VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 7, 2012) - Coast Wholesale Appliances Inc. (TSX:CWA) -
Coast Wholesale Appliances Inc. will host a conference call and webcast to discuss its 2012 first quarter financial results on Tuesday, May 8, 2012 at 8:00 am Pacific Time (11:00 am Eastern). The call can be accessed by dialing: 1-877-240-9772 or 416-340-8527 (GTA and International).
A replay will be available through May 23, 2012 at: 1-800-408-3053 or 905-694-9451, passcode 8725589.
The live and archived webcast, as well as an mp3 download, can be accessed at http://www.investorcalendar.com/IC/CEPage.asp?ID=168350 or on Coast's website at www.coastwholesaleappliancesinc.com.
Coast Wholesale Appliances Inc. (Coast or the company) today reported financial results for the three months ended March 31, 2012, which represents the first quarter of the company's 2012 fiscal year.
|(in thousands of dollars except percentages and per-share amounts)|
|As a percentage of sales||22.9||%||24.0||%||24.5||%|
|Basic and diluted net income (loss) per share||(0.000||)||(0.049||)||N/A|
|EBITDA before other costs||616||762||1,483|
|EBITDA margin before other costs||2.1||%||2.7||%||4.9||%|
|EBITDA per share||0.061||(0.004||)||N/A|
First Quarter Operating Results
In its third consecutive quarter of year-over-year revenue growth, Coast recorded sales of $30.0 million for the three months ended March 31, 2012, up by $1.9 million, or 6.9%, from $28.1 million in Q1 of 2011. A 10.9% increase in its first quarter sales to builders was tempered somewhat by a more modest 2.5% retail sales gain. As a result, Coast's business mix for the three months continued to shift in favour of builder sales. Other revenues, generated by warranty sales, freight and installation, sales of glass products and commission sales, increased by 5.7%.
In British Columbia, revenues continued to generally improve over Q1 2011 levels, particularly in the multi-family builder sector. In Alberta, sales were down slightly from 2011, as moderate growth in retail revenues was offset by reduced sales to builders. In Saskatchewan and Manitoba, sales benefited from strong single-family and multi-family home construction activity, increasing year-over-year in both provinces, and particularly in Saskatchewan. Finally, revenues at Coast's Greater Toronto Area (GTA) store were again up significantly from the prior year, with strong sales growth in both the retail and builder segments. Builder business in this market continued to benefit from the completion of sales logged in 2010 and 2011 in both the single-family and multi-family sectors.
Coast's first quarter gross profit improved to $6.9 million from $6.8 million in 2011, while its gross margin decreased to 22.9% from 24.0% in 2011. The decline in gross margin percentage was due in large part to the competitive retail environment that persisted in all of Coast's markets. Gross margin was also negatively impacted by reduced prices on floor models in order to accommodate the introduction of the popular KitchenAid® line at Coast's 12 stores in BC and Alberta in January. As well, discounted pricing on certain items to reduce inventory levels and the increase in Coast's builder business, which generates a lower margin than its retail sales, had an impact. Finally, gross margin generated from Coast's other revenues was down year-over-year, due mainly to a reduction in commission sales of products marketed under an agency agreement.
The increase in revenue brought Coast's first quarter EBITDA up to $0.6 million from the $0.1 million shortfall reported after other costs in 2011 ($0.8 million before other costs). EBITDA margin improved to 2.1% from a 0.2% shortfall last year (2.7% before other costs). The decreases from the 2011 EBITDA and EBITDA margin before other costs were mainly due to the year-over-year reduction in gross margin. Profitability was also impacted by a relatively modest $0.3 million year-over-year increase in expenses. As a result, Coast recorded a loss of $4,000 for the seasonally slower first quarter of 2012, compared to a loss of $0.5 million in 2011.
During the first quarter, as part of its ongoing strategy to enhance profitability by increasing sales from its existing stores, Coast proceeded with upgrade work at its Coquitlam, BC and Victoria, BC stores. Both store refreshes are scheduled for completion by the end of the second quarter. To support its growth in the GTA, Coast moved forward with plans for the relocation of its existing store to a new facility. The new location will feature a state-of-the-art showroom with working designer kitchens and an adjoining warehouse that is of sufficient size to accommodate the future addition of new stores in the GTA. The move will be completed by the end of the second quarter.
"While we are disappointed by our Q1 gross margin, we are pleased with our sales performance, particularly in the GTA," said Maurice Paquette, President, CEO and a director of Coast. "At the same time, we continued to strengthen our backlog of contract orders for future delivery, thanks to a steady flow of development activity in both the multi-family and single-family builder sectors."
"We are also pleased with the progress we made in reducing our inventory," Paquette continued. "At March 31st, inventory was down by $0.6 million from the 2011 year-end and we are on track for further reductions in Q2, which will lead to improved inventory turns in the second half of the year."
"Finally, we are happy to report that our sales of KitchenAid® major appliances in BC and Alberta during the first three months of the year exceeded our expectations," he said. "The brand has been a strong performer for Coast in Saskatchewan, Manitoba, and Ontario, and we expect that extending it nationally will contribute significant incremental revenue through the balance of the year and over the longer term."
During the first quarter, monthly dividends of $0.035 per share were declared on each of January 17, February 15 and March 13, 2012, payable on or about the fifth day of the month following. Going forward, subject to the discretion of its Board of Directors, Coast expects to continue to pay cash dividends of $0.035 per share on a monthly basis, equivalent to $0.42 per share per annum.
In conjunction with the release of its first quarter results, Coast announced that Jack Peck, the company's Chief Financial Officer, has indicated that he intends to retire in the fall of 2012. A search for a replacement is now underway. Mr. Peck will remain with Coast until a new CFO is appointed and will work closely with his successor to ensure a smooth and orderly transition.
The preceding paragraph about dividends and following discussion are qualified in their entirety by the forward-looking statements report at the end of this news release.
A cautious outlook persists for Coast's business, and for the major household appliances industry. On the builder side, the company expects that its sales will continue to improve through the balance of 2012, but at a slower rate in the second half of the year. The improvement may be tempered somewhat by a softening of its single-family business, due to a general downward trend in single-family housing starts that began in the second quarter of 2011 and has persisted into 2012. Overall, Coast does not anticipate that total housing starts for this year will be significantly different from 2011 levels. On the retail side, while first quarter sales improved year-over-year, the company expects that consumers will remain careful about making major purchases and that retail pricing will remain extremely competitive through the balance 2012, putting downward pressure on sales and margins.
"We expect that our revenues and profitability will continue to be impacted by slow economic growth and fragile consumer confidence in our western Canadian and GTA markets through 2012 and into 2013," said Paquette. "However, we remain confident in our ability to grow our business over the longer-term as economic conditions improve, and particularly in the GTA market. In the meantime, keeping our stores current and attractive is vital to maintaining our market advantage."
During the second quarter, in addition to completing upgrade work at its Coquitlam and Victoria stores, and relocating its GTA store, Coast plans to add space to its Saskatoon, Saskatchewan warehouse. The expansion will enable the company to reconfigure the adjoining store's showroom in a major upgrade planned for the second half of the year.
A more detailed discussion of Coast's financial results can be found in its 2012 First Quarter Management's Discussion and Analysis, which will be posted with unaudited interim financial statements for the period on Coast's website (www.coastwholesaleappliancesinc.com) and SEDAR (www.sedar.com) on or before May 8, 2012.
Coast is a leading independent supplier of major household appliances and accessories to builders and developers of multi-family and single-family housing, and to retail customers. Founded in 1978, Coast currently operates 15 stores across the four western provinces and one store in the Greater Toronto Area of Ontario, as well as a network of warehouse distribution centres strategically situated to serve these locations.
This news release includes forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", "expect", "may", "plan", "will", and similar terms and phrases, including references to assumptions. Such statements may involve, but are not limited to, comments with respect to the sustainability of Coast's dividends to shareholders, economic performance in Canada and its sales expectations. Forward-looking statements are included in, but not limited to, the sections titled First Quarter Operating Results, Dividends and Outlook.
These forward-looking statements reflect current expectations of Coast's management regarding future events and operating performance as of the date of this news release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: sensitivity to general economic conditions; changes in consumer confidence in the economy; maintenance of profitability and management of changes to the company's business; competition; increases to interest rates; reliance on suppliers and their ability to supply product for sale on a timely basis; changes in consumer preferences; changes in the mix of product sales; fluctuations in fuel and commodity pricing; usage of extended warranty programs and the costs to deliver these services; changes to planning and supply chain processes; lack of long-term supplier agreements; reliance on key personnel; and foreign exchange rates as they relate to imported products.
Although the forward-looking statements contained in this news release are based upon what management believes to be reasonable assumptions, Coast cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements reflect management's current beliefs and are based on information currently available to Coast. They speak only as of the date of this news release, and reflect current assumptions regarding future events and operating performance. These assumptions include, without limitation: slow economic growth through 2012 in both Western Canada and the GTA, Coast's current markets; continued fluctuations in exchange rates with the Canadian dollar trading near par with the US dollar; continued low interest rates through 2012; continuing cautious credit markets for Coast's major builder customers to obtain financing for their current and future building activities; weak consumer confidence due to the slow economic recovery; and no significant change to total housing starts recorded in 2012 compared to 2011. These forward-looking statements are made as of the date of this news release and Coast assumes no obligation to update or revise them to reflect new events or circumstances, other than as required by law.
Non-IFRS Financial Measures
EBITDA and EBITDA margin are non-IFRS financial measures that are defined in the First Quarter Management's Discussion and Analysis to be posted on Coast's website and SEDAR on or before May 8, 2012.
FOR FURTHER INFORMATION PLEASE CONTACT:
Jack Peck Coast Wholesale Appliances Inc. Chief Financial Officer (604) 301-3400 email@example.com www.coastwholesaleappliancesinc.com