Watsonville-based company announces it will close stores in Canada
WATSONVILLE—Sales were up slightly in the third quarter for West Marine, the country’s largest boating chain, but net income dropped overall, the company reported Thursday.
Total revenues were up 1.6 percent in the quarter driven by the company’s ongoing merchandise expansion, store optimization strategy and a strong wholesale business, said Matt Hyde, West Marine CEO and president.
While store sales were particularly strong in the southeast they were pulled down by slower sales in the northeast, he said in a conference call with investors and industry analysts.
For the first nine months of the year, revenues were up about $2 million overall but net income was down almost $7 million or 3.4 percent. Earnings per share for the year were down to 50 cents from 78 cents a year ago.
“We are delivering an improving overall sales trend,” Tom Moran, chief financial officer. While the company’s revamped online retail presence has not yet met expectations, online sales are improving after initial challenges earlier in the year. The company was also hit with higher than usual healthcare costs.
The company’s continuing to push forward with plans to reshape itself into a broader, less seasonally based, water lifestyle retailer.
In July, West Marine launched one of its new “flagship” stores in Sausalito, an effort that involved shutting an existing boating supply store and opening a larger store that included a broader merchandise selection of water-related recreation, electronics and apparel.
“The store is off to a great start with strong, double-digit growth,” Hyde said.
CANADIAN STORES TO CLOSE
West Marine also announced Thursday that it would phase out its 10 highly seasonal Canadian stores to focus on domestic growth. The “very difficult” decision is a result of losing the longterm lease for a key Toronto store and facing new lease discussions on six other stores in the next few years, events that will have a negative impact on the company’s tax status in that country.
The company told Canadian employees Thursday that it would be closing stores as leases expire in the next four years.
“The decision to phase out Canadian operations was based on management’s and the board’s belief that continuing to pursue alternative locations, particularly in Toronto, would require significant further capital investments and include significant execution risks,” the company said in a filing Thursday with the Security and Exchange Commission.
The company reported a $100,000 restructuring charge in the third quarter for severance costs and expects to record the same amount for future termination benefits over the next three years.
The decision shouldn’t have a major effect on the company’s operations and financial results, the company said in its filing.
EX-EMPLOYEES FILE SUITS
West Marine, which employs nearly 3,900 people, was hit with two class action suits in the third quarter, each filed by former hourly employees alleging failure to pay overtime and incorrectly calculated bonuses and rest and meal periods.
Two former California hourly employees filed a federal court case in the Northern District and another case was filed in San Diego County Superior Court.
The company said it intends to defend each action vigorously.
At A Glance
West Marine Inc.
What: West Marine is a retailer and wholesaler of boating supplies with 279 stores in 38 states, Puerto Rico and Canada.
Headquarters: 500 Westridge Drive, Watsonville.
Information: 728-2700; www.westmarine.com
History: Founded by Randy Repass in 1968 as a mail order business. First store opened in 1975. The company went public in 1993.
Leadership: Matt Hyde, president and CEO.
Employees: The company employs about 3,865, about 358 of who are local.
Stock: West Marine shares on the Nasdaq closed up 30 cents Thursday to close at $9.48. The 52-week range is $8.37-$14.48.