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West Marine Reports First Quarter 2017 Results

04/26/17

WATSONVILLE, Calif., April 26, 2017 (GLOBE NEWSWIRE) -- West Marine, Inc. (NASDAQ:WMAR) today reported financial results for the first quarter ended April 1, 2017. First quarter 2017 net revenues were $129.1 million, a decrease of 1.0% compared to the same period last year. Comparable store sales were flat. Pre-tax loss was $12.1 million, compared to pre-tax loss of $15.2 million last year in the same period.  Loss per share was $0.29 per share compared with $0.37 per share in the same period last year.

Matt Hyde, CEO of West Marine, commented: “We are pleased that the improvements in our cost structure and our strategies are resulting in solid bottom-line gains. Despite the challenging weather and retail environment in the quarter, we’ve maintained our comparable store sales and improved gross margins over last year.”

Further Progress on Growth Strategies

  • Sales from eCommerce increased by 9.5% compared to the first quarter of 2016 and represented 13.2% of total sales, compared to 11.9% for the same period last year, showing progress towards the goal of 15% of total sales.
  • Sales in merchandise expansion product lines, which include footwear, apparel, clothing accessories, fishing products and paddlesports equipment, increased slightly, while core product sales were down 0.8%, compared to the same period last year.

Results for the First Quarter of 2017

Net revenues for the quarter ended April 1, 2017 decreased by $1.3 million, or 1.0%, to $129.1 million compared to $130.4 million for the quarter ended April 2, 2016.

Gross margin improved to 25.5% of net revenues, compared to 25.2% during the same period in 2016. Selling, general and administrative expense decreased year-over-year by $3.2 million.

Net loss for the first quarter was $7.3 million, or $0.29 per share, compared to net loss of $9.1 million, or $0.37 per share, for the first quarter of 2016.

Inventory at the end of the first quarter was down $11.2 million compared to the same period in 2016. As of April 1, 2017, the company had cash and cash equivalents totaling $47.0 million compared to $22.4 million at the same point in 2016.

Guidance

Based on information available as of today, the company reiterated its most recently issued full-year 2017 pre-tax income guidance of $13 to $16 million on comparable store sales increases of 1% to 2% for the full year. Total fiscal year revenue is projected to be $707 to $715 million.

Investor Conference Call

West Marine will hold a conference call and webcast on Wednesday, April 26, 2017, at 4:30 p.m. Eastern Time to discuss its first quarter 2017 results. The live call will be webcast and available in real time on the internet at westmarine.com under “Investor Relations.” Participants also may 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 3635365.

An audio replay of the call will be available April 26, 2017 at 8:00 p.m. Eastern Time through May 3, 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 3635365.

About West Marine

Each person has a unique connection to the water. At West Marine (westmarine.com, NASDAQ: WMAR), our knowledge, enthusiasm and products prepare waterlife adventurers to foster that connection and explore their passions. With more than 250 stores located in 38 states and Puerto Rico and eCommerce website reaching domestic and international customers, and a wholesale business for our professional customers, West Marine is recognized as a leading Waterlife Outfitter for cruisers, sailors, anglers and paddlesports enthusiasts. Since first opening our doors in 1968, West Marine associates continue to share the same love for the water as our customers and provide helpful advice on the gear and gadgets they need to be safe and have fun.

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 growth in net revenues and profitability, expectations that our investments will continue to drive our growth strategies, while improving profit margins, expectations related to our ability to manage costs, 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 first quarter 2017 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 December 31, 2016, as well as the discussion of critical accounting policies in our Form 10-K for the year ended December 31, 2016. 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 helpful picture of the 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 net income (loss), the most directly comparable GAAP financial measure in the table set forth below. For more information, see our Current Report on Form 8-K filed April 26, 2017.

West Marine, Inc.      
Condensed Consolidated Balance Sheets      
(Unaudited and in thousands, except share data)      
       
       
  April 1, 2017   April 2, 2016
ASSETS      
Current assets:      
Cash and cash equivalents $ 46,970     $ 22,351  
Trade receivables, net   9,087       9,076  
Merchandise inventories, net   257,379       268,594  
Other current assets   26,873       27,141  
Total current assets   340,309       327,162  
       
Property and equipment, net   79,595       81,967  
Long-term deferred income taxes   3,779       4,127  
Other assets   4,415       4,256  
TOTAL ASSETS $ 428,098     $ 417,512  
       
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $ 63,170     $ 66,905  
Accrued payroll   13,224       13,627  
Accrued expenses and other   30,578       28,595  
Total current liabilities   106,972       109,127  
       
Deferred rent and other   20,411       17,854  
Total liabilities   127,383       126,981  
       
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; 25,861,501 shares issued and 25,172,612      
shares outstanding at April 1, 2017, and 25,520,555 shares issued and 24,831,666 shares outstanding      
at April 2, 2016.   26       26  
Treasury stock   (9,698 )     (9,375 )
Additional paid-in capital   215,581       212,167  
Accumulated other comprehensive loss   (542 )     (549 )
Retained earnings   95,348       88,262  
Total stockholders' equity   300,715       290,531  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 428,098     $ 417,512  

 

West Marine, Inc.            
Condensed Consolidated Statements of Operations        
(Unaudited and in thousands, except per share data)        
             
    13 Weeks Ended
    April 1, 2017   April 2, 2016
Net revenues   $ 129,063     100.0 %   $ 130,405     100.0 %
Cost of goods sold     96,141     74.5 %     97,500     74.8 %
Gross profit     32,922     25.5 %     32,905     25.2 %
Selling, general and administrative expense       44,888     34.8 %     48,043     36.8 %
Loss from operations     (11,966 )   (9.3 )%     (15,138 )   (11.6 )%
Interest expense     110     0.1 %     105     0.1 %
Loss before income taxes     (12,076 )   (9.4 )%     (15,243 )   (11.7 )%
Income tax benefit     (4,806 )   (3.8 )%     (6,130 )   (4.7 )%
Net loss   $ (7,270 )   (5.6 )%   $ (9,113 )   (7.0 )%
             
Net loss per common and common equivalent share:            
             
Basic   $ (0.29 )       $ (0.37 )    
Diluted   $ (0.29 )       $ (0.37 )    
             
Weighted average common and common equivalent            
shares outstanding:            
Basic     25,047           24,766      
Diluted     25,047           24,766      

 

West Marine, Inc.        
Condensed Consolidated Statements of Cash Flows        
(Unaudited and in thousands)        
         
    13 Weeks Ended
    April 1, 2017   April 2, 2016
         
OPERATING ACTIVITIES:        
Net loss   $ (7,270 )   $ (9,113 )
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization     5,804       5,452  
Share-based compensation     791       680  
Deferred income taxes     858       456  
Provision for doubtful accounts     (5 )     3  
Lower of cost or market inventory adjustments     1,043       737  
Loss on asset disposals     1       22  
Changes in assets and liabilities:        
Trade receivables     (2,668 )     (1,938 )
Merchandise inventories     (46,317 )     (46,478 )
Other current assets     (6,310 )     (3,796 )
Other assets     30       (97 )
Accounts payable     31,551       41,137  
Accrued payroll     (2,385 )     (7,879 )
Accrued expenses and other     (254 )     1,174  
Deferred items and other non-current liabilities     383       262  
Net cash used in operating activities     (24,748 )     (19,378 )
         
INVESTING ACTIVITIES:        
Proceeds from sale of property and equipment     14       11  
Purchases of property and equipment     (4,228 )     (6,348 )
Net cash used in investing activities     (4,214 )     (6,337 )
         
FINANCING ACTIVITIES:        
Borrowings on line of credit     120       438  
Repayments on line of credit     (90 )     (438 )
Treasury shares acquired     (236 )     (89 )
Net cash used in financing activities     (206 )     (89 )
           
Effect of exchange rate changes on cash     (3 )     (4 )
         
NET DECREASE IN CASH     (29,171 )     (25,808 )
         
CASH AT BEGINNING OF PERIOD     76,141       48,159  
CASH AT END OF PERIOD   $ 46,970     $ 22,351  
Other cash flow information:        
Cash paid for interest   $ 103     $ 82  
Cash paid for income taxes, net of refunds of $9 and $2,937     116       (2,807 )
Non-cash investing activities:        
Property and equipment additions in accounts payable     1,072       1,150  
         

 

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
    April 1, 2017   April 2, 2016
         
GAAP Net Income   $ (7.3 )   $ (9.1 )
         
Add Back:        
Interest Expense     0.1       0.1  
Depreciation and Amortization *     5.8       5.4  
Income Tax Benefit       (4.8 )       (6.1 )
      1.1       (0.6 )
         
EBITDA   $ (6.2 )   $ (9.7 )
         
         
* Included in cost of goods sold and selling, general and administrative expense. Amortization of deferred
financing costs related to our revolving credit facility are included in interest expense.
Contact: West Marine, Inc.Jeffrey Lasher, Executive Vice President and Chief Financial Officer  
(831) 761-4229

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