West 49 Inc. reports fourth quarter and year end results



    - Company achieves continued strong sales growth and improved earnings -

    Toronto Stock Exchange Symbol: WXX

    BURLINGTON, ON, April 18 /CNW/ - West 49 Inc. (TSX: WXX) (the "Company"),
Canada's leading action sport retailer, today reported its financial results
for the fourth quarter and 2007 fiscal year ended January 27, 2007. All
figures are reported in Canadian dollars.

    
    Fourth quarter highlights:
        -  Net sales increased 22.1% to $61.9 million;
        -  Normalized EBITDA(1) increased 20.3% to $7.1 million;
        -  Net income improved 25.9% to $3.4 million or $0.05 per common
           share, excluding a non-recurring non-cash goodwill impairment
           charge attributable to www.boardzone.com;
        -  Opened a new D-Tox store in Guelph, Ontario; and
        -  Relocated and expanded two West 49 stores.

    Fiscal year highlights:
        -  Net sales increased 44.6% to $195.3 million;
        -  Normalized EBITDA increased 51.2% to $13.0 million;
        -  Net income improved 70.4% to $4.6 million or $0.07 per common
           share, excluding a non-recurring non-cash goodwill impairment
           charge attributable to www.boardzone.com; and
        -  Opened 20 new stores and relocated and expanded six existing
           stores.
    

    "Within our focus on growing our banners across Canada in fiscal 2007 we
accomplished our primary goals of opening 20 new stores and expanding our
banners into new geographical markets," said Sam Baio, Chief Executive Officer
of West 49 Inc. "Our success in this regard, along with the contributions of
our acquisitions in fiscal 2006 and strong comparable store sales, resulted in
a 44.6% increase in net sales and a 51.2% increase in normalized EBITDA for
the year. We continued to refine our buying and markdown strategies that
yielded exceptional results in the latter part of fiscal 2006, however, later
starts to our key selling seasons dampened our gross margin in fiscal 2007.
Nonetheless, our profitability kept pace with our sales growth and we improved
our income per common share to $0.07 for the year from $0.05 in the prior
year. And, we are comfortable with our progress to date in our stated
objective to improve our long-term profitability going forward."

    Financial Results for the Quarter
    Net sales for the fourth quarter of fiscal 2007 grew 22.1% to
$61.9 million from $50.7 million for the fourth quarter of fiscal 2006. The
increase was attributable to the opening of 20 new stores during the year as
planned, and by driving more traffic through existing stores during the
important Holiday selling season. Comparable store sales grew 7.3%(2), with
the Company's core West 49 banner achieving comparable store sales growth of
8.7% over the same period in fiscal 2006.
    Gross margin for the quarter increased 5.8% to $18.2 million from
$17.2 million for the fourth quarter of fiscal 2006. As a percentage of net
sales, gross margin was 29.4% compared with 33.9% the previous year, which was
characterized by exceptionally high margins. The decline as a rate to sales
was due largely to increased promotional markdowns taken early in the quarter
in anticipation of a late start to the Holiday selling period.
    Normalized EBITDA for the quarter increased 20.3% to $7.1 million from
$5.9 million for the same period the year before. A significant 450 basis
point reduction of SG&A expenses to 17.8% as a rate to net sales gained from
leveraging costs across all banners assisted in achieving this improvement.
Net income for the quarter improved to $2.9 million, or $0.05 per common
share, compared with $2.7 million, or $0.04 per common share for the fourth
quarter of fiscal 2006. Net income for the quarter included a non-recurring,
non-cash charge of $0.5 million, following a write down of goodwill associated
with the acquisition in fiscal 2006 of online retailer www.boardzone.com.
Excluding this charge, net income for the quarter was $3.4 million, or $0.05
per common share. Income per share is based on a weighted average of
62,806,484 common shares during the quarter compared to a weighted average of
61,715,054 common shares during the same period in fiscal 2006.
    At the end of the quarter the Company was operating 125 stores under
seven banners compared to 107 stores under six banners the year before. The
company also operated online retailer www.boardzone.com in both years.

    Financial Results for the Fiscal Year
    Net sales for the year grew 44.6% to $195.3 million compared with
$135.1 million the year before. Net sales for fiscal 2007 include full year
contributions from the Company's acquired banners compared to contributions
for partial periods in fiscal 2006. The growth was also attributable to new
store openings and higher sales at existing stores. Comparable store sales
increased 5.9% for the 2007 fiscal year, with West 49 stores posting
comparable store sales growth of 5.4%. This compares to a 7.2% rise in
comparable store sales in the prior year with West 49 stores posting
exceptionally strong comparable store sales growth of 8.3%
    Gross margin for the year increased 39.7% to $53.5 million, compared with
$38.3 million the year before. Gross margin as a rate to net sales was 27.4%
compared to 28.3% for fiscal 2006. This rate decline was partly attributable
to larger markdowns during the Back to School and Holiday Season compared to
the prior year. The Company implemented larger than expected markdowns to
offset the later starts to both the Back to School and Holiday selling
periods. The gross margin rate decline was also attributable to higher
occupancy costs as a rate to net sales due to the full year effect of the
acquired banners.
    Normalized EBITDA for fiscal 2007 increased 51.2% to $13.0 million
compared to $8.6 million for fiscal 2006. Assisting in this improvement was a
120 basis point reduction in SG&A expenses to 20.7% as a rate to net sales
that was largely attributable to the company gaining leverage in its
administrative expenses. Annual net income of $4.1 million, or $0.07 per
common share, was up from $2.7 million, or $0.05 per common share for fiscal
2006. Excluding the goodwill impairment charge in the fourth quarter of fiscal
2007, net income for the year was $4.6 million, or $0.07 per common share.
Earnings per share are based on a weighted average of 62,198,635 common shares
during fiscal 2007 compared to a weighted average of 54,739,371 common shares
during fiscal 2006.


    
    Selected Consolidated Financial Information
    -------------------------------------------------------------------------
    --------------------- ---------------------------------------------------

    (In thousands, except                  For the                   For the
     per share amounts         three months ending      twelve months ending
     and other operating   January 27,  January 28,  January 27,  January 28,
     information)                2007         2006         2007         2006
    --------------------- ---------------------------------------------------

    Summary of Operations:

    Net sales             $    61,928  $    50,714  $   195,268  $   135,128
    Gross margin               18,180       17,228       53,543       38,269
    SG&A                       11,037       11,290       40,504       29,633
    EBITDA - normalized         7,143        5,938       13,039        8,636
    EBITDA                      6,643        5,938       12,539        8,636
    Net income            $     2,866  $     2,731  $     4,137  $     2,722

    Income per Share:
    Basic income per
     share                $      0.05  $      0.04  $      0.07  $      0.05
    Weighted average
     common shares
     - basic               62,806,484   61,715,054   62,198,635   54,739,371
    -------------------------------------------------------------------------

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

    (In thousands, except                  For the                   For the
     per share amounts         three months ending      twelve months ending
     and other operating   January 27,  January 28,  January 27,  January 28,
     information)                2007         2006         2007         2006
    --------------------- ---------------------------------------------------

    EBITDA - normalized   $     7,143  $     5,938  $    13,039  $     8,636
    Less:
      Goodwill impairment         500            -          500            -
                          ---------------------------------------------------
    EBITDA                      6,643        5,938       12,539        8,636
    Less:

      Amortization              1,473          948        4,628        2,561
      Interest and
       dividends                  213          250        1,013          876
      Income tax                2,091        2,009        2,761        2,477
                          ---------------------------------------------------
    Net income            $     2,866  $     2,731  $     4,137  $     2,722
                          ---------------------------------------------------
                          ---------------------------------------------------
    -------------------------------------------------------------------------
    

    Other Developments
    In addition to achieving its goal of opening 20 new stores, the Company
relocated and expanded six stores during the year, including two in the fourth
quarter. The relocation and expansions are in line with the Company's strategy
to maximize returns from its existing operations, taking advantage of high
retail traffic areas and addressing select size-constrained store locations to
drive continued top line growth.

    Subsequent Events
    The Company also announced today that it is accelerating the roll-out of
its shared services initiative, which is designed to improve profitability,
better position the Company for future growth, and enhance controls.
Management believes the initiative will improve profitability by streamlining
processes and eliminating redundancies in management and administrative
positions. Under the initiative, the finance, human resources, resource
protection, information technology, store operations, store development,
marketing and visual functions will be centralized, while merchandising as
well as planning and allocation will remain banner-specific to further ensure
that the unique identities and cultures of each of the banners are preserved.
As part of the initiative, the Company expects to incur one-time charges of
approximately $0.8 million to $1.0 million, primarily attributable to employee
related expenses predominately during the first quarter of fiscal 2008,
including a net reduction of up to 12 full-time equivalent positions.
Consequently, the Company anticipates sustainable annual cost savings of
approximately $1.0 million beginning in its next fiscal year, with expected
saving of approximately one-third of this amount to be realized in the back
half of its current fiscal 2008 year.
    The Company also announced that Paul Beaumont, Chief Operating Officer,
has left the Company to pursue other interests. As such, the responsibilities
attributable to Mr. Beaumont's position will be realigned within the shared
services platform and the position of Chief Operating Officer will cease to
exist.
    "Since becoming a publicly traded company over two years ago, we have
undergone significant transition involving multiple acquisitions and
significant store count expansion," said Mr. Baio. "Paul played an important
role during this time, and I would like to thank him for his contribution now
that this transition has been substantially completed. I wish him all the best
in his future endeavours."

    Outlook
    "With our powerful brands and our focus on the lucrative tween and teen
market, we are well-positioned for continued growth and success," added Mr.
Baio. "We are excited about our plans for opening an additional ten to twelve
stores in fiscal 2008, as well as relocating and expanding eight to ten of our
existing stores to better capitalize on high traffic areas. While expanding
our total selling space remains a key component of our growth strategy, our
primary emphasis in fiscal 2008 will be to drive profitability by maximizing
returns from existing operations. As such, we look to build upon our strong
comparable store sales, improve our gross margin and leverage our selling,
general and administrative expenses. Not withstanding these objectives, our
margins continue to be impacted thus far in the first quarter by our markdowns
of our remaining outerwear, compounded by some late arriving spring
merchandise from our suppliers. We are pleased with the strong revenue growth
we have achieved and we believe that significant opportunities exist for us to
further improve our profitability going forward."

    Notice of Conference Call
    At 9:00 a.m. Eastern Time, on Wednesday, April 18, 2007, the Company's
management team will host a conference call to discuss the financial results
for the quarter and the fiscal year. To listen to the call by telephone, dial
416-644-3416 or 1-800-733-7560. To ensure participation, please connect
approximately 15 minutes prior to the scheduled start time. Anyone unable to
listen to the call can access a replay until Wednesday, April 25, 2007 at
midnight Eastern Time. To listen to the replay, dial 416-640-1917 or
1-877-289-8525 and enter the reservation number 21226578 followed by the
number sign.
    A live audio webcast of the Company's conference call will be available
at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1800700. 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 Year
End Unaudited Consolidated Balance Sheets, Statements of Operations and
Statements of Cash Flows.


    
    -------------------------------------------------------------------------
    WEST 49 INC.
    CONSOLIDATED BALANCE SHEETS
    AS AT                                            JANUARY 27,  JANUARY 28,
    (In thousands of dollars)                           2007         2006
                                                   ------------- ------------

    ASSETS
      Current
        Cash and cash equivalents                   $     5,413  $     2,760
        Accounts receivable                               3,007        3,987
        Inventory                                        24,025       21,247
        Future income taxes                                   -        1,633
        Prepaid expenses                                    791          747
                                                   ------------- ------------
                                                         33,236       30,374

    Capital assets                                       25,452       20,240
    Deferred costs                                          901          740
    Due from related parties                                 18            -
    Goodwill                                             24,554       30,295
    Other intangibles                                    17,905       11,325
                                                   ------------- ------------
                                                    $   102,066  $    92,974
                                                   ------------- ------------
                                                   ------------- ------------
    LIABILITIES
      Current
        Accounts payable and accrued charges        $    20,589  $    21,165
        Current portion of income taxes payable           1,774            -
        Current portion of long-term debt                 3,755        4,250
        Current portion of lease inducements                783          497
                                                   ------------- ------------
                                                         26,901       25,912

    Long-term debt                                           14          175
    Due to related parties                                    -           43
    Future income taxes                                   4,158        2,948
    Preferred shares                                      5,253        5,411
    Deferred rent                                         2,079        1,191
    Deferred lease inducements                            4,976        4,567
                                                   ------------- ------------
                                                         43,381       40,247
                                                   ------------- ------------
    SHAREHOLDERS' EQUITY
      Share capital                                      62,438       61,109
      Contributed surplus                                 2,118        1,626
      Deficit                                            (5,871)     (10,008)
                                                   ------------- ------------
                                                         58,685       52,727
                                                   ------------- ------------
                                                    $   102,066  $    92,974
                                                   ------------- ------------
                                                   ------------- ------------



    -------------------------------------------------------------------------
    WEST 49 INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (In thousands of dollars except                    FOR THE YEAR ENDING
     per share amounts)                              JANUARY 27,  JANUARY 28,
                                                        2007         2006
                                                   ------------- ------------

    Net sales                                       $   195,268  $   135,128

    Cost of sales                                       141,725       96,859
                                                   ------------- ------------

    Gross margin                                         53,543       38,269

    Selling, general and administrative expenses         40,504       29,633
                                                   ------------- ------------

    Income before other expenses                         13,039        8,636
                                                   ------------- ------------

    Other expenses:
      Dividends on preferred shares                         412          348
      Interest expense on long-term debt                    601          528
      Amortization                                        4,628        2,561
      Goodwill impairment                                   500            -
                                                   ------------- ------------
                                                          6,141        3,437
                                                   ------------- ------------

    Income before income taxes                            6,898        5,199

    Provision for income taxes                            2,761        2,477
                                                   ------------- ------------

    Net income                                      $     4,137  $     2,722
                                                   ------------- ------------
                                                   ------------- ------------

    Basic income per share                          $      0.07  $      0.05
                                                   ------------- ------------
                                                   ------------- ------------

    Diluted income per share                        $      0.07  $      0.05
                                                   ------------- ------------
                                                   ------------- ------------



    -------------------------------------------------------------------------
    WEST 49 INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands of dollars)                          FOR THE YEAR ENDING
                                                     JANUARY 27,  JANUARY 28,
                                                        2007         2006
                                                   ------------- ------------
    OPERATING ACTIVITIES

    Net income                                      $     4,137  $     2,722
      Add: Items not affecting cash
      Amortization of capital assets                      4,257        2,536
      Amortization of deferred costs                        475          335
      Amortization of deferred lease inducements           (706)        (428)
      Amortization of other intangibles                     370           25
      Future income taxes                                   961        1,977
      Loss from disposition of capital assets               235          149
      Goodwill impairment                                   500            -
      Straight-line rent expense                            575          458
      Stock based compensation                              945          880

                                                   ------------- ------------
                                                         11,749        8,654

    Changes in non-cash working capital
     from operations                                       (644)       3,330
                                                   ------------- ------------

    Net cash flows provided by operating activities      11,105       11,984
                                                   ------------- ------------

    FINANCING ACTIVITIES

      Due to/from related parties                           (62)          43
      Increase in deferred costs                           (536)        (204)
      Increase in long-term debt                          3,000        7,486
      Issuance of common stock                              718       13,995
      Repayment of long-term debt                        (3,656)      (9,002)
                                                   ------------- ------------

    Net cash flows (used by) provided by
     financing activities                                  (536)      12,318
                                                   ------------- ------------

    INVESTING ACTIVITIES

      Additions to capital assets                        (9,543)      (9,923)
      Acquisition costs of Off The Wall assets,
       net of cash                                            -       (7,137)
      Acquisition costs of Modes Freedom assets,
       net of cash                                           (6)     (11,028)
      Acquisition costs of Board Zone Inc.,
       net of cash                                          (10)      (1,292)
      Deferred lease inducements received                 1,578        3,093
      Proceeds from sale of capital assets                   65           10

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

    Net cash flows used by investing activities          (7,916)     (26,277)
                                                   ------------- ------------

    Increase (decrease) in cash and cash equivalents      2,653       (1,975)

    Cash and cash equivalents, beginning of year          2,760        4,735
                                                   ------------- ------------

    Cash and cash equivalents, end of year          $     5,413   $    2,760
                                                   ------------- ------------
                                                   ------------- ------------
    


    About West 49 Inc.
    West 49 Inc. is a multi-banner specialty retailer of apparel, footwear
and accessories related to skateboarding, snowboarding, and surfing, as well
as the music industry, and fashion-forward young women. The Company primarily
targets tween and teen customers (ages 10 through 18). West 49 Inc. 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 online retailer
www.boardzone.com. West 49 Inc.'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 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 before interest,
        taxes, dividends, depreciation and amortization, and which excludes
        the non-recurring, non-cash goodwill impairment charge of
        $0.5 million in the fourth quarter of fiscal 2007, 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.

    (2) Includes historical sales information for acquired banners prior to
        West 49 Inc.'s ownership.
    





For further information:

For further information: Kim Mullenger, Manager, Investor Relations,
West 49 Inc., (905) 336-5454 x 224, E-mail: kmullenger@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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