West Marine reports 3Q results

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West Marine today reported an increase in third-quarter sales and a gain in profits, adjusted to exclude a tax benefit in 2011.

The Watsonville, Calif.-based retailer said net income for the quarter that ended Sept. 29 was $10.3 million, or 43 cents a share, compared with $7.7 million, or 33 cents a share, in the prior year’s quarter, adjusted to exclude the tax benefit of a valuation allowance release last year. The tax benefit was recorded during the second quarter of 2011.

Net revenues for the quarter were $191.9 million, an increase of 6.5 percent from $180.3 million a year earlier. Revenues in the stores segment were $175 million, up $11.2 million, or 6.8 percent, from the prior year’s quarter, and comparable-store sales grew 4.9 percent.

West Marine said third quarter port supply segment revenues, representing sales to the company’s wholesale customers through its distribution centers, were $6.7 million, a decrease of $400,000, or 5 percent, from the same period last year. Net revenues in the company’s direct-to-customer segment were $10.3 million, an increase of $900,000, or 9.1 percent, from the prior year’s quarter.

The company reaffirmed its previously issued earnings guidance for the year, which calls for pretax income in a range of $23 million to $26 million, an increase of 8 percent to 23 percent from 2011. Total sales are expected to be in the range of $670 million to $680 million, with comparable-store sales growth of 2 percent to 3.5 percent, the company said.

"Our store teams did a great job driving a comparable-store sales increase of 4.9 percent and we were effective at delivering these dollars to the bottom line,” West Marine CEO Matt Hyde said in a statement.

“Looking a little deeper into the numbers, we enjoyed a healthy core business with impressive contributions from our growth strategies. As we turn toward the end of the year we are focused on inspiring our customers during the gift-giving season and we are excited about our strategies propelling us forward."

Looking ahead to 2013, the company said it remains focused on three previously discussed strategies that it expects will drive future sales and profitability growth.

West Marine’s store optimization strategy of moving to fewer, larger stores is designed to provide the company with an environment to execute its second strategy — offering expanded merchandise assortments to a broader group of customers. This includes core product categories, such as watersports and fishing, as well as the soft goods categories, such as footwear, apparel and accessories, the company said.

West Marine’s third strategy centers on maximizing its e-commerce website to provide customers with an improved shopping experience.

The company said it will be investing significant resources to support the strategies, including a 40 percent to 50 percent increase in its capital investment from 2012 to support sales growth and upgrade its infrastructure. The company said it anticipates capital expenditures for this year to be about $19 million.

West Marine said the strategies and investments support the company’s shift to an omni-channel retail model designed to provide a seamless customer experience and to better position the retailer to deliver incremental sales and operating margin improvement over time.

Click here for the full earnings report.

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