West 49's lower prices drive comparable store sales growth

05 Sep '08

3 min read

West 49 Inc Canada's leading action sport retailer, reported its financial results for its fiscal 2009 second quarter ended July 26, 2008. All figures are reported in Canadian dollars.

Second quarter highlights:
- Net sales growth of 6.1% to $45.0 million;
- Comparable store sales growth of 3.9% consolidated; 6.2% West 49 banner;
- Gross margin of $9.6 million, or 21.3% of net sales;
- 20 basis point reduction in selling, general and administrative expenses as rate to net sales, on a normalized basis;
- Net loss of $1.8 million, or $0.03 per share.

"Our top line growth for the quarter is the result of our exceptional branded offering at prices competitive with like retailers on both sides of the border," said Sam Baio, Chief Executive Officer of West 49 Inc.

"Strong sales from our core West 49 banner, including stores in the challenging Ontario market, drove growth in our consolidated comparable store sales.

While cross border shopping still had somewhat of a dampening effect on our results, it has also benefited us in forcing our Company to become more competitive.

A great example of this is our sales incentive program launched in March, which is really engaging our store associates and driving higher units per transaction."

Second Quarter Financial Results:
Net sales for the quarter increased 6.1% to $45.0 million from $42.4 million for the second quarter of last year. Comparable store sales increased 3.9% on a consolidated basis, including growth of 6.2% at the West 49 banner, and representing the strongest performance of the past six quarters. Comparable West 49 stores in Ontario contributed to the growth.

Gross margin for the quarter decreased 10.3% to $9.6 million from $10.7 million a year ago. As a rate to net sales, gross margin decreased 390 basis points to 21.3% for the quarter as products were strategically priced to better position the Company heading into the Back-to-School selling season.

EBITDA loss for the quarter was $0.6 million compared to positive EBITDA of $0.9 million, normalized, for the same quarter last year.

Selling, general and administrative expenses increased $0.5 million, however was 20 basis points lower as a rate to net sales, representing an improvement compared to the same quarter last year on a normalized basis.

The Company remains focused on managing costs, specifically with respect to store payroll as the Company absorbs mandatory minimum wage increases in most provinces.

Net loss for the quarter was $1.8 million, or $0.03 per share, compared to normalized net loss of $0.5 million, or $0.01 per share, for the second quarter of last year.

Net loss per share is based on a weighted average of 63,544,818 common shares outstanding during the quarter compared to 63,254,236 during the second quarter of fiscal 2008.

Six Month Financial Results:
Net sales increased 0.6% to $83.9 million for the six months ended July 26, 2008, compared to $83.4 million last year. Comparable store sales decreased 2.0% including a 0.6% decrease at the West 49 banner.

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