West 49 Inc. reports first quarter results



    - West 49's lower prices now more competitive with U.S. retailers -

    Toronto Stock Exchange Symbol: WXX

    BURLINGTON, ON, June 5 /CNW/ - West 49 Inc. (TSX: WXX) (the "Company"),
Canada's leading action sport retailer, today reported its financial results
for its fiscal 2009 first quarter ended April 26, 2008. All figures are
reported in Canadian dollars.

    
    First quarter highlights:

    -   Net sales of $38.9 million;
    -   Gross margin of $4.8 million, or 12.3% of net sales;
    -   90 basis point reduction in selling, general and administrative
        expenses;
    -   EBITDA(1) loss of $4.3 million;
    -   Net loss of $4.2 million, or $0.07 per share;
    -   Relocation and expansion of a West 49 store in North Bay, Ontario;
        and,
    -   No-tax event at West 49 stores in Ontario.
    

    "We continued to make the right decisions in the first quarter to address
the expected challenges posed by cross border shopping and market conditions
in Ontario for our West 49 banner," said Sam Baio, Chief Executive Officer of
West 49 Inc. "To lessen the impact of cross border shopping, we continued to
lower our prices to be more in line with U.S. prices. Also at our West 49
banner, following an especially challenging month of March, we had positive
comparable store sales results for the month of April, due in part to our
no-tax event in the province of Ontario and our continuing focus on driving
higher units per transaction. At our Off The Wall banner, during the first two
months of the quarter we continued to markdown and clear merchandise that was
not turning. The merchandise now in our Off The Wall stores is very relevant
to the desired target market customers and is moving well. While our actions
in the first quarter resulted in some short-term pain in terms of margins for
the quarter, they were strategic and necessary for putting us back on the
right track for the rest of the year. "
    "We are pleased to announce, that subsequent to the end of the quarter,
we had our initial launch for our new West 49 ecommerce site," added Mr. Baio.
"Now by visiting us at www.shop.west49.com our customers can find selected
merchandise, including some of the same great fashion and apparel, footwear,
accessories and equipment related to youth culture and action sports that they
would find at any of our 71 bricks and mortar West 49 stores across the
country."

    Financial Results for the Quarter

    Net sales for the quarter decreased 5.1% to $38.9 million from
$41.0 million for the first quarter of last year. Comparable store sales were
down 8.1% on a consolidated basis and down 7.4% for the core West 49 banner.
Comparable store sales continued to be impacted by the transition at Off The
Wall, cross border shopping, and a challenging Ontario market for the West 49
banner. However, while West 49 comparable store sales were down in February
and March, the banner had positive comparable store sales in April.
    Gross margin for the quarter decreased 36.8% to $4.8 million from
$7.6 million for the first quarter of fiscal 2008. As a rate to net sales,
gross margin decreased 620 basis points to 12.3% for the quarter. The decrease
was due primarily to lower product margins (driven largely by markdowns at Off
The Wall to clear merchandise during the first two months of the quarter) and
the weaker net sales results not being sufficient to leverage higher occupancy
costs. Increased freight costs also contributed to the year-over-year
variance.
    EBITDA loss for the quarter was $4.3 million compared to $2.6 million,
excluding restructuring costs of $0.6 million incurred in the first quarter of
last year. The higher EBITDA loss was due to the lower gross margin for the
quarter, which was partially offset by a 90 basis point reduction achieved in
selling, general and administrative expenses through continued improvements in
expense management.
    Net loss for the quarter was $4.2 million, or $0.07 per share, compared
to $2.8 million, or $0.04 per share, excluding the after-tax impact of
$0.4 million of restructuring costs in the first 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 a weighted average of 63,208,263
common shares outstanding for the same period a year ago.
    At the end of the quarter the Company was operating 134 stores compared
to 128 stores at the end of the first quarter of fiscal 2008.
    The table below is a reconciliation of the Company's results for the
first quarter of fiscal 2009 to results on a normalized basis:

    
    -------------------------------------------------------------------------
    ------------------------------------------------- -----------------------
                                                                         Net
    (In thousands of dollars)                             EBITDA        Loss
    ------------------------------------------------- -----------------------

    Actual results                FY2009          Q1      (4,317)     (4,194)
                                  FY2008          Q1      (3,191)     (3,188)

    Restructuring costs           FY2009          Q1           -           -
                                  FY2008          Q1         634         413

    Normalized results            FY2009          Q1      (4,317)     (4,194)
                                  FY2008          Q1      (2,557)     (2,775)

    -------------------------------------------------------------------------
    

    Store Real Estate Activity

    During the quarter, the Company relocated and expanded a West 49 store at
Northgate Plaza in North Bay, Ontario. Subsequent to the end of the quarter,
the Company closed its Arsenic store at Galeries de Terrebonne in Terrebonne,
Quebec when the lease expired. The decision not to renew the lease was made as
the store was not meeting expected sales thresholds under the Company's focus
on maximizing returns from its stores.

    Outlook

    "We are building sustainable momentum from our continued focus on
strengthening our business and maximizing returns at our existing stores,"
said Mr. Baio. "We are now commanding better pricing from our vendors and
passing it on to our loyal customers. Merchandise at our Off The Wall banner
is moving well and following a positive month of April at our West 49 banner
we are seeing continued momentum into the second quarter. Additionally, we
believe our strategic initiatives in the key areas of buying, merchandise
planning, distribution and supply chain, store sales incentives and
recruitment and retention will drive positive comparable store sales,
improvements to our gross margin and improvements to our profitability."

    Notice of Conference Call

    At 9:00 a.m. Eastern Time, on Thursday, June 5, 2008, the Company's
management team will host a conference call to discuss its fiscal 2009 first
quarter results. To access the conference call by telephone, dial 416-644-3417
or 1-800-732-6179. Please connect approximately 15 minutes prior to the
beginning of the call to ensure participation. The conference call will be
archived for replay until Thursday, June 12, 2008 at midnight. To access the
archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the
reservation number 21273023 followed by the number sign.
    A live audio webcast of the Company's first quarter results conference
call will be available at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2294380. Please
connect at least 15 minutes prior to the conference call to ensure adequate
time for any software download that may be required to join the webcast. The
webcast will be archived at the above website for 90 days.

    Annual Meeting of Shareholders

    West 49 Inc. will hold its Annual Meeting of Shareholders on Wednesday,
June 11 at 12:00 p.m. Eastern Time at the Toronto Stock Exchange Gallery,
Exchange Tower, 130 King Street West, Toronto, Ontario.
    The Annual Meeting of Shareholders will be broadcast live over the
internet. The live webcast will be available at
http://w.on24.com/r.htm?e=111617&s=1&k=9DDDE4
CB89B295262BF9ED4B9E2053A6. Please connect at least 15 minutes prior to the
scheduled start time to ensure adequate time for any software download that
may be required to join the webcast. The webcast will be archived at the above
website for 90 days.

    Financial Statements

    For convenience, this press release includes the Company's Fiscal 2009
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 26,  JANUARY 26,
    (Unaudited, in thousands of dollars)                   2008         2008
                                                    ------------ ------------

    ASSETS
      Current
        Cash and cash equivalents                    $        -   $    8,369
        Accounts receivable                               1,761        1,537
        Inventory                                        33,399       24,998
        Future income taxes                               1,499            -
        Prepaid expenses                                    512          459
                                                    ------------ ------------
                                                    ------------ ------------
                                                         37,171       35,363

    Capital assets                                       27,834       28,205
    Deferred costs                                          719          755
    Due from related parties                                105          138
    Goodwill                                             21,054       21,054
    Other intangibles                                    17,517       17,595
                                                    ------------ ------------
                                                    ------------ ------------
                                                     $  104,400   $  103,110
                                                    ------------ ------------
                                                    ------------ ------------
    LIABILITIES
      Current
        Bank indebtedness                            $    1,133   $        -
        Accounts payable and accrued charges             27,097       23,203
        Income taxes payable                                201          614
        Current portion of long-term debt                 1,819        1,023
        Current portion of deferred lease
         obligations                                        873          868
        Current preferred shares                             33           63
                                                    ------------ ------------
                                                         31,156       25,771

    Long-term debt                                        4,641        5,448
    Future income taxes                                   1,875        1,875
    Preferred shares                                      5,190        5,190
    Deferred lease obligations                            7,895        7,903
                                                    ------------ ------------
                                                         50,757       46,187
                                                    ------------ ------------
    SHAREHOLDERS' EQUITY
        Share capital                                    62,961       62,961
        Contributed surplus                               2,306        2,238
        Deficit                                         (11,624)      (8,276)
                                                    ------------ ------------
                                                    ------------ ------------
                                                         53,643       56,923
                                                    ------------ ------------
                                                    ------------ ------------
                                                     $  104,400   $  103,110
                                                    ------------ ------------
                                                    ------------ ------------



    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 26,    APRIL 28,
                                                           2008         2007
                                                    ------------ ------------

    Net sales                                        $   38,916   $   40,997

    Cost of sales                                        34,083       33,442
                                                    ------------ ------------

    Gross margin                                          4,833        7,555

    Selling, general and administrative expenses          9,150       10,746
                                                    ------------ ------------

    Loss before other expenses                           (4,317)      (3,191)
                                                    ------------ ------------

    Other expenses:
      Dividends on preferred shares                          97          105
      Interest expense on long-term debt                    116           49
      Amortization                                        1,534        1,447
                                                    ------------ ------------
                                                          1,747        1,601
                                                    ------------ ------------

    Loss before income taxes                             (6,064)      (4,792)

    Income taxes                                         (1,870)      (1,604)
                                                    ------------ ------------

    Net loss and comprehensive loss                  $   (4,194)  $   (3,188)
                                                    ------------ ------------
                                                    ------------ ------------


    Basic and diluted loss per share                 $    (0.07)  $    (0.05)
                                                    ------------ ------------
                                                    ------------ ------------



    WEST 49 INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited, in thousands of dollars)       FOR THE 3-MONTH PERIOD ENDING
                                                       APRIL 26,    APRIL 28,
                                                           2008         2007
                                                    ------------ ------------
    OPERATING ACTIVITIES

    Net loss                                         $   (4,194)  $   (3,188)
      Items not affecting cash:
      Amortization of capital assets                      1,456        1,369
      Amortization of deferred costs                        103          201
      Amortization of deferred lease inducements           (221)        (197)
      Amortization of other intangibles                      78           78
      Future income taxes                                (1,903)      (1,604)
      Gain from disposition of capital assets               (21)         (63)
      Straight-line rent expense                             87          195
      Stock based compensation                               68          164
                                                    ------------ ------------
                                                         (4,547)      (3,045)

    Changes in non-cash working capital
     from operations                                     (3,948)      (1,549)
                                                    ------------ ------------

    Net cash flows used by operating activities          (8,495)      (4,594)
                                                    ------------ ------------

    FINANCING ACTIVITIES

      Due from related parties                               33          (70)
      Increase in deferred costs                            (66)        (291)
      Issuance of common stock                                -           29
      Redemption of preferred shares                        (30)           -
      Repayment of long-term debt                           (11)        (979)
                                                    ------------ ------------

    Net cash flows used by financing activities             (74)      (1,311)
                                                    ------------ ------------

    INVESTING ACTIVITIES

      Additions to capital assets                        (1,065)      (2,445)
      Deferred lease inducements received                   132          112
      Proceeds from disposition of capital assets             -           60
                                                    ------------ ------------

    Net cash flows used by investing activities            (933)      (2,273)
                                                    ------------ ------------

    Decrease in cash and cash equivalents                (9,502)      (8,178)

    Cash and cash equivalents, beginning of period        8,369        5,413
                                                    ------------ ------------

    Cash and cash equivalents, end of period         $   (1,133)  $   (2,765)
                                                    ------------ ------------
                                                    ------------ ------------

    SUPPLEMENTAL DISCLOSURE

      Interest paid                                  $      125   $       24
      Dividends paid on preferred shares                    104          104
      Income taxes paid                                     485        1,466
    


    About West 49 Inc.

    West 49 Inc. is a leading Canadian multi-banner specialty retailer of
fashion and apparel, footwear, accessories and equipment related to music,
youth culture and action sports. 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 needs of identified target
markets, primarily tweens and teens. As at April 26, 2008, the Company
operated 134 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. The Company 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, particularly in respect of future operating results and
economic performance of the Company are assumptions regarding projected
revenue, gross margin and expenses. The assumptions, although considered
reasonable by the Company at the time of preparation, may prove to be
incorrect. Investors are cautioned that forward-looking information involves
known and unknown risks, uncertainties and numerous 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, including without limitation accounting
adjustments and changes in accounting policies and methods. Accordingly,
investors should not place undue reliance on forward-looking information. The
Company 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 only, it should not be relied upon as of any other date, and the
Company assumes no obligation to update or revise this information to reflect
new events or circumstances, except as expressly required by law.

    
    (1) EBITDA, which is defined as earnings (loss) before interest, taxes,
        dividends, depreciation and amortization, 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 the
        Company's performance.
    





For further information:

For further information: Rhonda Allen, Chief Financial Officer and
Corporate Secretary, West 49 Inc., (905) 336-5454 ext. 224, E-mail:
ir@west49.com; Trevor Heisler, Investor Relations, The Equicom Group Inc.,
(416) 815-0700 ext. 270, E-mail: theisler@equicomgroup.com

Organization Profile

WEST 49 INC.

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