West 49 Inc. reports third quarter results



    - Multi-banner retailer substantially completes shared services
    implementation and meets real estate targets for the year -

    Toronto Stock Exchange Symbol: WXX

    BURLINGTON, ON, Dec. 7 /CNW/ - West 49 Inc. (TSX: WXX) (the "Company"),
Canada's leading action sport retailer, today reported its financial results
for its third quarter of fiscal 2008, ended October 27, 2007. All figures are
reported in Canadian dollars.

    
    Third quarter highlights:
    -   Net sales increased 1.5% to $59.1 million;
    -   Gross margin of $16.8 million, or 28.4% of net sales;
    -   Selling, general and administrative expenses decreased 10 basis
        points as a rate to net sales;
    -   Normalized EBITDA(1) of $5.8 million;
    -   Net income of $2.6 million, or $0.04 per share (excluding the after-
        tax impact of the restructuring costs during the quarter);
    -   The Company substantially completed the roll-out of its shared
        services initiative; and
    -   The Company opened four new stores, relocated and expanded three
        stores and closed a store.
    

    "During the third quarter, we achieved several of our strategic
objectives for fiscal 2008," said Sam Baio, Chief Executive Officer of West 49
Inc. "We substantially completed the implementation of our shared services
model, having centralized our finance, human resources, information
technology, store operations and store development functions. This was a
significant undertaking, which we continue to expect will yield improvements
to profitability while also enhancing our controls and better positioning the
Company for future growth. We also achieved our real estate targets for new
store openings, relocations and expansions, and growth in total square
footage. With four new stores opened during the quarter we met our target for
opening 10 to 12 new stores for the year. Within our existing store base, we
relocated and expanded three stores to more optimum locations and sizes,
meeting our target of completing eight to ten of these projects in fiscal
2008. Finally, and as a result of our new store openings and relocations and
expansions, we met our annual target for growing our total square footage by
10 to 12 percent."
    "While our stores in Western Canada and the Atlantic Provinces continued
to generate strong sales, our financial results for the quarter were dampened
by a challenging retail climate in Ontario and the need to clear older
merchandise at Off The Wall as we transition the banner to a new merchandising
strategy," Mr. Baio continued. "Additionally, we lowered our average selling
price on key items such as footwear to help combat cross border shopping.
Nevertheless, we made incremental improvements to our management of expenses,
reducing our selling, general and administrative expenses as a rate to net
sales by ten basis points for the quarter and thirty basis points for the
year-to-date."

    Financial Results for the Quarter

    Net sales for the third quarter of fiscal 2008 increased 1.5% to
$59.1 million from $58.2 million for the third quarter of last year. The
increase was mostly attributable to new stores opened since the end of the
third quarter of last year. Consolidated comparable stores sales decreased
1.4%, while the Company's core West 49 banner posted comparable stores sales
growth of 1.7%, compared to the third quarter of last year.
    Gross margin for the quarter decreased 9.7% to $16.8 million from
$18.6 million for the same period in fiscal 2007. Gross margin as a rate to
net sales was 28.4% compared with 32.0% for the third quarter of fiscal 2007.
The 360 basis point decline was primarily attributable to higher occupancy
costs as a rate to net sales. The decline was also the result of lower product
margins, and higher freight and distribution costs.
    Normalized EBITDA for the quarter, which excludes restructuring costs of
$43 thousand related to the Company's shared service initiative, was
$5.8 million compared to $7.5 million for the same quarter of last year. The
decrease in EBITDA was primarily due to the lower gross margin achieved during
the quarter.
    Net income for the quarter (excluding the after-tax impact of the
restructuring costs during the quarter) was $2.6 million, or $0.04 per share,
compared to $3.9 million, or $0.06 per share, for the same period last year.
Net income per share is based on a weighted average of 63,315,747 common
shares during the quarter compared to a weighted average of 62,034,229 common
shares during the third quarter of fiscal 2007.

    Financial Results for the Nine-Month Period

    Net sales for the nine-month period of fiscal 2008 increased 6.9% to
$142.5 million from $133.3 million last year. Year-to-date consolidated
comparable store sales increased 0.2%, while the West 49 banner achieved
comparable store sales growth of 2.0% for the period.
    Gross margin for the nine-month period decreased 1.1% to $35.0 million
compared to $35.4 million the year before. As a rate to net sales, gross
margin declined 200 basis points to 24.6% compared to 26.6% for the first nine
months of fiscal 2007.
    Normalized EBITDA for the period was $4.1 million compared to
$5.9 million for the same period last year. Excluding the after-tax impact of
$0.5 million for restructuring costs, the Company sustained a net loss of
$0.7 million, or $0.01 per common share, compared with net income of
$1.3 million, or $0.02 per common share for the same period last year. Net
loss per share is based on a weighted average of 63,259,415 common shares
compared to a weighted average of 61,996,019 common shares during the same
period last year.
    The table below is a reconciliation of the Company's normalized EBITDA to
consolidated net income for the third quarter and to consolidated net loss for
the first nine months of fiscal 2008:

    
    -------------------------------------------------------------------------
    ---------------------- --------------------------------------------------
                                   Q3           Q3          YTD          YTD
    ($000's)                   FY2008       FY2007       FY2008       FY2007
    ---------------------- --------------------------------------------------

    EBITDA - normalized    $    5,754   $    7,533   $    4,101   $    5,896
    Less:
      Restructuring costs          43            -          745            -

                           --------------------------------------------------
    EBITDA                 $    5,711   $    7,533   $    3,356   $    5,896
    Less:
      Amortization              1,302        1,073        4,117        3,155
      Interest and
       dividends                  224          310          769          800
      Income taxes              1,594        2,297         (344)         670

                           --------------------------------------------------
    Net income (loss)      $    2,591   $    3,853   $   (1,186)  $    1,271
                           --------------------------------------------------
                           --------------------------------------------------

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


    Store Openings, Relocations and Expansions

    During the quarter, the Company made continued progress under its
strategy to grow its complementary banners across Canada, opening four new
stores: a West 49 store in Langley, British Columbia, two D-Tox stores,
including one in Red Deer, Alberta and one in Halifax, Nova Scotia, and a
Duke's Northshore store in Toronto, Ontario.
    Also during the quarter, the Company continued to execute its strategy to
maximize returns from existing stores, relocating and expanding three stores:
two West 49 stores in Red Deer, Alberta and Oshawa, Ontario and an Amnesia
store in Brossard, Quebec. The larger Amnesia store in Brossard Quebec now
includes a D-Tox department, and as such, the Company closed its D-Tox store
located in the same mall.
    Subsequent to quarter end, the Company opened a D-Tox store in Oshawa,
Ontario. The Company has now opened 12 new stores and relocated and expanded
nine others during the year, achieving its fiscal 2008 objectives for new
store openings, relocations and expansions and growth in square footage.

    Appointment of Vice President, General Merchandising Manager

    The Company also announced today that Peter Kershaw has been appointed
Vice President, General Merchandising Manager. In addition to leading the
buying team for the West 49, Billabong and Duke's Northshore banners, Mr.
Kershaw will have responsibility for the marketing and visual functions for
these banners. Mr. Kershaw will report directly to Sam Baio, President and
Chief Executive Officer, effective January 7, 2008.
    Mr. Kershaw is a seasoned merchant with more than 22 years of retail
experience, primarily in apparel (including action sports apparel). He spent
the past 16 years in progressively senior roles with Winners Merchants
International, most recently as Vice President and General Merchandising
Manager, Children's Wear.
    "Peter has an exceptional merchandising background and we are pleased to
welcome him to our team," said Mr. Baio. "His considerable experience, which
includes off-price buying, should help us capitalize on more favourable buying
opportunities as we continue to focus on improving gross margin and ensuring
we have the best possible merchandise flowing through our stores."

    Outlook

    "West 49 Inc. remains focused on maximizing returns from existing
operations and continuing to grow a healthy top line," said Mr. Baio. "Our
stores are ready for the Holidays with great new merchandise on the floor and
supported by strong marketing initiatives in our West 49, D-Tox, Amnesia and
Off The Wall banners. However, we expect that our top line in the fourth
quarter will continue to be impacted by the transition at Off The Wall, softer
retail conditions in Ontario, and cross border shopping. As we make our buys
for next year, we are partnering with all of our suppliers to ensure our costs
more accurately reflect the stronger Canadian dollar so that we continue to
provide excellent value to our loyal customers."

    Notice of Conference Call

    At 9:00 a.m. Eastern Time, on Friday, December 7, 2007, the Company's
management team will host a conference call to discuss the financial results
for the quarter. To access the conference call by telephone, dial 416-644-3414
or 1-800-733-7571. Please connect approximately 15 minutes prior to the
beginning of the call to ensure participation. The conference call will be
archived for replay until Friday, December 14, 2007 at midnight. To access the
archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the
reservation number 21255160 followed by the number sign.
    A live audio webcast of the Company's third quarter conference call will
be available at www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2111120.
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 2008
Third Quarter Unaudited Consolidated Balance Sheets, Statements of Operations
and Comprehensive Income and Statements of Cash Flows.


    
    WEST 49 INC.
    CONSOLIDATED BALANCE SHEETS
    AS AT                                            OCTOBER 27,  JANUARY 27,
    (Unaudited, in thousands of dollars)                   2007         2007
                                                     -----------  -----------

    ASSETS
      Current
        Cash and cash equivalents                    $        -   $    5,413
        Accounts receivable                               1,642        3,007
        Income taxes receivable                             364            -
        Inventory                                        37,928       24,025
        Future income taxes                                 561            -
        Prepaid expenses                                    454          791
                                                     -----------  -----------
                                                     -----------  -----------
                                                         40,949       33,236

    Capital assets                                       28,447       25,452
    Deferred costs                                          787          901
    Due from related parties                                 78           18
    Goodwill                                             24,554       24,554
    Other intangibles                                    17,672       17,905
                                                     -----------  -----------
                                                     $  112,487   $  102,066
                                                     -----------  -----------
                                                     -----------  -----------
    LIABILITIES
      Current
        Bank indebtedness                            $    2,672   $        -
        Accounts payable and accrued charges             27,241       20,589
        Income taxes payable                                  -        1,774
        Current portion of long-term debt                 6,509        3,755
        Current portion of lease inducements                850          783
                                                     -----------  -----------
                                                         37,272       26,901

    Long-term debt                                            -           14
    Future income taxes                                   3,840        4,158
    Preferred shares                                      5,253        5,253
    Deferred rent                                         2,923        2,079
    Deferred lease inducements                            5,124        4,976
                                                     -----------  -----------
                                                         54,412       43,381
                                                     -----------  -----------
    SHAREHOLDERS' EQUITY
        Share capital                                    62,619       62,438
        Contributed surplus                               2,513        2,118
        Deficit                                          (7,057)      (5,871)
                                                     -----------  -----------
                                                     -----------  -----------
                                                         58,075       58,685
                                                     -----------  -----------
                                                     -----------  -----------
                                                     $  112,487   $  102,066
                                                     -----------  -----------
                                                     -----------  -----------



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

                               FOR THE 3-MONTH           FOR THE 9-MONTH
                                PERIOD ENDING             PERIOD ENDING
                           OCTOBER 27,  OCTOBER 28,  OCTOBER 27,  OCTOBER 28,
                                 2007         2006         2007         2006
                           -----------  -----------  -----------  -----------

    Net sales              $   59,082   $   58,169   $  142,505   $  133,340

    Cost of sales              42,271       39,608      107,473       97,977
                           -----------  -----------  -----------  -----------

    Gross margin               16,811       18,561       35,032       35,363

    Selling, general and
     administrative
     expenses                  11,100       11,028       31,676       29,467
                           -----------  -----------  -----------  -----------

    Income before
     other expenses             5,711        7,533        3,356        5,896
                           -----------  -----------  -----------  -----------

    Other expenses:
      Dividends on
     preferred shares             108          103          318          307
      Interest expense on
       long-term debt             116          207          451          493
      Amortization              1,302        1,073        4,117        3,155
                           -----------  -----------  -----------  -----------
                                1,526        1,383        4,886        3,955
                           -----------  -----------  -----------  -----------

    Income (loss) before
     income taxes               4,185        6,150       (1,530)       1,941

    Income taxes                1,594        2,297         (344)         670
                           -----------  -----------  -----------  -----------

    Net income (loss) and
     comprehensive income
     (loss)                $    2,591   $    3,853   $   (1,186)  $    1,271
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    Basic and diluted
     income (loss)
     per share             $     0.04   $     0.06   $    (0.02)  $     0.02
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------



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

                               FOR THE 3-MONTH           FOR THE 9-MONTH
                                PERIOD ENDING             PERIOD ENDING
                           OCTOBER 27,  OCTOBER 28,  OCTOBER 27,  OCTOBER 28,
                                 2007         2006         2007         2006
                           -----------  -----------  -----------  -----------
    OPERATING ACTIVITIES

    Net income (loss)      $    2,591   $    3,853   $   (1,186)  $    1,271
      Items not affecting
       cash:
      Amortization of
       capital assets           1,224        1,042        3,884        3,031
      Amortization of
       deferred costs              40          145          202          312
      Amortization of
       deferred lease
       inducements               (211)        (191)        (614)        (523)
      Amortization of
       other intangibles           78           31          233          124
      Future income taxes       1,427        2,258         (880)         731
      (Gain) loss from
       disposition of
       capital assets               3          (39)         (71)         (28)
      Straight-line
       rent expense                94          300          391          655
      Stock based
       compensation               116          226          453          897
                           -----------  -----------  -----------  -----------
                                5,362        7,625        2,412        6,470
    Changes in non-cash
     working capital
     from operations           (3,183)        (439)      (7,688)      (2,704)
                           -----------  -----------  -----------  -----------
    Net cash flows provided
     by (used by) operating
     activities                 2,179        7,186       (5,276)       3,766
                           -----------  -----------  -----------  -----------

    FINANCING ACTIVITIES
      Due to/from related
       parties                     82          (71)         (59)        (210)
      Decrease (increase)
       in deferred costs            3          (50)         (11)        (287)
      Increase in
       long-term debt           3,650            -        4,150        3,000
      Issuance of
       common stock                18            -          123           26
      Repayment of
       long-term debt             (77)        (412)      (1,410)      (1,975)
                           -----------  -----------  -----------  -----------
    Net cash flows provided
     by (used by) financing
     activities                 3,676         (533)       2,793          554
                           -----------  -----------  -----------  -----------

    INVESTING ACTIVITIES
      Additions to
       capital assets          (2,498)      (1,862)      (6,517)      (8,652)
      Acquisition costs of
       Modes Freedom assets,
       net of cash                  -            -            -           (6)
      Acquisition costs of
       Board Zone Inc.,
       net of cash                  -            -            -          (10)
      Deferred lease
       inducements received       236          649          855        1,266
      Proceeds from
       disposition of
       capital assets               -           60           60           60
                           -----------  -----------  -----------  -----------
    Net cash flows used by
     investing activities      (2,262)      (1,153)      (5,602)      (7,342)
                           -----------  -----------  -----------  -----------
    Increase (decrease) in
     cash and cash
     equivalents                3,593        5,500       (8,085)      (3,022)
    Cash and cash
     equivalents,
     beginning of period       (6,265)      (5,762)       5,413        2,760
                           -----------  -----------  -----------  -----------

    Cash and cash
     equivalents,
     end of period         $   (2,672)  $     (262)  $   (2,672)  $     (262)
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

    SUPPLEMENTAL DISCLOSURE
      Interest paid        $      125   $      198   $      317   $      450
      Dividends paid              108          106          318          391
      Income taxes paid             -          340        2,829          340
    


    About West 49 Inc.

    West 49 Inc. is a leading Canadian multi-banner specialty retailer of
apparel, footwear, accessories and equipment related to skateboarding,
snowboarding, surfing, BMX, motocross, and the music industry. 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 (ages 10 through 18).
As at October 27, 2007, 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 an online retailer www.boardzone.com. The Company's
common shares are listed on the Toronto Stock Exchange under the symbol WXX.
The Company has approximately 64 million shares outstanding.

    Forward-looking statements

    Information in this news release that is not current or historical
factual information may constitute forward-looking information. Implicit in
this information are assumptions that, although considered reasonable by the
Company 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. 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, 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 (loss) before
    interest, taxes, dividends, depreciation and amortization and which
    excludes one-time restructuring charges of $43 thousand in the third
    quarter and $0.7 million in the first nine months of fiscal 2008, is not
    a financial measure recognized by Canadian generally accepted accounting
    principles ("GAAP") and does not have a standardized meaning prescribed
    by GAAP. The Company believes that this Non-GAAP financial measure
    provides meaningful information on the Company's performance and
    operating results. However, readers are cautioned that Normalized EBITDA
    has no standardized meaning as prescribed by GAAP and may not be
    comparable to similar measures presented by other companies. Further,
    readers are cautioned that Normalized EBITDA should not replace net
    income or loss or cash flows from operating, investing and financing
    activities (as determined in accordance with GAAP), as an indicator of
    the Company's performance.





For further information:

For further information: Rhonda Allen, Director, Finance, West 49 Inc.,
(905) 336-5454 ext. 224, E-mail: rallen@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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