West Marine, Inc. (Nasdaq:WMAR), the largest specialty retailer of boating supplies and accessories, today reported financial results for the second quarter ended June 29, 2013.
Net revenues were $236.8 million, a decrease of 2.8% compared to last year.
Comparable store sales decreased by 2.7%.
Direct-to-Consumer sales were up 12.0%, driven by our strategic investments in eCommerce.
Sales in our merchandise expansion categories (which include footwear, apparel, clothing accessories, fishing products and paddle sports equipment) were up 4.3%, with core usage-related product sales down 3.5%, compared to last year.
Pre-tax income was $37.7 million, down 1.1% compared to pre-tax income of $38.1 million last year.
The company is lowering 2013 full-year guidance, with pre-tax income now expected to be in the range of $15.5 million to $17.5 million, compared to pre-tax income of $24.3 million for 2012.
Net income per diluted share was $0.91 for the second quarter, compared to net income per share of $0.95 last year.
Second quarter liquidity continued to improve, with cash increasing from $37.1 million last year to $45.8 million.
Total inventory at the end of the second quarter was $243.1 million, a 2.3% decline versus last year.
The company remained debt-free at quarter-end with $115.8 million available on its revolving credit line at the end of the period.
Net revenues for the 13 weeks ended June 29, 2013 were $236.8 million, a decrease of 2.8% compared to net revenues of $243.6 million for the 13 weeks ended June 30, 2012.
In line with our omni-channel focus, beginning in the first quarter, we changed the definition of comparable store sales to now include sales from our Direct-to-Consumer and wholesale channels. As before, store sales are included in comparable store sales in the fiscal period in which they commence their 14th full month of operations. Stores that were closed or substantially remodeled (i.e., resulting in an increase or decrease of 40% or more of selling square footage) are excluded. Using this new definition, comparable store sales for our second quarter decreased by 2.7% over the same period last year. For the second quarter last year, we reported a 2.1% increase in comparable store sales. However, using the new definition, our second quarter 2012 comparable store sales would have increased by 1.8%.
Matt Hyde, West Marine's CEO, commented: "The quarter came in much weaker than expected due to reduced recreational boating usage as a consequence of the continued unfavorable weather. We have been able to partially offset these results with our growth strategies and by sales in areas experiencing a more typical boating season. Our teams are responding by managing our expenses and controlling inventories, while we continue to invest in our future growth strategies with a focus on strengthening West Marine."
Net income for the second quarter was $22.3 million, or $0.91 per diluted share, compared to net income of $22.6 million, or $0.95 per diluted share, for the second quarter last year.
Net revenues for the 26 weeks ended June 29, 2013 were $351.0 million, a decrease of 3.8% compared to net revenues of $365.0 million for the 26 weeks ended June 30, 2012.
Comparable store sales decreased by 4.0% for the first six months of 2013 versus the same period last year. For the first six months last year, we reported a 2.8% increase in comparable store sales. However, using the new definition, our first six months 2012 comparable store sales would have increased by 2.3%.
Net income for the first six months was $13.3 million, or $0.54 per diluted share, compared to net income of $16.4 million, or $0.69 per diluted share for the first six months last year.
Total inventory at the end of the second quarter was $243.1 million, a $5.8 million, or 2.3%, decrease versus the balance at June 30, 2012, and a 0.5% decrease on an inventory per square foot basis. Inventory turns for 2013 were down 2.2% versus the first six months of last year.
During the first half of 2013, our sales results were lower than expected, driven primarily by unusually cold, rainy and windy weather in many of our markets, which in turn resulted in a reduction in boat usage. Consequently, we are lowering our previously-issued sales and earnings guidance for fiscal year 2013. We now expect pre-tax income in a range of $15.5 million to $17.5 million, approximately $9.0 million lower than our previously-communicated pre-tax income guidance. This will result in diluted earnings per share of approximately $0.37 to $0.42. Comparable store sales for full-year 2013 are now anticipated to be down 2.0% to 4.0% (using our new definition for comparable store sales outlined above), with total revenues now expected to be in the range of $650 million to $660 million, $27.5 million lower than our previously-communicated guidance. We anticipate capital expenditures for fiscal 2013 to be in the range of $25 million to $29 million, unchanged from our prior guidance.
Share Repurchase Program
As previously disclosed, our Board of Directors authorized a $10 million stock repurchase program with the primary purpose of mitigating the dilutive impact of shares issued under the company's omnibus equity incentive plan and its employee stock purchase plan. No shares were repurchased during the second quarter of 2013.
Investor Conference Call
West Marine will hold a conference call and webcast on Thursday, July 25, 2013, at 1:00 p.m. Eastern Time (EDT) to discuss its second quarter 2013 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 16686186.
An audio replay of the call will be available July 25, 2013 at 4:00 p.m. EDT through August 1, 2013 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 16686186.
About West Marine
West Marine, Inc. is the largest specialty retailer of boating supplies and accessories, with 294 company-operated stores located in 38 states, Puerto Rico, Canada and five franchised stores located in Turkey. Founded in 1968 by a sailor, West Marine has grown to become a leading omni-channel retailer for boats and boaters – from power cruisers and sailors to anglers and paddle sports enthusiasts. West Marine also offers gear, apparel and footwear for anyone who enjoys recreational time on or around the water. The company's wholesale channel is one of the largest distributors of marine equipment serving boat manufacturers, marine services, commercial vessel operators and government agencies.
For more information on West Marine, Inc. 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, risks related to continued unseasonably cold, rainy and windy boating season, expectations related to our earnings and profitability, expectations and projections with respect to our ability to execute on our strategic growth strategies, expectations related to our ability to manage our assets, and our expectations for full-year 2013 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 our second quarter of 2013 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 December 29, 2012, as well as the discussion of critical accounting policies in our Form 10-K for the year ended December 29, 2012. 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 GAAP. We believe that Return on Invested Capital ("ROIC"), as presented in the accompanying financial tables, is a meaningful measure of our efficient and effective use of capital. ROIC 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.
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