West 49 Inc. reports stronger second quarter results



    
    - Improved results despite seasonally slower period and weak economy -

    Toronto Stock Exchange Symbol: WXX
    

    BURLINGTON, ON, Sept. 10 /CNW/ - West 49 Inc. (TSX: WXX) (the "Company"),
Canada's leading action sport retailer, today reported its financial results
for its second quarter ended August 1, 2009. All figures are reported in
Canadian dollars.

    
    Second quarter highlights:

    -   EBITDA(1) of $0.3 million, an improvement of $0.8 million from a loss
        of $0.5 million a year ago;
    -   Net loss of $1.0 million, or $0.01 per share, compared to a loss of
        $1.8 million, or $0.03 per share, a year ago;
    -   Net sales decreased 3.1% to $43.6 million;
    -   Gross margin rate increased 50 basis points to 21.8% of net sales;
        and
    -   Selling, general and administrative ("SG&A") expense reduction of
        $0.9 million, a 130 basis point improvement as a rate to net sales.
    

    "We achieved positive EBITDA by improving margins and reducing expenses,
despite the unseasonably cool weather and difficult economy which resulted in
lower sales," said Sam Baio, Chief Executive Officer of West 49 Inc. "These
strategic areas of focus are continuing to yield positive results. During the
quarter we also strengthened our business by adding two new stores under our
core West 49 banner, closing the final two Duke's test concept stores, and
closing two additional underperforming stores."

    
    Financial Results

    (Amounts in thousands of $ except per share amounts and weighted
     averages)
                                      Fiscal 2010             Fiscal 2009
                                  Second     Year-to-     Second     Year-to-
                                 Quarter        Date     Quarter        Date

    Net sales                     43,559      84,387      45,019      83,935
    Gross margin                   9,483      16,899       9,595      14,428
    EBITDA (loss)                    326      (1,882)       (474)     (4,791)
    Net income (loss)               (954)     (3,571)     (1,754)     (5,948)
    Basic income (loss)
     per share                     (0.01)      (0.06)      (0.03)      (0.09)
    Weighted average common
     shares outstanding       63,803,519  63,803,519  63,544,818  63,544,818
    

    Net sales for the quarter decreased $1.4 million, or 3.1%, to $43.6
million, but remained up slightly for the year-to-date. Comparable store sales
decreased 4.7%, on a consolidated basis while the West 49 banner remained
relatively flat, with a slight decrease of 0.2%. A depressed economy and
unseasonably cool temperatures impacted sales during what is typically one of
the slower quarters of the year.
    "We are pleased with the sales performance of our core West 49 banner
during these challenging market conditions," said Mr. Baio. "However, we are
disappointed by the sales performance of certain other elements of our
business, specifically with respect to our girls business, which we will
continue to monitor and address."
    Gross margin for the quarter of $9.5 million, while down $0.1 million
from last year, represented a 50 basis point increase as a rate to net sales.
Gross margin for the quarter was 21.8% of net sales compared to 21.3% a year
earlier. The increase in gross margin rate was reflective of the Company
closely working with merchandise vendors to ensure product assortments
reflected current trends and provided exceptional value for customers.
    SG&A expenses for the quarter decreased $0.9 million to $9.2 million. As
a rate to net sales, SG&A expenses were down 130 basis points to 21.1% from
22.4% in the second quarter of last year as a result of the Company's
continued focus on expense management, primarily variable store operating
costs and other discretionary spending. The 130 basis point improvement marked
the sixth consecutive quarter that the Company lowered its SG&A expenses as a
rate to net sales.
    EBITDA for the quarter was $0.3 million, an improvement of $0.8 million,
compared to a loss of $0.5 million for the second quarter a year ago. The
improvement was mainly due to the improved gross margin as a rate to sales and
cost savings.
    Net loss for the quarter improved to $1.0 million, or $0.01 per share,
from a net loss of $1.8 million, or $0.03 per share, for the second quarter
last year.

    Store Real Estate Activity

    As part of the Company's focus on growing its core business, two new West
49 stores were opened during the quarter; one in the Eastgate Square, Stoney
Creek, Ontario, and one in the Georgian Mall, Barrie, Ontario. During the
quarter, the Company closed the final two Duke's Northshore locations,
completing the Company's exit from this test concept, as well as two other
underperforming stores: an Arsenic store in Laval, Quebec and a street-front
Billabong store in Toronto, Ontario.
    Subsequent to the quarter end, the Company opened a West 49 store and an
Off The Wall store at CrossIron Mills, in Rocky View, Alberta.

    Banking Arrangements

    During the quarter, and as per the Company's news release on July 7,
2009, the Company successfully obtained the renewal of its existing credit
facilities which included more accommodating financial covenants. As such, the
Company was in compliance with all banking covenants at the end of the
quarter, and management believes that the Company will remain in compliance
with these covenants throughout the term of the facility. The Company's next
renewal date with its existing bank is scheduled for June 30, 2010.

    Outlook

    "The strategies we continue to execute have better positioned our
business for our seasonally stronger back half of the year," said Mr. Baio.
"We remain focused on increasing profitability by: growing our core business;
refining inventory management; improving our margins and containing costs."

    Notice of Conference Call

    The Company will host a conference call on Thursday, September 10, 2009
at 9:00 a.m. (ET) to discuss its fiscal 2010 second quarter results. To access
the conference call by telephone, dial 416-644-3426 or 1-800-731-5319. 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 17, 2009 at midnight. To access the archived conference call, dial
416-640-1917 or 1-877-289-8525 and enter the reservation number 21313746
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=2782120. 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 web site 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 August 1, 2009, the Company operated 131 stores in
nine provinces, under the banners West 49, Billabong, Off The Wall,
Amnesia/Arsenic and D-Tox, 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 Information

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


    WEST 49 INC.
    CONSOLIDATED BALANCE SHEETS
    AS AT                                            August 1,    January 31,
    (Unaudited, in thousands of dollars)                 2009           2009
                                                 -------------  -------------

    Assets
      Current
        Cash and cash equivalents                 $         -    $     6,788
        Accounts receivable                             1,385          1,226
        Income taxes receivable                             -             16
        Inventories                                    43,388         28,552
        Future income taxes                             2,899          1,326
        Prepaid expenses                                3,548            741
                                                 -------------  -------------
                                                       51,220         38,649

    Capital assets                                     26,894         27,399
    Deferred costs                                        113            138
    Due from related parties                               95             10
    Future income taxes                                 2,185          2,142
    Goodwill                                           12,580         12,580
    Intangible assets                                  13,829         13,829
                                                 -------------  -------------
                                                 -------------  -------------
                                                  $   106,916    $    94,747
                                                 -------------  -------------
                                                 -------------  -------------
    Liabilities
      Current
        Bank indebtedness                         $     5,313    $         -
        Accounts payable and accrued charges           38,558         27,792
        Current portion of long-term debt               6,315          6,843
        Current portion of deferred lease
         obligations                                      945            942
        Current preferred shares                           18             33
                                                 -------------  -------------
                                                       51,149         35,610

    Deferred lease obligations                          8,484          8,293
    Preferred shares                                    5,190          5,190
                                                 -------------  -------------
                                                       64,823         49,093
                                                 -------------  -------------
                                                 -------------  -------------
    Shareholders' Equity
        Share capital                                  63,371         63,371
        Contributed surplus                             2,064          2,054
        Deficit                                       (23,342)       (19,771)
                                                 -------------  -------------
                                                       42,093         45,654
                                                 -------------  -------------
                                                 -------------  -------------
                                                  $   106,916    $    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         For the 6-Month
                                      Periods Ending          Periods Ending
                                August 1,    July 26,   August 1,    July 26,
                                    2009        2008        2009        2008
                              ----------- ----------- ----------- -----------

    Net sales                  $  43,559   $  45,019   $  84,387   $  83,935

    Cost of sales                 34,076      35,424      67,488      69,507
                              ----------- ----------- ----------- -----------

    Gross margin                   9,483       9,595      16,899      14,428

    Selling, general and
     administrative expenses       9,157      10,069      18,781      19,219
                              ----------- ----------- ----------- -----------

    Income (loss) before
     other expenses                  326        (474)     (1,882)     (4,791)
                              ----------- ----------- ----------- -----------
    Other expenses:
      Dividends on preferred
       shares                         55          88         115         185
      Interest expense on
       long-term debt                174         214         321         330
      Amortization                 1,470       1,508       2,858       3,042
      Restructuring costs              -         173           -         173
                              ----------- ----------- ----------- -----------
                                   1,699       1,983       3,294       3,730
                              ----------- ----------- ----------- -----------

    Loss before income taxes      (1,373)     (2,457)     (5,176)     (8,521)

    Recovery of income taxes        (419)       (703)     (1,605)     (2,573)
                              ----------- ----------- ----------- -----------
    Net loss and
     comprehensive loss        $    (954)  $  (1,754)  $  (3,571)  $  (5,948)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------
    Basic and diluted loss
     per share                 $   (0.01)  $   (0.03)  $   (0.06)  $   (0.09)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------



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

                                     For the 3-Month         For the 6-Month
                                      Periods Ending          Periods Ending
                                August 1,    July 26,   August 1,    July 26,
                                    2009        2008        2009        2008
                              ----------- ----------- ----------- -----------

    Operating Activities

    Net loss                   $    (954)  $  (1,754)  $  (3,571)  $  (5,948)
      Non-cash items
       included above:
      Amortization of
       capital assets              1,470       1,445       2,858       2,901
      Amortization of
       deferred costs                 51          62         105         165
      Amortization of
       deferred lease
       inducements                  (242)       (302)       (486)       (523)
      Amortization of
       intangible assets               -          63           -         141
      Future income taxes           (448)       (768)     (1,616)     (2,671)
      Impairment or
       disposition of
       store assets                  (52)        176         123         155
      Straight-line rent
       expense                        57          91         117         178
      Stock based compensation         4          79          10         147
                              ----------- ----------- ----------- -----------
                                    (114)       (908)     (2,460)     (5,455)

    Changes in non-cash
     working capital from
     operations                   (1,664)     (1,646)     (7,295)     (5,594)
                              ----------- ----------- ----------- -----------
    Net cash flows used by
     operating activities         (1,778)     (2,554)     (9,755)    (11,049)
                              ----------- ----------- ----------- -----------

    Financing Activities

      Due from related parties       (54)         (1)        (85)         32
      Increase in deferred
       costs                         (80)         (7)        (80)        (73)
      Redemption of
       preferred shares                -           -         (15)        (30)
      Repayment of long-term
       debt                         (264)       (204)       (528)       (215)
                              ----------- ----------- ----------- -----------
    Net cash flows used by
     financing activities           (398)       (212)       (708)       (286)
                              ----------- ----------- ----------- -----------

    Investing Activities

      Additions to capital
       assets                     (1,566)     (2,073)     (2,317)     (3,138)
      Deferred lease
       inducements received          613         808         679         940
                              ----------- ----------- ----------- -----------
    Net cash flows used by
     investing activities           (953)     (1,265)     (1,638)     (2,198)
                              ----------- ----------- ----------- -----------
    Net change in cash and
     cash equivalents             (3,129)     (4,031)    (12,101)    (13,533)

    Cash and cash equivalents,
     beginning of period          (2,184)     (1,133)      6,788       8,369
                              ----------- ----------- ----------- -----------

    Cash and cash equivalents,
     end of period             $  (5,313)  $  (5,164)  $  (5,313)  $  (5,164)
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Supplemental Disclosure
      Interest paid            $     131   $     260   $     321   $     385
      Dividends paid on
       preferred shares               58          92         127         196
      Income taxes paid                -       1,022           -       1,507
    





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; Follow West 49
Inc. on Twitter at http://twitter.com/West49Inc

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