West 49 Inc. reports second quarter results



    - West 49's lower prices drive comparable store sales growth -

    Toronto Stock Exchange Symbol: WXX

    BURLINGTON, ON, Sept. 4 /CNW/ - West 49 Inc. (TSX: WXX) (the "Company"),
Canada's leading action sport retailer, today 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.
    Gross margin for the period was $14.4 million, or 17.2% of net sales,
compared to $18.2 million, or 21.8% of net sales for the same period a year
earlier.
    EBITDA loss for the period was $5.0 million compared to $1.7 million,
normalized, for the first six months of last year. Net loss for the
year-to-date was $5.9 million, or $0.09 per share, compared to normalized net
loss of $3.3 million, or $0.05 per share, for the same period a year earlier.
Net loss per share is based on a weighted average of 63,544,818 common shares
outstanding during the six months ended July 26, 2008 compared to 63,231,249
during the six months ended July 28, 2007.
    The table below is a reconciliation of the Company's results for the
second quarter and six month period to results on a normalized basis:

    
    -------------------------------------------------------------------------
    ----------------------------------------     ----------------------------
                                                                         Net
    (In thousands of dollars)                       EBITDA              Loss
    ----------------------------------------     ----------------------------
    Actual results          FY2009     Q2             (647)           (1,754)
                                       YTD          (4,964)           (5,948)
                            FY2008     Q2              836              (589)
                                       YTD          (2,355)           (3,777)

    Restructuring costs     FY2009     Q2                -                 -
                                       YTD               -                 -
                            FY2008     Q2               68                44
                                       YTD             702               457

    Normalized results      FY2009     Q2             (647)           (1,754)
                                       YTD          (4,964)           (5,948)
                            FY2008     Q2              904              (545)
                                       YTD          (1,653)           (3,320)
    -------------------------------------------------------------------------
    

    Store Real Estate Activity

    During the quarter, the Company opened two new stores: a West 49 store in
Medicine Hat, Alberta and an Off The Wall store in Kamloops, British Columbia.
    In keeping with its focus for fiscal 2009 to maximize returns from
existing stores, the Company relocated an Amnesia store in Chicoutimi, Quebec
during the quarter.
    As previously disclosed, the Company closed its Arsenic store in
Terrebonne, Quebec when the lease expired during the quarter. The Company also
announced that it had closed its Duke's Northshore store on Yonge Street in
Toronto, Ontario, due to disappointing results. The Yonge Street store was a
street-front location while the banner's three mall-based locations remain
part of the test concept.
    At the end of the quarter the Company was operating 134 stores compared
to 130 stores at the end of the second quarter of fiscal 2008.
    Subsequent to quarter end, the Company expanded an Amnesia store in
Laval, Quebec.

    Outlook

    "We are well positioned for the back half of the year, which includes the
seasonally stronger Back-to-School and Holiday selling periods," said Mr.
Baio. "We have lowered our prices on branded apparel and footwear considerably
from this time last year. As we continue to pass on lower prices to our loyal
customers, our outstanding store associates are driving higher units per
transaction as we remain focused on driving growth in comparable store sales
and maximizing returns from existing stores and operations."

    Notice of Conference Call

    The Company will host a conference call at 9:00 a.m. Eastern Time, on
Thursday, September 4, 2008 to discuss its fiscal 2009 second quarter results.
To access the conference call by telephone, dial 416-644-3415 or
1-800-732-0232. 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, September 11, 2008 at midnight. To access the archived
conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation
number 21280942 followed by the number sign.
    A live audio webcast of the Company's second quarter results conference
call will be available at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2388100. 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.

    Financial Statements

    For convenience, this press release includes excerpts from the Company's
Fiscal 2009 Second Quarter Unaudited Consolidated Balance Sheets, Statements
of Operations and Comprehensive Income and Statements of Cash Flows.

    
    -------------------------------------------------------------------------
    WEST 49 INC.
    CONSOLIDATED BALANCE SHEETS
    AS AT                                              JULY 26,   JANUARY 26,
    (Unaudited, in thousands of dollars)                  2008          2008
                                                    -----------   -----------
    ASSETS
      Current
       Cash and cash equivalents                    $        -    $    8,369
       Accounts receivable                               1,863         1,537
       Income taxes receivable                             735             -
       Inventory                                        41,145        24,998
       Future income taxes                               2,283             -
       Prepaid expenses                                    766           459
                                                    -----------   -----------
                                                        46,792        35,363

    Capital assets                                      28,371        28,205
    Deferred costs                                         658           755
    Due from related parties                               106           138
    Goodwill                                            21,054        21,054
    Other intangibles                                   17,454        17,595
                                                    -----------   -----------
                                                    -----------   -----------
                                                    $  114,435    $  103,110
                                                    -----------   -----------
                                                    -----------   -----------

    LIABILITIES
      Current
        Bank indebtedness                           $    5,164    $        -
        Accounts payable and accrued charges            34,488        23,203
        Income taxes payable                                 -           614
        Current portion of long-term debt                1,819         1,023
        Current portion of deferred lease
         obligations                                       958           868
        Current preferred shares                            33            63
                                                    -----------   -----------
                                                        42,462        25,771

    Long-term debt                                       4,440         5,448
    Future income taxes                                  1,891         1,875
    Preferred shares                                     5,190         5,190
    Deferred lease obligations                           8,484         7,903
                                                    -----------   -----------
                                                        62,467        46,187
                                                    -----------   -----------
                                                    -----------   -----------
    SHAREHOLDERS' EQUITY
        Share capital                                   62,961        62,961
        Contributed surplus                              2,385         2,238
        Deficit                                        (13,378)       (8,276)
                                                    -----------   -----------
                                                        51,968        56,923
                                                    -----------   -----------
                                                    -----------   -----------
                                                    $  114,435    $  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    FOR THE 6-MONTH PERIOD
                                            ENDING                    ENDING

                              JULY 26,     JULY 28,     JULY 26,     JULY 28,
                                 2008         2007         2008         2007
                            ----------   ----------   ----------   ----------
    Net sales               $  45,019    $  42,426    $  83,935    $  83,423

    Cost of sales              35,424       31,760       69,507       65,202
                            ----------   ----------   ----------   ----------

    Gross margin                9,595       10,666       14,428       18,221

    Selling, general
     and administrative
     expenses                  10,242        9,830       19,392       20,576
                            ----------   ----------   ----------   ----------

    (Loss) income before
     other expenses              (647)         836       (4,964)      (2,355)
                            ----------   ----------   ----------   ----------

    Other expenses:
        Dividends on
         preferred shares          88          105          185          210
        Interest expense
         on long-term debt        214          286          330          335
        Amortization            1,508        1,368        3,042        2,815
                            ----------   ----------   ----------   ----------
                                1,810        1,759        3,557        3,360
                            ----------   ----------   ----------   ----------

    Loss before income
     taxes                     (2,457)        (923)      (8,521)      (5,715)

    Income taxes                 (703)        (334)      (2,573)      (1,938)
                            ----------   ----------   ----------   ----------

    Net loss and
     comprehensive loss     $  (1,754)   $    (589)   $  (5,948)   $  (3,777)
                            ----------   ----------   ----------   ----------
                            ----------   ----------   ----------   ----------


    Basic and diluted
     loss per share         $   (0.03)   $   (0.01)   $   (0.09)   $   (0.06)
                            ----------   ----------   ----------   ----------
                            ----------   ----------   ----------   ----------


    -------------------------------------------------------------------------
    WEST 49 INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited, in thousands of dollars)

                            FOR THE 3-MONTH PERIOD    FOR THE 6-MONTH PERIOD
                                            ENDING                    ENDING

                              JULY 26,     JULY 28,     JULY 26,     JULY 28,
                                 2008         2007         2008         2007
                            ----------   ----------   ----------   ----------
    OPERATING ACTIVITIES

    Net loss                $  (1,754)   $    (589)   $  (5,948)   $  (3,777)
      Items not affecting
       cash:
      Amortization of
       capital assets           1,445        1,291        2,901        2,660
      Amortization of
       deferred costs              62          (39)         165          162
      Amortization of
       deferred lease
       inducements               (302)        (206)        (523)        (403)
      Amortization of
       other intangibles           63           77          141          155
      Future income taxes        (768)        (703)      (2,671)      (2,307)
      Gain from
       disposition of
       capital assets             176          (11)         155          (74)
      Straight-line rent
       expense                     91          102          178          297
      Stock based
       compensation                79          173          147          337
                            ----------   ----------   ----------   ----------
                                 (908)          95       (5,455)      (2,950)

    Changes in non-cash
     working capital from
     operations                (1,646)      (2,956)      (5,594)      (4,505)
                            ----------   ----------   ----------   ----------

    Net cash flows used by
     operating activities      (2,554)      (2,861)     (11,049)      (7,455)
                            ----------   ----------   ----------   ----------

    FINANCING ACTIVITIES

      Due from related
       parties                     (1)         (71)          32         (141)
      Increase in deferred
       costs                       (7)         277          (73)         (14)
      Increase in long-term
       debt                         -          500            -          500
      Issuance of common
       stock                        -           76            -          105
      Redemption of
       preferred shares             -            -          (30)           -
      Repayment of
       long-term debt            (204)        (354)        (215)      (1,333)
                            ----------   ----------   ----------   ----------

    Net cash flows
     (used by) provided by
     financing activities        (212)         428         (286)        (883)
                            ----------   ----------   ----------   ----------

    INVESTING ACTIVITIES

      Additions to capital
       assets                  (2,073)      (1,574)      (3,138)      (4,019)
      Deferred lease
       inducements received       808          507          940          619
      Proceeds from
       disposition of
       capital assets               -            -            -           60
                            ----------   ----------   ----------   ----------

    Net cash flows used by
     investing activities      (1,265)      (1,067)      (2,198)      (3,340)
                            ----------   ----------   ----------   ----------

    Decrease in cash and
     cash equivalents          (4,031)      (3,500)     (13,533)     (11,678)

    Cash and cash
     equivalents, beginning
     of period                 (1,133)      (2,765)       8,369        5,413
                            ----------   ----------   ----------   ----------

    Cash and cash
     equivalents, end of
     period                 $  (5,164)   $  (6,265)   $  (5,164)   $  (6,265)
                            ----------   ----------   ----------   ----------
                            ----------   ----------   ----------   ----------

    SUPPLEMENTAL DISCLOSURE

      Interest paid         $     260    $     168    $     385    $     192
      Dividends paid on
       preferred shares            92          105          196          210
      Income taxes paid         1,022        1,363        1,507        2,829
    

    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 July 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, as well as two ecommerce
sites, www.shop.west49.com and 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 Biddix, 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.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890