Canada -- West 49 Inc, Canada's leading action sport retailer, reported its financial results for its first quarter ended May 2, 2009. All figures are reported in Canadian dollars.

First quarter highlights:
• Net sales increased 4.9% to $40.8 million;
• Gross margin increased 580 basis points as a rate to net sales;
• Selling, general and administrative ("SG&A") expenses decreased 20 basis points as a rate to net sales;
• Net loss narrowed to $2.6 million, or $0.04 per share, from $4.2 million, or $0.07 per share, for the first quarter of last year;
• Opened one new West 49 store and closed an Off The Wall and a Duke's Northshore store.

"In spite of the challenging economy, we improved our margins while growing both our net sales and comparable store sales in the first quarter," said Sam Baio, Chief Executive Officer of West 49 Inc. "The strategies we have been executing over the past several quarters are beginning to pay off during the first quarter of fiscal 2010. Our stronger comparable store sales and top line growth are a testament to the exceptional brands we offer and our competitive pricing. Our improved focus on inventory and merchandising, and partnering with our vendors yielded higher margins. In addition, we benefited from the continued improvement in our expense management."

Financial Results
Net sales for the quarter increased 4.9% to $40.8 million. Comparable store sales increased 2.9% on a consolidated basis and 7.7% for the core West 49 banner. For reference purposes, last year the Company reported comparable store sales declines of 8.1% on a consolidated basis and 7.4% for the West 49 banner in the first quarter.

Gross margin increased $2.6 million to $7.4 million. As a rate to net sales, gross margin increased 580 basis points to 18.1% from 12.3% a year earlier. The higher gross margin rate was the result of improved product margins.

The Company's continued focus on managing its expenses, especially its variable store operating costs, contributed a 20 basis point reduction in selling, general and administrative (SG&A) expenses as a rate to net sales. The Company's SG&A rate decreased to 23.5% of net sales from 23.7% of net sales in the first quarter of last year.

EBITDA(1) loss narrowed to $2.2 million from $4.3 million a year ago, primarily due to the higher net sales and improvement in gross margin rate achieved. The Company had a net loss for the quarter of $2.6 million, or $0.04 per share, which was an improvement from a year ago when the Company had a net loss of $4.2 million, or $0.07 per share.

Store Real Estate Activity
During the quarter, the Company opened a West 49 store in the Milton Centre in Milton, Ontario and closed an Off The Wall store and a Duke's Northshore store. The Company closed its Off The Wall store in the Lougheed Town Centre in Burnaby, BC due to under-performance when its lease expired. The Duke's Northshore location in the Park Royal Shopping Centre in West

Vancouver, BC was closed as the Company continues to exit from this test concept. In addition, the Company relocated and expanded an Amnesia store in the Les Promenades de L'Outaouais mall in Gatineau, Quebec during the quarter. At the end of the quarter, the Company was operating 133 stores, compared to 134 stores a year earlier.

Banking Arrangements
As previously disclosed and anticipated by management, at the end of the first quarter the Company was in breach of one of its banking covenants. The Company has since received a waiver from its bank and continues to work closely with the bank towards completing its annual renewal process during the second quarter.

Outlook
"Regardless of the current economic environment, our business continues to show strong growth potential, especially our core West 49 banner," said Mr. Baio. "We believe that our competitive retailing strategies and prudent management of operations better position us for this challenging economic climate. We will strategically open new stores, continue our efforts to maximize returns from our existing stores, and will continue to review our portfolio for any under-performing stores that should be targeted for closure. These efforts, along with our continuous focus on our customers and our products, ensure that we will be the retail destination of choice for the Canadian tween and teen action sports lifestyle."
 
West 49 Inc