West49 WXX.to .98 reports Q3 EPS .06...not bad for under $1.
<< - Strong sales growth complemented by growth in gross margin and earnings -
BURLINGTON, ON, Dec. 7 /CNW/ - West 49 Inc. (TSX: WXX - News; the "Company"), Canada's leading action sport retailer, today reported its financial results for the third quarter of fiscal 2007, ended October 28, 2006. All figures are reported in Canadian dollars.
Financial and operational highlights for the third quarter:
- Sales increased 49.2% to $58.2 million;
- Gross margin increased 46.5% to $18.6 million;
- Net income improved to $0.06 per common share;
- The Company opened seven new stores.
"Our strong top line growth from our acquisitions of complementary banners last year, new store openings, and solid comparable store sales, resulted in significant increases in our gross margin and EBITDA(1), as well as an improvement in our bottom line," said Sam Baio, Chief Executive Officer of West 49 Inc. "We continued to benefit from the buying and markdown strategies implemented last year, despite a later than expected Back to School selling season, which slightly dampened our profitability for the quarter. Importantly, on a year-to-date basis, our gross margin and EBITDA are up both on an absolute basis and as a rate to sales, contributing to a two cent improvement in earnings per share over the same period last year. In addition, I am pleased to report that by opening seven stores during the quarter and one subsequent to quarter end, we achieved our target of opening twenty new stores for the year."
Financial Results for the Quarter
Net sales for the third quarter of fiscal 2007 increased 49.2% to $58.2 million from $39.0 million for the third quarter of last year. Approximately half of the growth was attributable to the acquisitions in November of last year of the banners Amnesia/Arsenic, D-Tox and the online business www.boardzone.com, with the remainder of the growth resulting from new stores opened since the third quarter of last year and comparable store sales increases. Overall comparable store sales grew 5.8%(2), with the Company's core West 49 banner posting comparable store sales growth of 5.6% compared to the third quarter of last year.
Gross margin for the quarter increased 46.5% to $18.6 million from $12.7 million for the third quarter of fiscal 2006. As a percentage of net sales, gross margin was 32.0% compared with 32.6% the previous year, with the decrease being attributable to larger than expected markdowns to compensate for a later than expected start to the important Back to School selling season.
EBITDA for the quarter increased 33.9% to $7.5 million from $5.6 million for the same period last year. Net income for the quarter was $3.9 million, or $0.06 per common share, compared with $2.9 million, or $0.05 per common share for the third quarter of last year. Earnings per share are based on a weighted average of 62,034,229 common shares during the quarter compared to a weighted average of 57,970,252 common shares during the same quarter last year.
At the end of the quarter, the Company operated 125 stores and an online retailer under seven banners as compared to 77 stores under three banners at the end of the third quarter last year.
Financial Results for the Nine-Month Period
Net sales for the first nine months of fiscal 2007 increased 57.9% to $133.3 million compared with $84.4 million for the corresponding period of fiscal 2006. For the period, the Company achieved overall comparable store sales growth of 5.2%, with West 49 stores posting comparable store sales growth of 3.8%, over the same period last year.
Gross margin for the period increased 68.6% to $35.4 million, compared with $21.0 million the year before. As a percentage of net sales, gross margin increased to 26.6% compared to 24.9% for the first nine months of last year.
EBITDA for the period increased 118.5% to $5.9 million compared to $2.7 million for the same period last year. Net income for the period was $1.3 million, or $0.02 per common share, compared with a loss of $9 thousand, or $0.00 per common share for the first nine months of fiscal 2006. Earnings per share are based on a weighted average of 61,996,019 common shares during the nine-month period compared to a weighted average of 52,414,147 common shares during the corresponding period last year.
Other Highlights
Continuing with its strategy to open new stores and expand its regional banners into new geographical markets, during the quarter the Company opened seven new stores, which included the expansion of the Off the Wall banner into Ontario with the opening of locations in Newmarket and Hamilton. The Company also opened West 49 stores in Ottawa, Ontario and Winnipeg, Manitoba, an Amnesia/Arsenic store in Carrefour Laval, Quebec, a D-Tox store in Newmarket, Ontario, and opened its second Duke's Northshore store in Barrie, Ontario.
Subsequent Events
Subsequent to quarter end, the Company met its fiscal 2007 target for opening 20 new stores with the opening of a D-Tox store in Guelph, Ontario. In keeping with the Company's strategy to maximize returns on existing stores, two West 49 stores have been relocated and expanded; Stone Road Mall in Guelph, Ontario and Orchard Park in Kelowna, British Columbia. Also in keeping with this strategy, the Company decided to close an 844 square foot D-Tox store, ending the lease agreement four months in advance of the original lease expiry date. This decision was made considering that the Company also has a D-Tox shop included in the larger square footage Amnesia store in the same retail mall.
On December 1, 2006, 1,065,090 warrants that were issued to Desjardins Securities Inc. as part of the private placement in December 2004 were exercised at an exercise price of $0.65. Pursuant to the terms of the Company's CAPEX demand loan facility, the $0.7 million proceeds from these warrants will be used towards repayment of the existing loan balance.
Outlook
"In addition to our ongoing efforts to build scale and drive top line growth, we are firmly focused on maximizing returns from our operations through growth in comparable store sales and improved margins," said Mr. Baio. "We will continue to examine and refine our buying and markdown strategies in pursuit of further improvements going forward. Finally, while looking to capitalize on the efficiencies inherent in being a multi-banner retailer through our shared services model, we will continue to execute our long-term plan to reduce our selling, general and administrative expenses as a rate to sales. The multi-banner growth platform that we created last year and the strengthening of our management team this year will help ensure our success in each of these initiatives."
Notice of Conference Call
West 49 Inc. will host a conference call on Thursday, December 7, 2006 at 9:00 a.m. ET to discuss its results for the third quarter of fiscal 2007. To access the conference call by telephone, dial 416-644-3419 or 1-800-733-7560. 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, December 14, 2006 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21211023 followed by the number sign. |
