Exhibit 99.1

 

WEST MARINE REPORTS DOUBLE-DIGIT EARNINGS GROWTH YEAR-TO-DATE AND UPDATES FISCAL YEAR EARNINGS GUIDANCE

 

WATSONVILLE, CA, October 29, 2015 - West Marine, Inc. (Nasdaq: WMAR) today reported financial results for the first nine months of fiscal 2015 and for the third quarter ended October 3, 2015.

 

2015 Year-to-Date Results

 

·

Net revenues for the first nine months of fiscal 2015 were $574.6 million, an increase of 5.2% compared to last year.

·

Adjusted comparable store sales increased by 4.9%.

·

Pre-tax income was $27.6 million, an increase of 20.1% compared to pre-tax income of $23.0 million last year.

·

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) year-to-date were $43.1 million, compared to EBITDA of $36.5 million last year.

·

Net income and earnings per share were $15.6 million and $0.63, respectively, compared to net income and earnings per share of $12.2 million and $0.50, respectively, per share last year, a 27.4% increase.

·

Fiscal 2015 comparable store sales are expected to range from 3.5% to 5.5% and pre-tax profit is expected to range between $6.0 million and $8.0 million.

·

Remained debt-free at quarter-end with $115.8 million available on our revolving credit line at the end of the period.

 

Matt Hyde, West Marine’s CEO, commented: “The West Marine team is delivering strong results, with good top line sales from our strategies flowing through to double-digit earnings growth year-over-year. As we wrap up the core boating season, our associates are now focusing on expanding our holiday presence, with new gift items and compelling offers for our customers recreating on or around the water.”

 

Progress on the company’s growth strategies year-to-date was as follows:

·

Sales from our eCommerce website increased by 25.1% compared to last year and represented 8.3% of total sales, compared to 7.0% for the same period last year, showing progress towards our end of 2019 goal of 15%.

·

Sales through our optimized stores were 40.8% of total sales compared to 36.1% last year. This year-over-year increase supports our end of 2019 goal to deliver 50% of our total sales through optimized stores.

·

Merchandise expansion: Sales in these product lines, which include footwear, apparel, clothing accessories, fishing products and paddle sports equipment, increased 15.2%, and core product sales were up 2.8%, compared to last year.

 

Results for the Third Quarter of 2015

 

Due to the impact from the calendar shift compared to 2014, our net revenues for the third quarter decreased by $2.1 million, or 1.1%, to $194.4 million compared to $196.5 million for the third quarter of 2014. Comparable store sales decreased by 0.7% for the third quarter. Sales comparisons were negatively impacted this year from a shift in the fiscal calendar following a 53-week fiscal year and decreased sales by approximately 6%. This calendar shift affected our key selling season, moving the selling period leading up to July 4^th to the second quarter this year, as compared to July 4^th being part of the third quarter last year.

 

Pre-tax profit margin declined by 0.6% of revenues to 4.4% for the third quarter compared to 5.0% for the third quarter last year. This change primarily was driven by a 0.8% decrease in gross profit margin resulting from deleveraging of raw product cost of goods, as well as, a 0.3% decrease in selling, general and administrative expense.

 

Net income for the third quarter was $4.9 million, or $0.20 per diluted share, compared to net income of $4.9 million, or $0.20 per diluted share, for the third quarter of 2014.

 

Results for the first Nine Months of 2015

 

Net revenues for the 39 weeks ended October 3, 2015 were $574.6 million, an increase of 5.2%, compared to net revenues of $546.3 million for the 39 weeks ended September 27, 2014. Comparable store sales increased by 5.5% for the first nine months of 2015. Adjusted comparable store sales increased 4.9% as sales comparisons benefitted this year from a shift in the fiscal calendar following a 53-week year and increased sales by approximately 0.6% as compared to the first nine months last year.

 

 

Pre-tax profit margin improved by 0.6% at 4.8% for the first nine months of 2015 as compared to 4.2% for the first nine months last year. This change primarily was driven by a decrease in selling, general and administrative expense as a percentage of revenues of 0.6%.

 

Net income for the first nine months was $15.6 million, or $0.63 per diluted share, compared to net income of $12.2 million, or $0.50 per diluted share, for the first nine months last year.

 

Total inventory at the end of the third quarter was $237.0 million, a $21.8 million, or 10.1%, increase versus the balance at September 27, 2014, and a 13.4% increase on an inventory per square foot basis, primarily to support Q4 holiday sales. Inventory turns for 2015 decreased by 1.2% versus the first nine months of last year.

 

2015 Guidance

 

We are updating our previously announced full year guidance:

·

Comparable store sales are expected to be in the range of 3.5% to 5.5%, up from our previously issued range of 1.0% to 4.0%,

·

Pre-tax income is expected to range from approximately $6.0 million to $8.0 million, compared to our previously issued range of $6.0 million to $11.0 million,

·

EBITDA is now expected to be in the range of approximately $27.0 million to $29.0 million, compared to our previous range of $26.0 million to $31.0 million,

·

GAAP diluted earnings per share is expected to be in the range of approximately $0.14 to $0.20, compared to the previously issued range of $0.14 to $0.27 earnings per share,

·

Capital expenditures for fiscal 2015 are expected to be approximately $25 million, compared to our previously issued range of $22 million to $25 million.

 

Our comparable store sales are trending to the high end of our original guidance, however, we are experiencing lower than anticipated gross profits. The lower gross profits have been driven by increased inventory shrinkage and a charge for a product quality issue. Additionally, we had higher than expected clearance sales resulting from the successful launch of our ship from store program and the liquidation of inventory associated with the closure of our stores in Canada.

 

Investor Conference Call

 

West Marine will hold a conference call and webcast on Thursday, October 29, 2015, at 1:00 p.m. Eastern Time to discuss its third quarter 2015 results. The live call will be webcast and available in real time on the Internet at westmarine.com under "Investor Relations." Participants may also 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 52141444.

 

An audio replay of the call will be available October 29, 2015 at 4:00 p.m. EDT through November 5, 2015 at 11:59 p.m. EDT. The replay number is (855) 859-2056 in the United States and Canada and (404) 537-3406 for international calls. The access code is 52141444.

 

About West Marine

 

Founded in 1968 by a sailor, West Marine, Inc. is the largest omni-channel specialty retailer exclusively offering boating gear, apparel and footwear and other waterlife-related products to anyone who enjoys recreational time on or around the water. With over 260 stores located in 38 states, Puerto Rico and Canada and an eCommerce website reaching domestic and international customers, West Marine is the leading waterlife outfitter for cruisers, sailors, anglers, paddle sports enthusiasts and industry service providers. West Marine has everything you need for your life on the water. For more information on West Marine, its products and store locations, visit westmarine.com or call 1-800-BOATING (1-800-262-8464). West Marine’s stock is traded on NASDAQ under the symbol WMAR.

 

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 our earnings and growth in profitability, expectations that our investments will continue to drive our growth strategies, expectations related to our ability to manage our assets, including inventory productivity, and our expectations for full-year 2015 results, 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 third quarter of 2015 and the current fiscal year 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 January 3, 2015, as well as the discussion of critical accounting policies in our Form 10-K for the year ended January 3, 2015. 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 clearer picture of 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 the most directly comparable GAAP financial measure in the table set forth below.

 

Contact: West Marine, Inc.

Deborah Ajeska, Controller

(831) 761-4229

 

 

West Marine, Inc.

Condensed Consolidated Balance Sheets

(Unaudited and in thousands, except share data)

 

		October 3, 2015				September 27, 2014
ASSETS
Current assets:
Cash		$	60,486			$	63,603
Trade receivables, net			8,565				8,460
Merchandise inventories			236,984				215,232
Deferred income taxes			18,167				16,370
Other current assets			5,597				5,666
Total current assets			329,799				309,331
Property and equipment, net			78,980				79,950
Long-term deferred income taxes			3,580				4,055
Other assets			3,348				3,577
TOTAL ASSETS		$	415,707			$	396,913
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	38,203			$	34,451
Accrued expenses and other			47,302				46,325
Total current liabilities			85,505				80,776
Deferred rent and other			20,852				15,984
Total liabilities			106,357				96,760
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; 25,384,450 shares issued and 24,695,561 shares outstanding at October 3, 2015, and  25,014,180 shares issued and 24,325,291 shares outstanding at September 27, 2014.			25				25
Treasury stock			(9,285	)			(9,171	)
Additional paid-in capital			210,743				206,700
Accumulated other comprehensive loss			(567	)			(534	)
Retained earnings			108,434				103,133
Total stockholders' equity			309,350				300,153
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	415,707			$	396,913

 

 

West Marine, Inc.

Condensed Consolidated Statements of Income

(Unaudited and in thousands, except per share data)

 

		13 Weeks Ended
		October 3, 2015								September 27, 2014
Net revenues		$	194,375				100.0	%		$	196,510				100.0	%
Cost of goods sold			138,115				71.1	%			138,123				70.3	%
Gross profit			56,260				28.9	%			58,387				29.7	%
Selling, general and administrative expense			47,576				24.4	%			48,512				24.7	%
Income from operations			8,684				4.5	%			9,875				5.0	%
Interest expense			107				0.1	%			99				0.0	%
Income before income taxes			8,577				4.4	%			9,776				5.0	%
Provision for income taxes			3,685				1.9	%			4,839				2.5	%
Net income		$	4,892				2.5	%		$	4,937				2.5	%
Net income per common and common equivalent share:
Basic		$	0.20							$	0.20
Diluted		$	0.20							$	0.20
Weighted average common and common equivalent
shares outstanding:
Basic			24,694								24,323
Diluted			24,718								24,341

 

		39 Weeks Ended
		October 3, 2015								September 27, 2014
Net revenues		$	574,620				100.0	%		$	546,332				100.0	%
Cost of goods sold			400,618				69.7	%			380,744				69.7	%
Gross profit			174,002				30.3	%			165,588				30.3	%
Selling, general and administrative expense			146,044				25.4	%			142,268				26.0	%
Income from operations			27,958				4.9	%			23,320				4.3	%
Interest expense			338				0.1	%			322				0.1	%
Income before income taxes			27,620				4.8	%			22,998				4.2	%
Provision for income taxes			12,041				2.1	%			10,772				2.0	%
Net income		$	15,579				2.7	%		$	12,226				2.2	%
Net income per common and common equivalent share:
Basic		$	0.63							$	0.51
Diluted		$	0.63							$	0.50
Weighted average common and common equivalent
shares outstanding:
Basic			24,599								24,202
Diluted			24,709								24,393

 

 

West Marine, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited and in thousands)

 

		39 Weeks Ended
		October 3, 2015				September 27, 2014
OPERATING ACTIVITIES:
Net income		$	15,579			$	12,226
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			15,385				13,378
Share-based compensation			2,154				2,376
Excess tax benefit from share-based compensation			-				(223	)
Deferred income taxes			878				(603	)
Provision for doubtful accounts			62				82
Lower of cost or market inventory adjustments			2,128				1,112
Loss on asset disposals			716				325
Changes in assets and liabilities:
Trade receivables			(1,784	)			(2,101	)
Merchandise inventories			(24,814	)			(13,308	)
Other current assets			7,624				2,990
Other assets			308				(261	)
Accounts payable			5,070				12,594
Accrued expenses and other			5,622				9,104
Deferred items and other non-current liabilities			95				1,180
Net cash provided by operating activities			29,023				38,871
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment			29				36
Purchases of property and equipment			(15,640	)			(20,832	)
Net cash used in investing activities			(15,611	)			(20,796	)
FINANCING ACTIVITIES:
Borrowings on line of credit			816				2,087
Repayments on line of credit			(816	)			(2,087	)
Proceeds from exercise of stock options			1,141				1,314
Proceeds from sale of common stock pursuant to Associates Stock Buying Plan			296				318
Excess tax benefit from share-based compensation			-				223
Treasury shares acquired			(114	)			(4,766	)
Net cash provided by (used in) financing activities			1,323				(2,911	)
Effect of exchange rate changes on cash			76				31
NET INCREASE IN CASH			14,811				15,195
CASH AT BEGINNING OF PERIOD			45,675				48,408
CASH AT END OF PERIOD		$	60,486			$	63,603
Other cash flow information:
Cash paid for interest		$	220			$	227
Cash paid for income taxes, net of refunds of $80 and $1,391			44				2,067
Non-cash investing activities:
Property and equipment additions in accounts payable			836				1,326

 

 

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				13 Weeks Ended				39 Weeks Ended				39 Weeks Ended
		October 3, 2015				September 27, 2014				October 3, 2015				September 27, 2014
GAAP Net Income		$	4.9			$	4.9			$	15.6			$	12.2
Add Back:
Interest Expense			0.1				0.1				0.3				0.3
Depreciation and Amortization			5.2				4.6				15.2				13.2
Income Tax Expense			3.7				4.8				12.0				10.8
			9.0				9.5				27.5				24.3
EBITDA		$	13.9			$	14.4			$	43.1			$	36.5

 

		Estimated								53 Weeks Ended
		Fiscal Year 2015								January 3, 2015
		Low				High
Estimated/Reported GAAP Net Income		$	3.6			$	6.5			$	1.9
Add Back Estimated/Reported:
Interest Expense			0.4				0.4				0.4
Depreciation and Amortization			19.6				19.6				18.2
Income Tax Expense			2.4				4.5				2.1
			22.4				24.5				20.7
Estimated/Reported EBITDA		$	26.0			$	31.0			$	22.6