The Westbeach clothing brand, who sells its stock on the over-the-counter market using the stock ticker MRRW, released its quarterly report on November 4, 1999.
The company’s continuing operations consist of the Westbeach brand apparel and accessory lines and its three retail stores.
Net sales for continuing operations for the first nine months of 1999 decreased by 15.2 percent to $5,319,000, from $6,271,000 for the first nine months of 1998. Sales for continuing operations of Westbeach brand apparel were $2,864,000 for the nine months ended September 1999 and $4,268,000 for the nine months ended September 1998. Sales through the company’s retail stores were $2,455,000 and $2,003,000 for the nine months ended September 1999 and for the nine months ended September 1998, respectively.
According to the SEC filing, the decrease in sales in Westbeach brand apparel resulted from the later arrival in 1999 versus 1998 of inventory for fall shipments, caused by the company’s working capital problems.
Gross profit for continuing operations in the first nine months of 1999 decreased 19.8 percent to $2,016,000 from $2,513,000 in the first nine months of 1998 as a result of the decreased sales. As a percentage of sales, total gross margin decreased from 40.1 percent in 1998 to 37.9 percent in 1999. The decrease in gross profit was caused by the lower sales of Westbeach brand apparel noted above.
Interestingly, Westbeach says part of the decrease in gross profit margin is attributable to a different customer mix in the 1999 period versus 1998. Shipments to distributors represented a higher percentage of the customer mix during the first nine months of 1999 compared to 1998, and these shipments typically have a lower margin than shipments to retailers.
Operating expenses for continuing operations consist of selling, marketing, and customer service; engineering, advance design, and product development; general and administrative expenses, and loss on impairment of assets. These expenses increased to $5,849,000 for the first nine months of 1999 from $5,763,000 for the first nine months of 1998. This increase is due to a loss on impairment of goodwill of $1,135,000 in September of 1999. As a percentage of sales, the costs increased to 110 percent in 1999, from 91.9 percent in 1998.
Selling, marketing, and customer service expenses for the first nine months of 1999 decreased 29.5 percent to $1,593,000 from $2,261,000 for the first nine months of 1998. As a percentage of sales, selling, marketing, and customer service expenses decreased to 30 percent 1999, from 36.1 percet in 1998. Staff and employee related expenses increased $163,000, while travel expenses decreased $73,000, trade show expenses decreased $52,000, advertising decreased $323,000, distribution of promotional products decreased $63,000, and all other expenses decreased by $320,000.