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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended April 2, 2005

OR

For the transition period from              to             

Commission file number 0-22512

WEST MARINE, INC.

(Exact Name of Registrant as Specified in Its Charter)

500 Westridge Drive

Watsonville, CA 95076-4100

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (831) 728-2700

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  x    No  ¨

At April 29, 2005, the number of shares outstanding of the registrant’s common stock was 21,036,781.

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PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

WEST MARINE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

APRIL 2, 2005, JANUARY 1, 2005 AND APRIL 3, 2004

(Unaudited, in thousands, except share data)

See notes to condensed consolidated financial statements.

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WEST MARINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share and store data)

See notes to condensed consolidated financial statements.

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WEST MARINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

See notes to condensed consolidated financial statements.

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WEST MARINE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Thirteen Weeks Ended April 2, 2005 and April 3, 2004

(Unaudited)

NOTE 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared from the records of West Marine, Inc. in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting only of normal, recurring items) necessary to fairly present the financial position at April 2, 2005 and April 3, 2004, and the interim results of operations and cash flows for the 13-week periods then ended have been included.

The consolidated balance sheet at January 1, 2005, presented herein, has been derived from the audited consolidated financial statements of West Marine for the year then ended which were included in West Marine’s annual report on Form 10-K.

Accounting policies followed by West Marine are described in Note 1 to its audited consolidated financial statements for the year ended January 1, 2005. Certain information and disclosures normally included in the notes to financial statements prepared in accordance with generally accepted accounting principles have been omitted for purposes of the condensed consolidated interim financial statements presented herein. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, for the fiscal year ended January 1, 2005, which were included in West Marine’s annual report on Form 10-K.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the 13-week period ended April 2, 2005 are not necessarily indicative of the results to be expected for the year ending December 31, 2005, or any other interim period.

NOTE 2. Stock-based Compensation

West Marine has two stock-based employee compensation plans. West Marine accounts for those plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of the grant.

The following table illustrates the effect on net income and earnings per share if West Marine had applied the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation. Our calculations are based on a single option valuation approach and forfeitures are recognized as they occur (in thousands, except share and per share amounts).

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West Marine’s calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions:

NOTE 3. Intangible Assets

Intangible assets represent the value of a marketing agreement between West Marine and BoatU.S. and are being amortized on a straight-line basis over ten years.

Amortization expense for the next five years is estimated at $0.3 million per year.

NOTE 4. Segment Information

West Marine has three divisions - Stores, Wholesale (Port Supply) and Direct Sales (catalog and Internet)—all of which sell aftermarket recreational boating supplies directly to customers. West Marine’s customer base overlaps between its Stores and Wholesale divisions and between its Stores and Direct Sales divisions. All processes for the three divisions within the supply chain are commingled, including purchases from merchandise vendors, distribution center activity and customer delivery.

Assets are not presented by segment, as West Marine’s assets overlap among segments. Contribution is defined as net sales, less product costs and direct expenses. The following is financial information related to West Marine’s business segments (in thousands):

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

West Marine, Inc.

Watsonville, California

We have reviewed the accompanying condensed consolidated balance sheets of West Marine, Inc. and subsidiaries as of April 2, 2005, and April 3, 2004, and the related condensed consolidated statements of operations and cash flows for the 13-week periods ended April 2, 2005 and April 3, 2004. These interim financial statements are the responsibility of West Marine’s management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of West Marine, Inc. and subsidiaries as of January 1, 2005, and the related consolidated statements of income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 25, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 1, 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

May 12, 2005

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is based upon our financial statements as of the dates and for the periods presented in this section. You should read this discussion and analysis in conjunction with the Financial Statements and notes thereto found in Item 1 of this Form 10-Q.

General

West Marine is one of the largest boating supplies retailers in the world. We have three divisions—Stores, Wholesale (Port Supply) and Direct Sales (catalog and Internet) – all of which sell aftermarket recreational boating supplies directly to customers. At the end of the first quarter of 2005, we offered our products through 383 stores in 38 states, Puerto Rico and Canada; on the Internet (www.westmarine.com and www.boatus-store.com); and through catalogs. Also, we are engaged, through our Port Supply division, our stores and on the Internet (www.portsupply.com), in the wholesale distribution of products to commercial customers and other retailers.

Unless the context otherwise requires, “West Marine,” “we,” “us” and “our” refer to West Marine, Inc. and its subsidiaries. Our principal executive offices are located at 500 Westridge Drive, Watsonville, California 95076-4100, and our telephone number is (831) 728-2700.

All references to the first quarter of 2005 mean the 13-week period ended April 2, 2005, and all references to the first quarter of 2004 mean the 13-week period ended April 3, 2004.

Recent Accounting Pronouncements

In April 2005, the Securities and Exchange Commission (SEC) approved a new rule that delays the effective date of Statement of Financial Accounting Standard No. 123R (SFAS 123R) “Shared-Based Payment.” The SEC’s new rule allows West Marine to implement SFAS 123R at the beginning of our next fiscal year, or as of January 1, 2006. The new rule does not change the accounting required by SFAS 123R; it changes only the date for compliance with the standard. West Marine will apply SFAS 123R to all awards granted, modified or cancelled on or after January 1, 2006. We currently provide disclosure in our financial statement footnotes (see Note 2 in Item 1 of this Form 10-Q) to demonstrate the effect of expensing the fair value of stock option grants on net income (loss) and earnings per share using one of the option valuation methodologies allowed in the standard.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of West Marine’s financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the financial statements.

We believe our application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are constantly reevaluated and adjustments are made when facts and circumstances dictate a change.

We describe our stock-based compensation accounting policies in Note 2 to the financial statements located in Item 1 of this Form 10-Q. We have identified certain other critical accounting policies, which are described below.

Lease accounting. Our accounting practices and policies with respect to leasing transactions include: a) recording rent expense starting on the date we gain possession of leased property; b) conforming the lease term used in calculating straight-line rent expense with the term used to amortize improvements on leased property; and c) recording tenant improvement allowances received from landlords as an adjustment to deferred rent, reducing straight-line rent expense.

Deferred rent. Certain of our operating leases contain periods of free or reduced rent or contain predetermined fixed increases in the minimum rent amount during the lease term. For these leases, we recognize rent expense on a straight-line basis over the expected life of the lease, generally about ten years, including periods of free rent, and record the difference between the amount charged to rent expense and the rent paid as deferred rent. Tenant improvement allowances received from landlords are treated as deferred rent adjustments, reducing straight-line rent expense over the life of the lease.

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Revenue recognition. Typically, we record sales, net of estimated returns, when merchandise is purchased by customers at retail locations. When merchandise is shipped from a warehouse directly to a customer, we record sales when such merchandise is received by the customer. Return allowances, which reduce net sales for expected product returns, are estimated using historical experience. As of each of April 2, 2005, January 1, 2005 and April 3, 2004, reserves for allowances and returns were $0.2 million. The issuance of gift cards is recorded initially as a liability. Revenue is recognized at the time the customer redeems the gift card and takes possession of merchandise.

Comparable store sales. We define comparable store sales as sales from stores that have been open at least 13 months, where selling square footage did not change by more than 40% in the previous 13 months.

Merchandise categories. The merchandise that we sell can be divided into four general categories: Maintenance, which includes engine systems, plumbing and electrical; Safety, which includes electronics, navigation and media; Powerboat and Lifestyle, which includes apparel, cabin and galley, fishing, watersports, boats, motors and gift items; and Hardware, which includes fasteners, trailers, deck hardware, ropes, chains, anchors and ventilation. The following chart shows the relative proportion of gross sales contributed by each of these four categories:

Merchandise inventories. Our merchandise inventories are carried at the lower of cost or market on a first-in, first-out basis. Inventory cost includes certain indirect costs related to the purchasing, transportation and warehousing of merchandise. We make certain assumptions based upon historical experience and current information to adjust inventory value to the lower of cost or market.

Potentially obsolete inventories are marked down based upon current levels of discontinued product and historical analysis of the liquidation of discontinued inventory below cost. The nature of our inventory is such that the risk of obsolescence is not material. We adjust our inventories for estimated shrinkage based upon historical analysis.

Vendor allowances. We receive allowances from vendors through a variety of programs and arrangements, including cash discounts and purchase quantity discounts. We recognize such allowances as a reduction to cost of goods sold as the related products are sold or as a reduction in selling, general and administrative expenses when earned.

Long-lived assets. We depreciate furniture and equipment over useful lives of two to seven years, depending upon the specific category of asset. We depreciate leasehold improvements over the lesser of the lease term or the estimated useful lives of the improvements, usually ten years, and we depreciate buildings over 25 years. We review long-lived assets for impairment whenever events or changes in circumstances, such as store closures, indicate that the carrying value of an asset may not be recoverable. At the time a decision is made to close a store, we record an impairment charge, if appropriate, and accelerate depreciation over the revised useful life. We believe at this time that our long-lived assets’ carrying values and useful lives continue to be appropriate.

Income taxes. We record a valuation allowance to reduce our deferred tax assets to the amount we believe is more likely than not to be realized. While we have considered future taxable income, state tax apportionment and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should we determine that we would be able to realize deferred tax assets in the future in excess of our recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.

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Our tax filings are subject to audit by governmental authorities in the jurisdictions where we conduct business, which audits may result in assessments of additional taxes. We believe we have adequately provided for obligations that would result from these legal and tax proceedings where it is probable we will be required to pay some amounts and where we can estimate such amounts.

Foreign currency translation. In the preparation of consolidated financial statements, the assets and liabilities of our Canadian subsidiary are denominated in Canadian dollars and translated to U.S. dollars at the rate of exchange in effect at the balance sheet date while income and expenses are translated at average rates of exchange prevailing during the reporting period. The related translation adjustments are reflected in the other comprehensive income section of the consolidated statements of stockholders’ equity. Almost all of the revenues and expenditures of West Marine are denominated in U.S. dollars. However, foreign currency gains and losses from transactions denominated in foreign currencies, including inter-company transactions, are included in operating results and have not been significant to date.

Results of Operations

The following table sets forth certain income statement components expressed as a percent of net sales:

Net sales for the first quarter of 2005 were $125.3 million, a decrease of $3.9 million, or 3.0%, compared to net sales of $129.2 million in the first quarter of 2004. Net loss for the first quarter of 2005 was $5.5 million, or ($0.26) per share, compared to a net loss of $3.1 million, or ($0.15) per share, in the first quarter of 2004.

Net sales attributable to our Stores division decreased $2.0 million to $106.0 million in the first quarter of 2005, a 1.9% decrease compared to the first quarter of 2004, partly due to winter-like weather patterns causing boating season activities to be delayed in markets from the mid-Atlantic up into the northeast and across to the Great Lakes. Comparable store sales are an important performance metric used by our management. Comparable store sales decreased 6.8% for the first quarter of 2005 compared to the same period a year ago, partly due to the shift in the start of the boating season from the first quarter of 2004 to the second quarter of this year. Comparable store sales by region for the first quarter of 2005 were as follows: Northeast (22.4%); Southeast 1.3%; and Western (4.8%). Wholesale (Port Supply) net sales through our distribution centers decreased 5.4%, to $11.3 million in 2005 compared with 2004, primarily because wholesale customers purchased more merchandise through our store locations. Direct Sales net sales decreased $1.2 million, or 12.9%, to $8.0 million, primarily due to Direct Sales customers migrating to new stores as they open in these customers’ geographic areas.

Gross profit decreased by $0.9 million, or 2.6%, to $32.8 million for the first quarter of 2005, compared to $33.7 million in the first quarter of 2004. Gross profit percentage is another key performance metric used by our management. Gross profit as a percentage of net sales increased 0.1% to 26.2% for the first quarter of 2005, compared to 26.1% in the first quarter of 2004. Gross profit as a percentage of sales increased for the first quarter of 2005, compared to the prior year primarily due to better product margins stemming from several factors, including private label product expansion and a greater mix of higher margin products. This increase was partially offset by the deleveraging of occupancy costs due to the addition of new stores, which add occupancy costs much like those of a mature store without the corresponding increase in sales.

Selling, general and administrative expenses increased $3.2 million, or 8.7%, to $40.2 million in the first quarter of 2005, compared to $37.0 million for the same period last year. Selling, general and administrative expenses increased as a percentage of sales to 32.1% in the first quarter of 2005, versus 28.6% in the first quarter of last year, mainly due to lower than expected sales combined with costs for new stores and store initiatives. The future profitability of our company largely is dependent on our ability to increase sales and gross profit while containing selling, general and administrative expenses.

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Interest expense decreased $0.1 million, or 8.0%, to $1.6 million in the first quarter of 2005, compared to $1.7 million for the same period last year. The decrease in interest expense was due to lower borrowing costs associated with our new credit facility.

Liquidity and Capital Resources

Our cash needs primarily are for working capital to support our inventory requirements and capital expenditures, pre-opening expenses, beginning inventory for new stores and remodeling or relocating older stores. We may also require additional capital in the event we choose to pursue acquisition opportunities. We believe our existing credit facility and cash flows from operations will be sufficient to satisfy our liquidity needs for the next 12 months.

Operating Activities

During the first quarter of 2005, net cash used in operating activities consisted primarily of a net loss of $5.5 million and increases in: inventories of $21.5 million; accounts receivable of $2.0 million; and accounts payable of $8.9 million. These increases were partially offset by a decrease in accrued expenses of $2.5 million and a decrease in prepaid expenses of $4.2 million. Inventory increased approximately 6.9% over last year because of the addition of nine new stores and because first quarter sales were lower than we had projected. On a per square foot basis, inventory increased approximately 1.3%. Trade payables increased 7.8% over last year, primarily because of the increase in inventory purchases. We expect lower inventory purchases over the remainder of this fiscal year.

Investing Activities

During the first quarter of 2005, we spent $11.7 million for capital expenditures. We expect to spend from $25.0 million to $30.0 million on capital expenditures during 2005, mainly for new stores and information systems improvements. We intend to pay for our expansion through cash generated from operations and bank borrowings.

Financing Arrangements

We have a $190.0 million credit facility that expires in October 2009. Borrowings under this credit facility at the end of the first quarter of 2005 were $157.9 million, bearing interest at rates ranging from 4.08% to 5.75%. At West Marine’s option, subject to certain conditions and restrictions, the credit facility provides up to $150.0 million in additional financing at various times during the term. This credit facility is guaranteed by West Marine and its subsidiaries and is secured by a security interest in substantially all of the assets of West Marine and its subsidiaries. The credit facility includes a $30.0 million sub-facility available for the issuance of commercial and stand-by letters of credit, and a sub-limit of up to $20.0 million for same day advances.

Depending on our election at the time of borrowing, our credit facility bears interest at either (a) the higher of (i) the agent’s prime rate plus a margin or (ii) the federal funds rate plus 0.5% or (b) LIBOR plus a margin.

Our credit facility contains various covenants which require us to maintain certain financial ratios, including debt service coverage, debt to earnings and current ratio. In light of certain accounting changes implemented at year end, we amended our consolidated leverage ratio covenant in March 2005. The covenants also require us to maintain minimum levels of net worth and place limitations on the types and levels of certain investments. These covenants also restrict the repurchase or redemption of our common stock and payment of dividends, investments in subsidiaries and annual capital expenditures. As of April 2, 2005, and January 1, 2005, we were in compliance with all such covenants.

At the end of the first quarter of 2005, we had $4.3 million of outstanding stand-by letters of credit and $0.2 million of outstanding commercial letters of credit, compared to $4.0 million and $1.2 million, respectively, at the end of first quarter 2004.

For the first quarter of 2005, the weighted average interest rate on all of our outstanding borrowings was 4.19%.

Off-Balance Sheet Arrangements

We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as special purpose entities or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other limited purposes. As of April 2, 2005, we are not involved in any unconsolidated special purpose entities or variable interest entities.

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Seasonality

Historically, our business has been highly seasonal. In 2004, 64% of our net sales and all of our net income occurred during the second and third quarters, principally during the period from April through July, which represents the peak months for boat buying, usage and maintenance in most of our retail markets. Management expects the seasonal fluctuation in net sales to become more pronounced as we continue to expand our operations.

Business Trends

We believe people look to West Marine expecting high levels of personalized service delivered by associates who sincerely care about customers and are passionate about boating; they look for a broad assortment of high quality merchandise, priced fairly and in stock when they need it; they have come to expect the convenience of stores located near where they boat or live. We believe all of this comes together in the mind of the customer to represent exceptional value.

With a clear understanding of where we are and with a focus on long-term shareholder value, we are launching a number of new initiatives intending to improve inventory turnover, increase comparable store sales and strengthen our operations. By delivering what customers want, everyday, we expect to continue to be their retailer of choice, our position in the market should continue to grow and we plan to achieve maximum long-term value for our shareholders. These initiatives include:

In the long term, we believe these new initiatives will create a stronger West Marine and, over time, will enhance value by creating additional new strategies that build on this solid foundation.

We opened five traditional stores and four Express stores in the first quarter of 2005. During the second quarter of 2005, we plan to open four traditional and four Express stores, as well as remodel two stores. We currently plan to open 50 or more stores during 2005, comprised of 30 to 35 traditional stores and 15 to 20 Express stores.

We closed one store during the first quarter of 2005. We currently plan to close a total of five stores during 2005, one of which is due to a change in the use of the property by the landlord.

We operate in a highly competitive industry, and we expect competition to increase in the future. An increase in competition in our markets may result in pressure on our pricing policies.

Internet Address and Access to SEC Filings

Our Internet address is www.westmarine.com. Interested readers may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, in the “Investor Relations” portion of our website as well as through the Securities and Exchange Commission’s website, www.sec.gov.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995

The statements in this Form 10-Q that relate to future plans, events, expectations, objectives or performance (or assumptions underlying such matters) are forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements include, among other things, statements that relate to West Marine’s future plans, expectations, objectives, performance and similar projections, as well as facts and assumptions underlying these statements or projections. You should not place undue reliance on such forward-looking statements as they speak only as of the date they are made, and we assume no obligation to publicly update or revise any forward-looking statement even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. Actual results may differ materially from the results expressed or implied in these forward-looking statements due to various risks, uncertainties or other factors.

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Set forth below are certain important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements.

Because consumers often consider boats to be luxury items, the market is subject to changes in consumer confidence and spending habits. A slowdown in the domestic economy or an increase in interest rates may adversely affect sales volumes, as well as our ability to maintain current gross profit levels.

Our results of operations could be negatively impacted if our new initiatives to reduce inventories, reduce prices, increase associate hours, delay store openings, build sales through the Internet channel and restructure our merchandising organization fail to create the cost savings or increases in sales that we expect.

Our operations could be adversely affected if unseasonably cold weather, prolonged winter conditions, natural disasters, such as hurricanes, or extraordinary amounts of rainfall occur during the peak boating season in the second and third quarters.

Our Direct Sales division has faced market share erosion in areas where either we or our competitors have opened stores. Management expects this trend to continue.

As West Marine expands into new ventures, concepts and acquisitions, such as boat services, which includes the installation of certain products we sell, and Express stores, we face additional challenges including those related to hiring personnel and our unfamiliarity with local demographics. New markets may also have competitive conditions, consumer tastes and discretionary spending patterns that are different from our existing markets.

Our growth principally has been related to our stores’ operations. Our continued growth depends to a significant degree on our ability to continue to expand our operations through the opening and profitable operation of new stores, as well as our ability to increase net sales at our existing stores. Our planned expansion is subject to a number of factors, including the adequacy of our capital resources, our ability to locate suitable store sites and negotiate acceptable lease terms, to hire, train and integrate employees and to adapt our distribution and other operations systems.

The markets for recreational watersports and boating supplies are highly competitive. Competitive pressures resulting from competitors’ pricing policies are expected to continue.

We believe that insurance coverage is prudent for risk management and we expect that our insurance costs will continue to increase. For certain types or levels of risk, including medical care and worker’s compensation, we have decided to limit our purchase of relevant insurance, choosing instead to self-insure certain levels of risk. In other cases, we have elected to retain a higher portion of the risk in the form of higher deductibles. If we suffer a substantial loss that is not covered by commercial insurance, the loss and attendant expenses could have a material adverse effect on our business and operating results.

The price of our common stock may be subject to volatile fluctuations based on general economic and market conditions and by our ability to meet analysts’ expectations. Failure to meet such expectations, even slightly, could have an adverse effect on the market price of our common stock. In addition, stock market volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of these companies. Variations in the market price of our common stock may be the result of changes in the trading characteristics that prevail in the market for our common stock including low trading volumes, trading volume fluctuations and other similar factors. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future.

Investors should be aware that while we do, from time to time, communicate with securities analysts and others, we do not, by policy, selectively disclose to them any material nonpublic information or other confidential commercial information. Accordingly, you should not assume that we agree with any statement or report issued by any analyst regardless of the content of the statement or report. We do not, by policy, confirm forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

Additional factors which may affect our financial results include inventory management issues, the impact of the Internet and e-commerce on the supply chain, fluctuations in consumer spending on recreational boating supplies, fluctuations in fuel prices, environmental regulations, demand for and acceptance of our products and other risk factors disclosed from time to time in our filings with the Securities and Exchange Commission.

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe there has been no material change in our exposure to market risk from that discussed in our last Annual Report on Form 10-K.

Based on our operating results for the year ended January 1, 2005, a 10% change in the weighted-average interest rate affecting our floating financial instruments would have an effect of approximately $0.5 million on our pretax income and cash flows over the next year and would have an immaterial effect on the fair value of our fixed-rate financial instruments (see Note 4 to the Consolidated Financial Statements set forth in Item 8 – Financial Statements and Supplementary Data of our fiscal year 2004 Form 10-K).

ITEM 4 – CONTROLS AND PROCEDURES

West Marine maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to West Marine’s management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures which, by their nature, can provide only reasonable assurance regarding management’s control objectives. Management, including West Marine’s Chief Executive Officer and Chief Financial Officer, concluded that West Marine’s disclosure controls and procedures are effective in reaching a level of reasonable assurance regarding management’s control objectives.

West Marine has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of West Marine’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon this evaluation, as of April 2, 2005, West Marine’s Chief Executive Officer and Chief Financial Officer concluded that West Marine’s disclosure controls and procedures are effective in timely alerting them to material information relating to West Marine required to be included in West Marine’s Exchange Act reports. During West Marine’s fiscal quarter ended April 2, 2005 there has been no change in West Marine’s internal control over financial reporting that was identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) which has materially affected, or is reasonably likely to materially affect, West Marine’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

We are a party to various legal proceedings incidental to our business. In our opinion, after consultation with legal counsel responsible for these matters, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect the financial position, results of operations or cash flows of West Marine.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5 – OTHER INFORMATION

None.

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ITEM 6 – EXHIBITS

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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