comparable store sales are expected to be in the range of 3.5%
to 5.5%, up from our previously issued range of 1.0% to 4.0%,
- Pre-tax income is expected to range from approximately $6.0
million to $8.0 million, compared to our previously issued range of
$6.0 million to $11.0 million,
- EBITDA is now expected to be in the range of approximately
$27.0 million to $29.0 million, compared to our previous range of
$26.0 million to $31.0 million,
- GAAP diluted earnings per share is expected to be in the range
of approximately $0.14 to $0.20, compared to the previously issued
range of $0.14 to $0.27 earnings per share,
- Capital expenditures for fiscal 2015 are expected to be
approximately $25 million, compared to our previously issued range
of $22 million to $25 million.
Our comparable store sales are trending to the high end of our
original guidance, however, we are experiencing lower than
anticipated gross profits. The lower gross profits have been driven
by increased inventory shrinkage and a charge for a product quality
issue. Additionally, we had higher than expected clearance sales
resulting from the successful launch of our ship from store program
and the liquidation of inventory associated with the closure of our
stores in Canada.
Investor Conference Call
West Marine will hold a conference call and webcast on Thursday,
October 29, 2015, at 1:00 p.m. Eastern Time to discuss its
third quarter 2015 results. The live call will be webcast and
available in real time on the Internet at westmarine.com under
"Investor Relations." Participants may also dial (888) 756-1546 in
the United States and Canada and (706) 634-1041 for international
calls. Please be prepared to give the conference ID number
52141444.
An audio replay of the call will be available October 29, 2015
at 4:00 p.m. EDT through November 5, 2015 at 11:59 p.m. EDT. The
replay number is (855) 859-2056 in the United States and Canada and
(404) 537-3406 for international calls. The access code is
52141444.
About West Marine
Founded in 1968 by a sailor, West Marine, Inc. is the largest
omni-channel specialty retailer exclusively offering boating gear,
apparel and footwear and other waterlife-related products to anyone
who enjoys recreational time on or around the water. With over 260
stores located in 38 states, Puerto Rico and Canada and an
eCommerce website reaching domestic and international customers,
West Marine is the leading waterlife outfitter for cruisers,
sailors, anglers, paddle sports enthusiasts and industry service
providers. West Marine has everything you need for your life on the
water. For more information on West Marine, its products and store
locations, visit westmarine.com or call 1-800-BOATING
(1-800-262-8464). West Marine’s stock is traded on NASDAQ under the
symbol WMAR.
Special Note Regarding Forward-Looking
Statements
This press release includes “forward-looking” information (as
defined in the Private Securities Litigation Reform Act of 1995),
including statements that are predictive or express expectations
that depend on future events or conditions that involve risks and
uncertainties. These risks and uncertainties include, among other
things, expectations related to our earnings and growth in
profitability, expectations that our investments will continue to
drive our growth strategies, expectations related to our ability to
manage our assets, including inventory productivity, and our
expectations for full-year 2015 results, as well as facts and
assumptions underlying these expectations and projections. In
addition, the results presented in this release are preliminary and
unaudited, and may change as we finalize our financial statements.
Actual results for the third quarter of 2015 and the current fiscal
year may differ materially from the preliminary expectations
expressed or implied in this release due to various risks,
uncertainties or other factors, including the risk factors set
forth in West Marine’s annual report on Form 10-K for the fiscal
year ended January 3, 2015, as well as the discussion of critical
accounting policies in our Form 10-K for the year ended January 3,
2015. Except as required by applicable law, West Marine assumes no
responsibility to update any forward-looking statements as a result
of new information, future events or otherwise.
Non-GAAP Financial Information
This release references certain financial information not
calculated in accordance with accounting principles generally
accepted in the United States (“GAAP”), specifically EBITDA. We
believe that EBITDA provides a clearer picture of operating
performance of the business, given the significant investments we
are making in the growth of the business, by eliminating the
effects of depreciation and interest expense. EBITDA is not a
measure of financial performance under GAAP and may not be defined
and calculated by other companies in the same manner. This non-GAAP
measure should be considered as a supplement to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP. Management has reconciled this non-GAAP
financial measure to the most directly comparable GAAP financial
measure in the table set forth below.
West Marine, Inc. |
|
|
|
|
|
Condensed Consolidated Balance Sheets |
|
|
|
|
(Unaudited
and in thousands, except share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 3, 2015 |
|
September 27, 2014 |
|
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
Cash |
|
|
$ |
60,486 |
|
|
$ |
63,603 |
|
|
|
Trade receivables, net |
|
|
8,565 |
|
|
|
8,460 |
|
|
|
Merchandise inventories |
|
|
236,984 |
|
|
|
215,232 |
|
|
|
Deferred income taxes |
|
|
18,167 |
|
|
|
16,370 |
|
|
|
Other current assets |
|
|
5,597 |
|
|
|
5,666 |
|
|
|
|
Total
current assets |
|
|
329,799 |
|
|
|
309,331 |
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
78,980 |
|
|
|
79,950 |
|
|
|
Long-term
deferred income taxes |
|
3,580 |
|
|
|
4,055 |
|
|
|
Other
assets |
|
|
|
3,348 |
|
|
|
3,577 |
|
|
TOTAL ASSETS |
|
|
$ |
415,707 |
|
|
$ |
396,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
38,203 |
|
|
$ |
34,451 |
|
|
|
Accrued
expenses and other |
|
47,302 |
|
|
|
46,325 |
|
|
|
|
Total
current liabilities |
|
|
85,505 |
|
|
|
80,776 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
rent and other |
|
|
20,852 |
|
|
|
15,984 |
|
|
|
|
Total
liabilities |
|
|
106,357 |
|
|
|
96,760 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
Preferred
stock, $.001 par value: 1,000,000 shares authorized; no shares
outstanding |
|
- |
|
|
|
- |
|
|
|
Common
stock, $.001 par value: 50,000,000 shares authorized; 25,384,450
shares issued and 24,695,561 |
|
|
|
|
|
shares outstanding at
October 3, 2015, and 25,014,180 shares issued and 24,325,291
shares outstanding |
|
|
|
|
|
at September 27,
2014. |
|
|
25 |
|
|
|
25 |
|
|
|
Treasury
stock |
|
|
(9,285 |
) |
|
|
(9,171 |
) |
|
|
Additional
paid-in capital |
|
|
210,743 |
|
|
|
206,700 |
|
|
|
Accumulated
other comprehensive loss |
|
(567 |
) |
|
|
(534 |
) |
|
|
Retained
earnings |
|
|
108,434 |
|
|
|
103,133 |
|
|
|
|
Total stockholders' equity |
|
309,350 |
|
|
|
300,153 |
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY |
$ |
415,707 |
|
|
$ |
396,913 |
|
|
|
|
|
|
|
|
|
|
|
West Marine, Inc. |
|
|
|
|
|
Condensed Consolidated Statements of
Income |
|
|
|
|
(Unaudited and in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
October 3, 2015 |
|
September 27, 2014 |
Net
revenues |
$ |
194,375 |
|
|
100.0 |
% |
|
$ |
196,510 |
|
|
100.0 |
% |
Cost of
goods sold |
|
138,115 |
|
|
71.1 |
% |
|
|
138,123 |
|
|
70.3 |
% |
|
Gross profit |
|
56,260 |
|
|
28.9 |
% |
|
|
58,387 |
|
|
29.7 |
% |
Selling,
general and administrative expense |
|
47,576 |
|
|
24.4 |
% |
|
|
48,512 |
|
|
24.7 |
% |
|
Income
from operations |
|
8,684 |
|
|
4.5 |
% |
|
|
9,875 |
|
|
5.0 |
% |
Interest
expense |
|
107 |
|
|
0.1 |
% |
|
|
99 |
|
|
0.0 |
% |
|
Income
before income taxes |
|
8,577 |
|
|
4.4 |
% |
|
|
9,776 |
|
|
5.0 |
% |
Provision for income taxes |
|
3,685 |
|
|
1.9 |
% |
|
|
4,839 |
|
|
2.5 |
% |
|
Net income |
$ |
4,892 |
|
|
2.5 |
% |
|
$ |
4,937 |
|
|
2.5 |
% |
|
|
|
|
|
|
|
Net income per common and common equivalent share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.20 |
|
|
|
$ |
0.20 |
|
|
|
Diluted |
$ |
0.20 |
|
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Weighted
average common and common equivalent |
|
|
|
|
|
shares
outstanding: |
|
|
|
|
|
|
Basic |
|
24,694 |
|
|
|
|
24,323 |
|
|
|
Diluted |
|
24,718 |
|
|
|
|
24,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended |
|
|
October 3, 2015 |
|
September 27, 2014 |
Net
revenues |
$ |
574,620 |
|
|
100.0 |
% |
|
$ |
546,332 |
|
|
100.0 |
% |
Cost of
goods sold |
|
400,618 |
|
|
69.7 |
% |
|
|
380,744 |
|
|
69.7 |
% |
|
Gross profit |
|
174,002 |
|
|
30.3 |
% |
|
|
165,588 |
|
|
30.3 |
% |
Selling,
general and administrative expense |
|
146,044 |
|
|
25.4 |
% |
|
|
142,268 |
|
|
26.0 |
% |
|
Income
from operations |
|
27,958 |
|
|
4.9 |
% |
|
|
23,320 |
|
|
4.3 |
% |
Interest
expense |
|
338 |
|
|
0.1 |
% |
|
|
322 |
|
|
0.1 |
% |
|
Income
before income taxes |
|
27,620 |
|
|
4.8 |
% |
|
|
22,998 |
|
|
4.2 |
% |
Provision for income taxes |
|
12,041 |
|
|
2.1 |
% |
|
|
10,772 |
|
|
2.0 |
% |
|
Net income |
$ |
15,579 |
|
|
2.7 |
% |
|
$ |
12,226 |
|
|
2.2 |
% |
|
|
|
|
|
|
|
Net income per common and common equivalent share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.63 |
|
|
|
$ |
0.51 |
|
|
|
Diluted |
$ |
0.63 |
|
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
Weighted
average common and common equivalent |
|
|
|
|
|
shares
outstanding: |
|
|
|
|
|
|
Basic |
|
24,599 |
|
|
|
|
24,202 |
|
|
|
Diluted |
|
24,709 |
|
|
|
|
24,393 |
|
|
|
|
|
|
|
|
|
West Marine, Inc. |
|
|
|
|
|
Condensed Consolidated Statements of Cash
Flows |
|
|
|
|
(Unaudited
and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended |
|
|
|
|
|
|
July 4, 2015 |
|
June 28, 2014 |
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income |
|
|
$ |
15,579 |
|
|
$ |
12,226 |
|
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
15,385 |
|
|
|
13,378 |
|
|
|
|
Share-based
compensation |
|
2,154 |
|
|
|
2,376 |
|
|
|
|
Excess tax
benefit from share-based compensation |
|
- |
|
|
|
(223 |
) |
|
|
|
Deferred
income taxes |
|
|
878 |
|
|
|
(603 |
) |
|
|
|
Provision
for doubtful accounts |
|
62 |
|
|
|
82 |
|
|
|
|
Lower of cost or market inventory adjustments |
|
2,128 |
|
|
|
1,112 |
|
|
|
|
Loss on
asset disposals |
|
|
716 |
|
|
|
325 |
|
|
|
Changes in
assets and liabilities: |
|
|
|
|
|
|
Trade receivables |
|
|
(1,784 |
) |
|
|
(2,101 |
) |
|
|
|
Merchandise inventories |
|
(24,814 |
) |
|
|
(13,308 |
) |
|
|
|
Other
current assets |
|
|
7,624 |
|
|
|
2,990 |
|
|
|
|
Other
assets |
|
|
308 |
|
|
|
(261 |
) |
|
|
|
Accounts
payable |
|
|
5,070 |
|
|
|
12,594 |
|
|
|
|
Accrued
expenses and other |
|
5,622 |
|
|
|
9,104 |
|
|
|
|
Deferred
items and other non-current liabilities |
|
95 |
|
|
|
1,180 |
|
|
|
Net cash
provided by operating activities |
|
29,023 |
|
|
|
38,871 |
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Proceeds
from sale of property and equipment |
|
29 |
|
|
|
36 |
|
|
|
|
Purchases
of property and equipment |
|
(15,640 |
) |
|
|
(20,832 |
) |
|
|
Net cash
used in investing activities |
|
(15,611 |
) |
|
|
(20,796 |
) |
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Borrowings
on line of credit |
|
816 |
|
|
|
2,087 |
|
|
|
|
Repayments on line of credit |
|
(816 |
) |
|
|
(2,087 |
) |
|
|
|
Proceeds from exercise of stock options |
|
1,141 |
|
|
|
1,314 |
|
|
|
|
Proceeds from sale of common stock pursuant to Associates Stock
Buying Plan |
|
296 |
|
|
|
318 |
|
|
|
|
Excess tax benefit from share-based compensation |
|
- |
|
|
|
223 |
|
|
|
|
Treasury shares acquired |
|
(114 |
) |
|
|
(4,766 |
) |
|
|
Net cash
provided by (used in) financing activities |
|
1,323 |
|
|
|
(2,911 |
) |
|
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
76 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH |
|
|
14,811 |
|
|
|
15,195 |
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
45,675 |
|
|
|
48,408 |
|
|
CASH AT END OF PERIOD |
|
$ |
60,486 |
|
|
$ |
63,603 |
|
|
Other cash flow information: |
|
|
|
|
|
|
Cash paid
for interest |
|
$ |
220 |
|
|
$ |
227 |
|
|
|
Cash paid
for income taxes, net of refunds of $80 and $1,391 |
|
44 |
|
|
|
2,067 |
|
|
Non-cash investing activities: |
|
|
|
|
|
|
|
Property
and equipment additions in accounts payable |
|
836 |
|
|
|
1,326 |
|
|
|
|
|
|
|
|
|
|
|
|
West Marine |
|
Reconciliations of Non-GAAP
Information |
|
Net Income to Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA") |
|
(Unaudited and in millions) |
|
|
|
|
|
13 Weeks Ended |
|
13 Weeks Ended |
|
39 Weeks Ended |
|
39 Weeks Ended |
|
|
|
October 3, 2015 |
|
September 27, 2014 |
|
October 3, 2015 |
|
September 27, 2014 |
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income |
|
$ |
4.9 |
|
|
$ |
4.9 |
|
|
$ |
15.6 |
|
|
$ |
12.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Add
Back: |
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
Depreciation and Amortization |
|
|
5.2 |
|
|
|
4.6 |
|
|
|
15.2 |
|
|
|
13.2 |
|
|
Income Tax Expense |
|
|
3.7 |
|
|
|
4.8 |
|
|
|
12.0 |
|
|
|
10.8 |
|
|
|
|
|
9.0 |
|
|
|
9.5 |
|
|
|
27.5 |
|
|
|
24.3 |
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
13.9 |
|
|
$ |
14.4 |
|
|
$ |
43.1 |
|
|
$ |
36.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
53 Weeks Ended |
|
|
|
|
|
Fiscal Year 2015 |
|
January 3, 2015 |
|
|
|
|
|
Low |
|
High |
|
|
|
|
|
Estimated/Reported GAAP Net Income |
|
$ |
3.6 |
|
|
$ |
6.5 |
|
|
$ |
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add Back
Estimated/Reported: |
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
0.4 |
|
|
|
0.4 |
|
|
|
0.4 |
|
|
|
|
Depreciation and Amortization |
|
|
19.6 |
|
|
|
19.6 |
|
|
|
18.2 |
|
|
|
|
Income Tax Expense |
|
|
2.4 |
|
|
|
4.5 |
|
|
|
2.1 |
|
|
|
|
|
|
|
22.4 |
|
|
|
24.5 |
|
|
|
20.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated/Reported EBITDA |
|
$ |
26.0 |
|
|
$ |
31.0 |
|
|
$ |
22.6 |
|
|
|
Contact: West Marine, Inc.
Deborah Ajeska, Controller
(831) 761-4229
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