West 49 Inc. reports stronger first quarter results



    
    - Growth in net sales, comparable store sales and margins -

    Toronto Stock Exchange Symbol: WXX
    

    BURLINGTON, ON, June 11 /CNW/ - West 49 Inc. (TSX: WXX) (the "Company"),
Canada's leading action sport retailer, today reported its financial results
for its first quarter ended May 2, 2009. All figures are reported in Canadian
dollars.

    
    First quarter highlights:

    -   Net sales increased 4.9% to $40.8 million;
    -   Gross margin increased 580 basis points as a rate to net sales;
    -   Selling, general and administrative ("SG&A") expenses decreased 20
        basis points as a rate to net sales;
    -   Net loss narrowed to $2.6 million, or $0.04 per share, from $4.2
        million, or $0.07 per share, for the first quarter of last year;
    -   Opened one new West 49 store and closed an Off The Wall and a Duke's
        Northshore store.
    

    "In spite of the challenging economy, we improved our margins while
growing both our net sales and comparable store sales in the first quarter,"
said Sam Baio, Chief Executive Officer of West 49 Inc. "The strategies we have
been executing over the past several quarters are beginning to pay off during
the first quarter of fiscal 2010. Our stronger comparable store sales and top
line growth are a testament to the exceptional brands we offer and our
competitive pricing. Our improved focus on inventory and merchandising, and
partnering with our vendors yielded higher margins. In addition, we benefited
from the continued improvement in our expense management."

    
    Financial Results

    (Amounts in thousands of Canadian $ except per share amounts and weighted
    averages)

                                                     First Quarter Ended
                                                 May 2, 2009  April 26, 2008
    Net sales                                         40,828          38,916
    Gross margin                                       7,416           4,833
    EBITDA(1)                                         (2,208)         (4,317)
    Net income (loss)                                 (2,617)         (4,194)
    Basic income (loss) per share                     ($0.04)         ($0.07)
    Weighted average common shares outstanding    63,803,519      63,544,818
    

    Net sales for the quarter increased 4.9% to $40.8 million. Comparable
store sales increased 2.9% on a consolidated basis and 7.7% for the core West
49 banner. For reference purposes, last year the Company reported comparable
store sales declines of 8.1% on a consolidated basis and 7.4% for the West 49
banner in the first quarter.
    Gross margin increased $2.6 million to $7.4 million. As a rate to net
sales, gross margin increased 580 basis points to 18.1% from 12.3% a year
earlier. The higher gross margin rate was the result of improved product
margins.
    The Company's continued focus on managing its expenses, especially its
variable store operating costs, contributed a 20 basis point reduction in
selling, general and administrative (SG&A) expenses as a rate to net sales.
The Company's SG&A rate decreased to 23.5% of net sales from 23.7% of net
sales in the first quarter of last year.
    EBITDA(1) loss narrowed to $2.2 million from $4.3 million a year ago,
primarily due to the higher net sales and improvement in gross margin rate
achieved. The Company had a net loss for the quarter of $2.6 million, or $0.04
per share, which was an improvement from a year ago when the Company had a net
loss of $4.2 million, or $0.07 per share.

    Store Real Estate Activity

    During the quarter, the Company opened a West 49 store in the Milton
Centre in Milton, Ontario and closed an Off The Wall store and a Duke's
Northshore store. The Company closed its Off The Wall store in the Lougheed
Town Centre in Burnaby, BC due to under-performance when its lease expired.
The Duke's Northshore location in the Park Royal Shopping Centre in West
Vancouver, BC was closed as the Company continues to exit from this test
concept. In addition, the Company relocated and expanded an Amnesia store in
the Les Promenades de L'Outaouais mall in Gatineau, Quebec during the quarter.
At the end of the quarter, the Company was operating 133 stores, compared to
134 stores a year earlier.

    Banking Arrangements

    As previously disclosed and anticipated by management, at the end of the
first quarter the Company was in breach of one of its banking covenants. The
Company has since received a waiver from its bank and continues to work
closely with the bank towards completing its annual renewal process during the
second quarter.

    Outlook

    "Regardless of the current economic environment, our business continues
to show strong growth potential, especially our core West 49 banner," said Mr.
Baio. "We believe that our competitive retailing strategies and prudent
management of operations better position us for this challenging economic
climate. We will strategically open new stores, continue our efforts to
maximize returns from our existing stores, and will continue to review our
portfolio for any under-performing stores that should be targeted for closure.
These efforts, along with our continuous focus on our customers and our
products, ensure that we will be the retail destination of choice for the
Canadian tween and teen action sports lifestyle."

    Notice of Conference Call

    The Company will host a conference call at 9:00 a.m. Eastern Time, on
Thursday, June 11, 2009, to discuss its fiscal 2010 first quarter results. To
access the conference call by telephone, dial 416-644-3420 or 1-800-594-3615.
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 18, 2009 at midnight. To access the archived conference call,
dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21307867
followed by the number sign.
    A live audio webcast of the Company's fourth quarter and year end results
conference call will be available at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2695220. 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.

    Annual Meeting of Shareholders

    The Company also confirmed it will hold its Annual Meeting of
Shareholders on Wednesday, June 17, 2009 at 1:00 p.m. Eastern Time at the
Burlington Convention Centre, 1120 Burloak Drive, Burlington, Ontario. You are
entitled to vote at our annual shareholder meeting or any adjournment if you
were a common shareholder of the Company as at the Record Date of April 28,
2009.
    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=150260&s=1&k=5930FEC7A911628A697938E30309F808.
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.

    About West 49 Inc.

    West 49 Inc. is a leading Canadian specialty retailer of fashion and
apparel, footwear, accessories and equipment related to the youth action
sports lifestyle. 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 May 2, 2009, the Company operated 133 stores in nine
provinces, under the banners West 49, Billabong, Off The Wall,
Amnesia/Arsenic, D-Tox and Duke's Northshore, and operated online at
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. The following includes some of the factors
that could cause actual results, performance or achievements to differ
materially from those expressed in or implied by any forward-looking
information made by or on behalf of the Company: competition, changes in
demographic trends, changes in consumer preferences and discretionary spending
patterns, changes in business and economic conditions, human resource matters,
legal proceedings, challenges to intellectual property rights, and changes in
laws, regulations, and accounting policies and practices. The foregoing list
of factors is not exhaustive. In formulating the forward-looking information
contained herein, management has assumed that business and economic conditions
affecting the Company's operations will continue substantially in the ordinary
course, including without limitation with respect to industry conditions,
general levels of economic activity, laws, regulations, taxes, foreign
exchange rates, minimum wage rates and interest rates, weather, that there
will be no outbreaks of disease or public safety issues, and that there will
be no unplanned material changes in its facilities, equipment, supplies, with
respect to relations with customers, suppliers, landlords and employees, or
with respect to credit availability, among other things. These assumptions,
although considered reasonable by management at the time of preparation, may
prove to be incorrect. 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. Readers are cautioned that 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 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.

    Financial Statements

    For convenience, this press release includes the Company's Fiscal 2010
First Quarter Unaudited Consolidated Balance Sheets, Statements of Operations
and Comprehensive Loss and Statements of Cash Flows.


    
    WEST 49 INC.
    CONSOLIDATED BALANCE SHEETS
    AS AT                                                May 2,   January 31,
    (Unaudited, in thousands of dollars)                  2009          2009
                                                   ------------  ------------

    Assets
      Current
        Cash and cash equivalents                    $       -     $   6,788
        Accounts receivable                                793         1,226
        Income taxes receivable                             16            16
        Inventories                                     33,973        28,552
        Future income taxes                              2,494         1,326
        Prepaid expenses                                 3,511           741
                                                   ------------  ------------
                                                        40,787        38,649

    Capital assets                                      26,748        27,399
    Deferred costs                                         100           138
    Due from related parties                                42            10
    Future income taxes                                  2,142         2,142
    Goodwill                                            12,580        12,580
    Intangible assets                                   13,829        13,829
                                                   ------------  ------------
                                                   ------------  ------------

                                                     $  96,228     $  94,747
                                                   ------------  ------------
                                                   ------------  ------------
    Liabilities
      Current
        Bank indebtedness                            $   2,184     $       -
        Accounts payable and accrued charges            30,113        27,792
        Current portion of long-term debt                6,579         6,843
        Current portion of deferred lease
         obligations                                       923           942
        Current preferred shares                            18            33
                                                   ------------  ------------
                                                        39,817        35,610

    Deferred lease obligations                           8,178         8,293
    Preferred shares                                     5,190         5,190
                                                   ------------  ------------
                                                        53,185        49,093
                                                   ------------  ------------
                                                   ------------  ------------
    Shareholders' Equity
        Share capital                                   63,371        63,371
        Contributed surplus                              2,060         2,054
        Deficit                                        (22,388)      (19,771)
                                                   ------------  ------------
                                                        43,043        45,654
                                                   ------------  ------------
                                                   ------------  ------------
                                                     $  96,228     $  94,747
                                                   ------------  ------------
                                                   ------------  ------------



    WEST 49 INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
    (Unaudited, in thousands of dollars except per share amounts)

                                                          For the 3-Month
                                                           Periods Ending
                                                         May 2,     April 26,
                                                          2009          2008
                                                   ------------  ------------

    Net sales                                        $  40,828     $  38,916

    Cost of sales                                       33,412        34,083
                                                   ------------  ------------

    Gross margin                                         7,416         4,833

    Selling, general and administrative expenses         9,624         9,150
                                                   ------------  ------------

    Loss before other expenses                          (2,208)       (4,317)
                                                   ------------  ------------
                                                   ------------  ------------

    Other expenses:


      Dividends on preferred shares                         60            97
      Interest expense on long-term debt                   147           116
      Amortization                                       1,388         1,534
                                                   ------------  ------------
                                                   ------------  ------------
                                                         1,595         1,747
                                                   ------------  ------------

    Loss before income taxes                            (3,803)       (6,064)

    Recovery of income taxes                            (1,186)       (1,870)
                                                   ------------  ------------

    Net loss and comprehensive loss                  $  (2,617)    $  (4,194)
                                                   ------------  ------------
                                                   ------------  ------------


    Basic and diluted loss per share                 $   (0.04)    $   (0.07)
                                                   ------------  ------------
                                                   ------------  ------------



    WEST 49 INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited, in thousands of dollars)
                                                          For the 3-Month
                                                           Periods Ending
                                                         May 2,     April 26,
                                                          2009          2008
                                                   ------------  ------------


    Operating Activities

    Net loss                                         $  (2,617)    $  (4,194)
      Non-cash items included above:
      Amortization of capital assets                     1,388         1,456
      Amortization of deferred costs                        54           103
      Amortization of deferred lease inducements          (244)         (221)
      Amortization of intangible assets                      -            78
      Future income taxes                               (1,168)       (1,903)
      Impairment or disposition of store assets            175           (21)
      Straight-line rent expense                            60            87
      Stock based compensation                               6            68
                                                   ------------  ------------
                                                        (2,346)       (4,547)

    Changes in non-cash working capital
     from operations                                    (5,630)       (3,948)
                                                   ------------  ------------

    Net cash flows used by operating activities         (7,976)       (8,495)
                                                   ------------  ------------

    Financing Activities

      Due from related parties                             (32)           33
      Increase in deferred costs                             -           (66)
      Redemption of preferred shares                       (15)          (30)
      Repayment of long-term debt                         (264)          (11)
                                                   ------------  ------------

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

    Investing Activities

      Additions to capital assets                         (751)       (1,065)
      Deferred lease inducements received                   66           132
      Proceeds from disposition of capital assets            -             -
                                                   ------------  ------------

    Net cash flows used by investing activities           (685)         (933)
                                                   ------------  ------------

    Net change in cash and cash equivalents             (8,972)       (9,502)

    Cash and cash equivalents, beginning of period       6,788         8,369
                                                   ------------  ------------

    Cash and cash equivalents, end of period         $  (2,184)    $  (1,133)
                                                   ------------  ------------
                                                   ------------  ------------

    Supplemental Disclosure

      Interest paid                                  $     190     $     125
      Dividends paid on preferred shares                    69           104
      Income taxes paid                                      -           485
    







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.

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