- Progress made on key objective to reduce SG&A expenses as a rate to net
sales -
Toronto Stock Exchange Symbol: WXX
BURLINGTON, ON, June 8 /CNW/ - West 49 Inc. (TSX: WXX) (the "Company"),
Canada's leading action sport retailer, today reported its financial results
for its first quarter of fiscal 2008, ended April 28, 2007. All figures are
reported in Canadian dollars.First quarter highlights:
- Net sales of $41.0 million, an increase of 15.5% compared to the
first quarter of last year;
- Improved management of expenses resulted in an 80 basis point
reduction in SG&A expenses as a rate to net sales, excluding
restructuring costs of $0.6 million related to the shared services
initiative;
- Net loss of $2.8 million, or $0.04 per share (excluding the after tax
impact of $0.4 million for restructuring costs during the quarter);
and
- The Company opened four new stores, expanded three stores and closed
a store during the quarter."While we are pleased with our strong sales growth for the quarter, as
expected, our margins were impacted by a few factors, which we believe our now
behind us," said Sam Baio, Chief Executive Officer of West 49 Inc. "Through
our decision to continue to aggressively price key items we were able to drive
traffic to our stores to counter the late arrival of some spring merchandise
from branded suppliers. We were able to clear our remaining fashion outerwear
from the winter season and our great spring merchandise is now flowing through
the stores. Importantly, we have made progress in our stated efforts to reduce
our selling, general and administrative expenses as a rate to net sales
compared to the first quarter of last year."
Financial Results for the Quarter
Net sales for the first quarter of fiscal 2008 increased 15.5% to
$41.0 million from $35.5 million for the first quarter of last year. The
growth was primarily attributable to new stores opened by the Company since
the first quarter of last year, while comparable store sales growth also
contributed to the increase. Consolidated comparable store sales increased
2.9% and the core West 49 banner's comparable store sales increased 2.6%.
Gross margin for the quarter decreased 2.6% to $7.6 million from
$7.8 million for the same period in fiscal 2007. As a rate to net sales, gross
margin was 18.5% compared with 22.0% for the first quarter of fiscal 2007.
Gross margin was impacted by several factors, including markdowns to clear
remaining fashion outerwear from the winter season, the late arrival of some
spring merchandise from branded suppliers and continued aggressive pricing of
key items. The strategic decision to continue to aggressively price key items
was made to drive traffic to the Company's stores to counter the late arrival
of some spring merchandise. The lower gross margin rate was also attributable
to higher occupancy costs as a rate to net sales, which were due to recent
store expansions and opening new stores in new geographic markets.
Normalized EBITDA(1) loss for the quarter, which excludes restructuring
costs of $0.6 million related to the Company's shared service initiative, was
$2.6 million compared to a loss of $1.3 million for the first quarter of last
year. The wider loss was the result of the decline in gross margin. In
contrast, selling, general and administrative expenses as a rate to net sales
improved to 24.6% from 25.4% in fiscal 2007, when excluding restructuring
costs during the quarter. The improvement is attributable to more effective
management of expenses.
Net loss for the quarter (excluding the after tax impact of $0.4 million
for restructuring costs during the quarter) was $2.8 million, or $0.04 per
share, compared to a net loss of $1.8 million, or $0.03 per share, for the
first quarter of fiscal 2007. The loss per share is based on a weighted
average of 63,208,263 common shares during the first quarter of fiscal 2008
compared to a weighted average of 61,920,045 common shares during the first
quarter of fiscal 2007.
The table below is a reconciliation of the Company's normalized EBITDA to
consolidated net loss:-------------------------------------------------------------------------
-------------------------------------------------------------------------
Q1 Q1
(In thousands) FY2008 FY2007
-------------------------------------------------------------------------
EBITDA - normalized $ (2,557) $ (1,265)
Less:
Restructuring charges 634 -
-----------------------
EBITDA $ (3,191) $ (1,265)
Less:
Amortization 1,447 1,017
Interest and dividends 154 204
Income taxes (1,604) (726)
-----------------------
Net loss $ (3,188) $ (1,760)
-----------------------
-----------------------
-------------------------------------------------------------------------Store Openings, Relocations and Expansions
As part of the Company's continued strategy to grow its banners across
Canada, during the quarter, the Company opened two Off The Wall stores (White
Oaks Mall in London, Ontario and Georgian Mall in Barrie, Ontario), a D-Tox
store (Les Galeries de Terrebonne in Terrebonne, Quebec) and an Amnesia store
(Les Galeries de la Capitale in Quebec City, Quebec). The new Amnesia store
also includes a D-Tox department. As a result, the Company closed its D-Tox
store located in the same mall to eliminate redundancy.
In keeping with the Company's strategy to maximize returns from existing
stores, the Company relocated and expanded two West 49 stores (Polo Park
Shopping Centre in Winnipeg, Manitoba and Park Royal Shopping Centre in West
Vancouver, British Columbia), and an Amnesia store (Carrefour de l'Estrie in
Sherbrooke, Quebec) during the quarter.
At the end of the quarter the Company was operating 128 stores under
seven banners and an online retailer, www.boardzone.com, compared to 112
stores under six banners and an online retailer, www.boardzone.com, the year
before.
Subsequent to quarter end, the Company opened a new Duke's Northshore
store (Park Royal Shopping Centre in West Vancouver, British Columbia) to
continue to test the retail concept focused on men's active lifestyle apparel.
Also subsequent to quarter end, the Company expanded a West 49 store (Square
One Shopping Centre in Mississauga, Ontario) and closed an Amnesia store (Le
Carrefour Laval in Laval, Quebec), which acted as a temporary clearance
centre, on account that a larger Amnesia store exists in the same mall.
Outlook
"With one of our weaker periods of the year behind us, we continue to
position ourselves well for the back half of the year, which has historically
been marked by disproportionately higher sales and all of our earnings," added
Mr. Baio. We remain confident in our ability to meet our primary objectives
for fiscal 2008. Having already opened five new stores, we are well on our way
to meeting our target of opening ten to twelve new stores for the year. In
addition to the four relocations and expansions completed so far this year, we
have plans for relocating and expanding four to six others during fiscal 2008.
Combined, the achievement of these two targets is expected to result in a ten
to twelve percent increase in our total retail square footage. On another
note, we continue to work towards completing the accelerated roll-out of our
shared services initiative, which is designed to improve profitability, better
position the Company for future growth, and enhance our controls. As stated
previously, we expect this significant undertaking to be completed during the
third quarter of this year."
Notice of Conference Call
At 9:00 a.m. Eastern Time, on Friday, June 8, 2007, the Company's
management team will host a conference call to discuss the financial results
for the quarter. To access the conference call by telephone, dial 416-644-3418
or 1-800-732-9303. Please connect approximately fifteen minutes prior to the
beginning of the call to ensure participation. The conference call will be
archived for replay until Friday, June 15, 2007 at midnight. To access the
archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the
reservation number 21234247 followed by the number sign.
A live audio webcast of the call will be available at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1887160.
Please connect at least 15 minutes prior to the conference call to ensure
adequate time for any software download that maybe required to join the
webcast. The webcast will be archived at the above web site for 90 days.
Financial Statements
For convenience, this press release includes the Company's Fiscal 2008
First Quarter Unaudited Consolidated Balance Sheets, Statements of Operations
and Comprehensive Income and Statements of Cash Flows.WEST 49 INC.
CONSOLIDATED BALANCE SHEETS
AS AT APRIL 28, JANUARY 27,
(Unaudited, in thousands of dollars) 2007 2007
----------- -----------
ASSETS
Current
Cash and cash equivalents $ - $ 5,413
Accounts receivable 2,090 3,007
Inventory 32,776 24,025
Future income taxes 1,604 -
Prepaid expenses 468 791
----------- -----------
----------- -----------
36,938 33,236
Capital assets 26,688 25,452
Deferred costs 991 901
Due from related parties 88 18
Future income taxes - -
Goodwill 24,554 24,554
Other intangibles 17,827 17,905
----------- -----------
----------- -----------
$ 107,086 $ 102,066
----------- -----------
----------- -----------
LIABILITIES
Current
Bank indebtedness $ 2,765 $ -
Accounts payable and accrued charges 28,015 20,589
Income taxes payable 310 1,774
Current portion of long-term debt 2,788 3,755
Current portion of lease inducements 788 783
----------- -----------
34,666 26,901
Long-term debt 2 14
Due to related parties (Note 14) - -
Future income taxes 4,158 4,158
Preferred shares 5,253 5,253
Deferred rent 2,458 2,079
Deferred lease inducements 4,859 4,976
----------- -----------
51,396 43,381
----------- -----------
SHAREHOLDERS' EQUITY
Share capital 62,481 62,438
Contributed surplus 2,268 2,118
Deficit (9,059) (5,871)
----------- -----------
----------- -----------
55,690 58,685
----------- -----------
----------- -----------
$ 107,086 $ 102,066
----------- -----------
----------- -----------
WEST 49 INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited, in thousands of dollars except per share amounts)
FOR THE 3-MONTH PERIOD ENDING
APRIL 28, APRIL 29,
2007 2006
----------- -----------
Net sales $ 40,997 $ 35,494
Cost of sales 33,442 27,710
----------- -----------
Gross margin 7,555 7,784
Selling, general and administrative expenses 10,746 9,049
----------- -----------
Loss before other expenses (3,191) (1,265)
----------- -----------
Other expenses:
Dividends on preferred shares 105 99
Interest expense on long-term debt 49 105
Amortization 1,447 1,017
----------- -----------
1,601 1,221
----------- -----------
Loss before income taxes (4,792) (2,486)
Income taxes (1,604) (726)
----------- -----------
Net loss and comprehensive loss $ (3,188) $ (1,760)
----------- -----------
----------- -----------
Basic and diluted loss per share $ (0.05) $ (0.03)
----------- -----------
----------- -----------
WEST 49 INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands of dollars)
FOR THE 3-MONTH PERIOD ENDING
APRIL 28, APRIL 29,
2007 2006
----------- -----------
OPERATING ACTIVITIES
Net loss $ (3,188) $ (1,760)
Items not affecting cash:
Amortization of capital assets 1,369 973
Amortization of deferred costs 201 79
Amortization of deferred lease inducements (197) (164)
Amortization of other intangibles 78 46
Future income taxes (1,604) (735)
Gain from disposition of capital assets (63) -
Impairment of capital assets - 104
Straight-line rent expense 195 151
Stock based compensation 164 366
----------- -----------
(3,045) (940)
Changes in non-cash working capital
from operations (1,549) (3,141)
----------- -----------
Net cash flows used by operating activities (4,594) (4,081)
----------- -----------
FINANCING ACTIVITIES
Due to/from related parties (70) (61)
Increase in deferred costs (291) (175)
Increase in long-term debt - 3,000
Issuance of common stock 29 22
Repayment of long-term debt (979) (1,094)
----------- -----------
Net cash flows (used by) provided by
financing activities (1,311) 1,692
----------- -----------
INVESTING ACTIVITIES
Additions to capital assets (2,445) (2,875)
Acquisition costs of Modes Freedom assets,
net of cash - (6)
Acquisition costs of Board Zone Inc.,
net of cash - (10)
Deferred lease inducements received 112 74
Proceeds from disposition of capital assets 60 -
----------- -----------
Net cash flows used by investing activities (2,273) (2,817)
----------- -----------
Decrease in cash and cash equivalents (8,178) (5,206)
Cash and cash equivalents, beginning of period 5,413 2,760
----------- -----------
Cash and cash equivalents, end of period $ (2,765) $ (2,446)
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE
Interest Paid $ 24 $ 94
Dividends Paid 104 85
Income Taxes Paid 1,466 -About West 49 Inc.
West 49 Inc. is a leading Canadian multi-banner specialty retailer of
apparel, footwear, accessories and equipment related to skateboarding,
snowboarding, and surfing, as well as the music industry, and fashion-forward
young women. The Company's stores which are primarily mall-based, carry a
variety of high-performance, premium brand name and private label products
that fulfill the lifestyle need of identified target markets, primarily tweens
and teens (ages 10 through 18). The Company operates over 125 stores in nine
provinces, under the banners West 49, Billabong, Off The Wall,
Amnesia/Arsenic, D-Tox, and Duke's Northshore, and an online retailer
www.boardzone.com. The Company's common shares are listed on the Toronto Stock
Exchange under the symbol WXX. West 49 Inc. has approximately 64 million
shares outstanding.
Forward-looking statements
Information in this news release that is not current or historical
factual information may constitute forward-looking information. Implicit in
this information are assumptions that, although considered reasonable by West
49 Inc. at the time of preparation, may prove to be incorrect. Readers are
cautioned that forward-looking information involves known and unknown risks,
uncertainties and other factors that may cause actual results, performance or
achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking information.
Accordingly, investors should not place undue reliance on forward-looking
information. West 49 Inc. includes in publicly available documents filed from
time to time with securities commissions and the Toronto Stock Exchange, a
thorough discussion of the risk factors that can cause anticipated outcomes to
differ from actual outcomes. Forward-looking information is provided as of the
date of this news release, and the Company assumes no obligation to update or
revise them to reflect new events or circumstances.
-------------------
(1) Normalized EBITDA, which is defined as earnings (loss) before
interest, taxes, dividends, depreciation and amortization and which
excludes the one-time restructuring charge of $0.6 million in the first
quarter of fiscal 2008, is not a financial measure recognized by Canadian
generally accepted accounting principles ("GAAP") and does not have a
standardized meaning prescribed by GAAP. The Company believes that this
Non-GAAP financial measure provides meaningful information on the
Company's performance and operating results. However, readers are
cautioned that Normalized EBITDA has no standardized meaning as
prescribed by GAAP and may not be comparable to similar measures
presented by other companies. Further, readers are cautioned that
Normalized EBITDA should not replace net income or loss or cash flows
from operating, investing and financing activities (as determined in
accordance with GAAP), as an indicator of West 49 Inc.'s performance.
For further information: Kim Mullenger, Manager, Investor Relations,
West 49 Inc., (905) 336-5454 x224, E-mail: kmullenger@west49.com; Trevor
Heisler, Investor Relations, The Equicom Group Inc., (416) 815-0700 ext. 270,
E-mail: theisler@equicomgroup.com
