West 49 Inc.
TSX : WXX

September 13, 2005 19:23 ET

West 49 Reports Second Quarter Results

BURLINGTON, ONTARIO--(CCNMatthews - Sept. 13, 2005) - West 49 Inc.(TSX:WXX) today announced results for its second quarter, the 13-week period ended July 30, 2005.

Net sales increased $10.4 million, or 64%, to $26.6 million in the 13 weeks ended July 30, 2005 compared to the second quarter last year, when West 49 was a private company. Comparable store sales increased 11.3% in the second quarter compared to the same period last year, while for the Company's West 49 stores, comparable sales increased 13.9%.

The company generated a net loss of $1.6 million or $.03 per share in the second quarter for fiscal 2006.

"Our top line growth remains very strong but our profitability was below plan for a number of reasons," said Sam Baio, Chief Executive Officer. "Poor weather in April and May resulted in a change in markdown strategy to avoid inventory backup in the back-to-school season. The Vancouver dock strike increased freight costs as we had to find other ways to deliver merchandise. These events resulted in a gross margin swing from 28.4% of net sales in the prior year to 19.2% this year. As a result of this strong quarter's growth we are improving our internal procedures to increase our profitability.

Historically, the first and second quarters are West 49's weakest periods, while the thirdand fourth quarters are the strongest.

At July 30, 2005 West 49 operated 75 stores, including 62 West 49 stores, 10 Off the Wall stores and three Billabong stores. That compares with 54 stores; including 53 West 49 stores and one Billabong stores on July 31, 2004. The Company opened three West 49 stores in its second quarter.

Of the $10.4 million increase in sales during the quarter, $4.2 million was due to the acquisition of Off The Wall. Results from Off the Wall were incorporated with those of West 49 beginning on May 25, 2005.

For the 26 weeks ended July 30, 2005, net sales rose 47.9% to $45.4 million compared to the same period a year earlier when West 49 was a private company. Comparable West 49 store sales increased 12.2%. Gross margin increased $0.8 million to $8.4 million but declined as percentage of net sales to 18.4% from 24.6% for the 26 weeks ended July 31, 2004.

On September 2, 2005, the Company raised net proceeds of $15 million in a private placement of common shares at $1.90 per share. About $3.0 million of the net proceeds is expected to be applied to reduce West 49's outstanding credit facility. The remainder will be used for potential acquisitions and/or to fund new store growth and/or working capital and/or general corporate purposes.

West 49 Inc. is a specialty retailer of apparel, footwear and accessories, with an emphasis on skateboarding, snowboarding and surfing. The Company targets "Generation Y" customers (ages 10 through 18). West 49 operates 65 stores in seven provinces. It also owns Off The Wall, fashion-forward young women's clothing retailer with 10 stores. West 49's shares are listed on the Toronto Stock Exchange under the symbol WXX.

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 West 49 at the time of preparation, may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties and could differ materially from what is currently expected, including those referred to in West 49's Annual Information Form dated April 29, 2005.



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WEST 49 INC.
CONSOLIDATED BALANCE SHEET JULY 30, JANUARY 29,
AS AT 2005 2005
(unaudited) ------------- -------------

ASSETS
Current
Cash and short-term investments $ - $ 4,735,304
Accounts and current notes
receivable 2,483,710 1,319,381
Inventory 19,958,827 10,665,026
Future income tax - current 3,148,000 1,806,000
Prepaid expenses 482,369 343,743

------------- -------------
26,072,906 18,869,454

Capital assets 14,585,734 8,933,221
Deferred costs 908,375 710,239
Goodwill 27,593,319 18,063,853
Future income taxes 1,891,000 1,891,000

------------- -------------
$ 71,051,334 $ 48,467,767
------------- -------------
------------- -------------
LIABILITIES
Current
Bank indebtedness $ 4,433,383 $ -
Accounts payable and accrued
charges 15,855,339 7,275,333
Current portion of long-term debt 9,495,171 5,011,734

------------- -------------
29,783,893 12,287,067

Long-term debt 926,616 495,963
Preferred shares and special shares 5,411,414 5,411,414
Deferred lease inducements 3,941,372 2,100,381

------------- -------------
40,063,295 20,294,825
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SHAREHOLDERS' EQUITY
Share capital 45,782,859 40,541,693
Contributed surplus 880,016 362,000
Deficit (15,674,836) (12,730,751)

------------- -------------
30,988,039 28,172,942

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$ 71,051,334 $ 48,467,767
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WEST 49 INC.
CONSOLIDATED STATEMENT 3 Months Ended 6 Months Ended
OF OPERATIONS JULY 30 AUG 31 JULY 30 AUG 31
(unaudited) 2005 2004 2005 2004
-----------------------------------------------

Sales $ 26,583,279 $ 6,878 $ 45,436,284 $ 7,102

Cost of sales;
includes buying,
distribution and
moccupancy costs 21,473,131 96,914 37,079,502 175,165
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Gross margin 5,110,148 (90,036) 8,356,782 (168,063)

Selling, general
and administrative
expenses 6,271,763 - 11,091,030 -
-----------------------------------------------

Loss before other
expenses (1,161,615) (90,036) (2,734,248) (168,063)
-----------------------------------------------

Other Expenses
Dividends on special
and preferred shares 112,736 9,855 169,106 27,480
Interest expense on
long term debt 187,554 9,813 263,746 32,888
Loss on sale of
capital assets 80,198 - 123,695 -
Amortization 572,233 - 957,790 -
-
-----------------------------------------------
952,721 19,668 1,514,337 60,368
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Loss from ongoing
operations before
income taxes (2,114,336) (109,704) (4,248,585) (228,431)
Income tax (recovery) (554,500) - (1,304,500) -
-----------------------------------------------

Loss from ongoing
operations (1,559,836) (109,704) (2,944,085) (228,431)

Net income from
discontinued
operations - 433,517 - 535,668
-----------------------------------------------

Net (loss) income $(1,559,836) $323,813 $(2,944,085) $307,237
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Basic and diluted
loss per share
from ongoing
operations $ (0.03) $ (0.02) (0.06) $ (0.03)
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Basic and diluted
income per share
from discontinued
operations - 0.06 - 0.07
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Basic and diluted
loss per share
$ (0.03) $ 0.04 (0.06) $ 0.04
-----------------------------------------------
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(i)prior year numbers have been adjusted to reflect the 10:1 stock
consolidation.




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WEST 49 INC.
CONSOLIDATED STATEMENT 3 Months Ended 6 Months Ended
OF CASH FLOWS JULY 30 AUGUST 31 JULY 30 AUGUST 31
(unaudited) 2005 2004 2005 2004
-----------------------------------------------

OPERATING ACTIVITIES
Loss from ongoing
operations $(1,559,836) $(109,704) $(2,944,085) $(228,431)
Add: Items not
affecting cash
Amortization of
assets 572,233 - 957,790 -
Amortization of
deferred costs (23,585) - 47,125 -
Amortization of
deferred lease
inducements (95,753) - (170,482) -
Future taxes (591,816) - (1,342,000) -
Straight line rent
expense 132,581 - 253,974 -
Stock based
compensation 518,016 - 518,016
Loss from sale of
capital assets 80,198 - 123,695 -
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(967,962) (109,704) (2,555,967) (228,431)

Changes in non-cash
working capital from
ongoing operations 3,088,764 (297,202) (825,081) (290,673)
-----------------------------------------------

Cash flows from
(used) by operating
activities from
ongoing operations 2,120,802 (406,906) (3,381,048) (519,104)
-----------------------------------------------

Cash flows (used)
provided by
discontinued
operating
activities - (61,228) - 84,037
-----------------------------------------------

FINANCING ACTIVITIES
Issuance of
common stock 15,025 - 23,775 -
Repayment of long
term debt (704,782) - (1,175,722) -
Repayment of
special shares - (1,174,958) - (1,174,958)
Increase in long
term debt 5,485,951 (1,427,491) 5,485,951 (1,485,081)
-----------------------------------------------

Cash flows from
(used by)
financing
activities 4,796,194 (2,602,449) 4,334,004 (2,660,039)
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INVESTING ACTIVITIES
Additions to
capital assets (2,807,992) (20,840) (4,323,796) (72,716)
Acquistion of Off
The Wall, net of
cash acquired (6,863,535) - (7,063,535) -
Decrease (increase)
in deferred costs 116,331 (193,561) -
Deferred lease
inducements
received 957,354 - 1,459,249 -
Proceeds from sale
of business assets - 5,967,016 - 5,967,016
Acquisition costs - (217,500) - (217,500)
-----------------------------------------------

Cash flows from
(used by)
investing
activities (8,597,842) 5,728,676 (10,121,643) 5,676,800
-----------------------------------------------

(Decrease) increase
in cash and short
term investments (1,680,846) 2,658,093 (9,168,687) 2,581,694
Cash and short term
investments
(Bank Indebtedness)
Cash, Beginning
of period (2,752,537) 265,815 4,735,304 342,214
-----------------------------------------------
(Bank Indebtedness)
Cash, End of
period $(4,433,383) $2,923,908 $(4,433,383) $2,923,908
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Contact Information

  • West 49 Inc.
    Pete Pigott
    Chief Operating Officer
    (905) 336-5454 x 261
    or
    West 49 Inc.
    Kim Mullenger
    Manager of Financial Reporting and Investor Relations
    (905) 336-5454 x 224
    www.west49.com