West Marine today reported a 50 percent increase in profit for the third quarter in what its chief executive described as "a rather tepid market" and maintained the 2011 pretax earnings guidance it previously issued.
Net income for the quarter that ended Oct. 1 was $11.2 million, or 48 cents a diluted share, compared with $7.4 million, or 32 cents a share, a year earlier.
Net revenue for the period was $180.3 million, an increase of 4.5 percent from $172.5 million in the quarter last year.
“We are pleased with the solid results delivered during the third quarter, which fully met our expectations,” West Marine president and CEO Geoff Eisenberg said. “We continue to be optimistic about our business, as exemplified by the upcoming opening in just a few weeks of our super-flagship store in Fort Lauderdale, which will be almost twice as large as any store we've ever done."
Net income for the first nine months of the year was $43.6 million, or $1.88 a diluted share, a 30.6 percent increase from $33 million, or $1.44 a diluted share, in the same period last year. Included in year-to-date net income was a $4.8 million, or 21 cents a diluted share, income tax benefit related to the reversal of the majority of the company’s tax valuation allowance.
The company said it was maintaining its full-year pretax earnings guidance at a range of $18.5 million to $20 million, with diluted earnings per share in the range of $1.05 to $1.16, which includes the income tax benefit.
Income before taxes for the third quarter was $12.7 million, a $5 million, or 65.9 percent, increase from the same period last year. Income before taxes for the first nine months of the year was $40.4 million, a $6.2 million, or 18.1 percent, increase from the same period last year.
Revenue in the stores segment was $163.8 million in the third quarter, up $6.4 million, or 4.1 percent, compared with the same period last year. Comparable-store sales grew 3.9 percent from the period a year earlier.
Eisenberg said during a conference call that the new store in Fort Lauderdale will be 50,000 square feet and will open Nov. 11. It is one of five stores he said the company will open between now and the end of the first quarter next year.
Eisenberg said flagship stores of 25,000 square feet will open in Honolulu, Old Saybrook, Conn., and Clear Lake, Texas, and an 11,000-square-foot standard store will open in Biloxi, Miss.
He said West Marine hopes that the Honolulu store will become a destination for visitors from Japan and the Pacific, which has become an important market for the company.
Eisenberg said West Marine expected the boating market to grow only a little last year and this year and that the company believed its management and business strategies would be key to growth.
Nonetheless, he said, the question is not if, but when boating will finally begin to flourish.
“We believe the passion for boating is one that does not die,” Eisenberg said. “It only recedes.”
West Marine said in its earnings report that the primary driver of growth was increased sales to Port Supply (wholesale) customers through the company’s store locations as part of ongoing efforts to better serve that group and to leverage the store facilities. Revenue from stores that opened in 2010 and the first nine months of this year contributed $8.5 million to stores segment sales. Stores that closed during those periods effectively reduced revenue by $7 million. The company said the majority of the closings were a result of its ongoing real estate optimization strategy. West Marine is evolving into a company that has fewer but larger stores.
The company’s Port Supply segment revenue, representing sales through West Marine’s distribution centers, for the third quarter was $7 million, an increase of $300,000, or 4.8 percent, from the same period last year.
The company said the continued execution of its real estate optimization efforts, including adding hubs in store locations that target and cater to Port Supply customers, continues to shift revenue from the Port Supply segment to the stores segment. West Marine said it believes its initiatives improve its service model to wholesale customers.