West Marine reported a 6.7 percent drop in net revenues for the third quarter, but officials say the company is free of debt for the first time in its history, with a cash balance of $22.3 million.
For the quarter that ended Oct. 3, net revenues dropped to $168.2 million from $180.2 million in the year-ago period.
The decrease was attributed to the fiscal calendar shift from last year, meaning fewer peak-season days in the third quarter. Also, store closings in the third and fourth quarters of 2008 and in the first three quarters of 2009 reduced net revenues by $8.9 million versus last year.
However, this decline was offset by $5.9 million in net revenues by new stores opened during the same time period as the store closings.
"During the third quarter, the West Marine team of over 4,000 associates continued to make excellent progress in all of our key long-term strategies, most notably store optimization, inventory management, and product line expansions," West Marine CEO Geoff Eisenberg said in a statement.
So far this year, eight new stores have opened, including an international location in Turkey and two flagship stores. There were 15 stores closed, but only two due to economic reasons, CFO Tom Moran said during a conference call with analysts this morning.
The rest, he said, were closed as part of the long-range optimization plan the company has in place to consolidate smaller stores into larger ones. There are currently 344 West Marine stores.
Eisenberg said the flagship stores in Brick, N.J., and Jacksonville, Fla., are doing well and have received positive feedback from consumers. The flagship stores average 25,000 to 30,000 square feet, as opposed to the standard 15,000 to 18,000 square feet.
Eisenberg said solid earnings growth was accomplished, and the company is positioned positively for future growth.
"One large favorable cause was the fact that due to the reasonable gas prices, people used their boats more this summer," he said during the conference call. "And it is a great feeling to look at the balance sheet and see zero on the debt line."
Gross profit for the 13-week period was $47.5 million, a decrease of $2.3 million from last year. But as a percentage of net revenues, gross profit increased by 0.6 percent to 28.2 percent, compared to last year's gross profit of 27.6 percent. This is primarily due to lower unit buying and distribution costs in light of the company's reduced inventory levels and improved shrinkage results.
Earnings per share for the third quarter were 38 cents, compared to 16 cents for the same period last year, an increase of 13 percent. Year-to-date earnings per share were $1.13, compared to a loss of 45 cents for the same period last year.
Net revenues in the 39 weeks ending Oct. 3 were $484.5 million, a 6.9 percent decrease compared to net revenues of $520.2 million for the 39 weeks ending Sept. 27, 2008. Comparable store sales also declined 3.4 percent versus a year ago, and revenue for the first nine months of this year were not impacted materially by the fiscal calendar shift.
Year-to-date gross profit was $142.5 million, a decrease of $8.2 million compared to the same period last year. But as a percentage of net revenues, the gross profit increased by 0.4 percent to 29.4 percent, compared to the gross profit of 29 percent for the same period last year. The increase is due to a reduction in promotional and clearance activity, a shift in sales mix to higher-margin product categories, and improved shrinkage results.
At midday, West Marine stock was trading at $8.25 per share. It's 52-week high and low are $9.61 and $3.53.
— Elizabeth Ellis