West Marine reports double-digit earnings growth for Q2 2015

West Marine, Inc. (Nasdaq:WMAR) today reported improved financial results for the second quarter ended July 4, 2015.

• Net revenues were $253.2 million, an increase of 7.1 percent compared to last year.
• Comparable store sales increased by 7.0 percent. The retail calendar shift impact on comparable store sales was approximately 4 percent.
• Pre-tax income was $37.1 million, compared to pre-tax income of $32.4 million last year.
• Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarter was $42.3 million, compared to EBITDA of $37.1 million for the same period last year.
• Net income and earnings per share were $20.9 million and $0.85, respectively, compared to net income of $18.3 million and $0.75 per share last year, a 14.4 percent increase.
• Fiscal 2015 pre-tax guidance is reaffirmed.
• Remained debt-free at quarter-end with $115.5 million available on our revolving credit line at the end of the period.

Matt Hyde, West Marine’s CEO, commented: “We’ve strengthened our business and delivered double-digit earnings growth and solid comparable store sales increases. Our investments are driving growth in retail, wholesale, and online, with positive results in all of our regions and across both core and merchandise expansion categories. I thank our associates for their continued hard work, commitment, and excellent results.”

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

• eCommerce: Sales from the eCommerce website increased by 27.0 percent compared to last year and represented 8.4 percent toward end of 2019 goal of 15% percent of total sales, compared to 7.2% for the same period last year.
• Store optimization: Sales through optimized stores increased to 41.7 percent of total sales compared to 41.5 percent last year.
• Merchandise expansion: Sales in these product lines, which include footwear, apparel, clothing accessories, fishing products and paddle sports equipment, increased by 20.2 percent, with core product sales up 6.3 percent, compared to last year.

YTD Results

Net revenues for the 26 weeks ended July 4, 2015 were $380.2 million, an increase of 8.7 percent, compared to net revenues of $349.8 million for the 26 weeks ended June 28, 2014. Comparable store sales increased by 9.0 percent for the first six months of 2015 versus the 1.1 percent decrease reported for the same period last year. Approximately 4 percent of this was attributable to the retail calendar shift in fiscal 2014 from a 53-week fiscal year to a 52-week fiscal year in fiscal 2015, which had a meaningful impact on the company’s seasonal business.

Pre-tax profit margin improved by 1.2 percent of revenues to 5.0 percent for the first six months compared to 3.8 percent for the first six months last year. This change primarily was driven by a decrease in selling, general and administrative expense of 0.9 percent of revenues, as well as a 0.4 percent increase in gross profit margin resulting from leverage of fixed costs, including occupancy.

Net income for the first six months was $10.7 million, or $0.43 per diluted share, compared to net income of $7.3 million, or $0.30 per diluted share, for the first six months last year.

Q2 Results

Net revenues for the second quarter increased by $16.7 million, or 7.1 percent, to $253.2 million compared to $236.5 million for the second quarter of 2014.

Pre-tax profit margin improved by 1.0 percent of revenues to 14.7 percent for the second quarter compared to 13.7% for the second quarter last year. This change was driven by a 1.0 percent increase in gross profit margin resulting from leverage of fixed costs, including occupancy, offset by a 0.1 percent increase in selling, general and administrative expense.

Net income for the second quarter was $20.9 million, or $0.85 per diluted share, compared to net income of $18.3 million, or $0.75 per diluted share, for the second quarter of 2014.

Total inventory at the end of the second quarter was $258.1 million, a $14.5 million, or 6.0 percent increase versus the balance at June 28, 2014, and a 6.7 percent increase on an inventory per square foot basis. Inventory turns for 2015 increased to 2.7% versus the first six months of last year.