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West Marine to shed jobs at its Watsonville support center

By IBI Magazine/Michael Verdon

West Marine will be laying off an undisclosed number of employees at its Watsonville support center and Hollister distribution center, according to a story in the Santa Cruz Sentinel. Besides the layoffs, open positions at those locations are not being filled.

The news comes after the company reported second-quarter profits being down by 39 per cent compared to the same quarter a year ago.

West Marine spokeswoman Laurie Fried told the paper that "a small percentage" of employees are affected by the layoffs, but would not give specific numbers.

Last October, the company reported it had 5,143 employees, including 602 in Watsonville where corporate headquarters are located. "We are a seasonal business," Fried told the paper. "We staff up in summer, and we're not as heavy in fall and winter."

But West Marine CEO Peter Harris said in an August 8th conference call discussing its second quarter results that the company would be closing 30 to 40 "underperforming" stores across the US by year's end, and that would involve staff layoffs. The West Marine chief executive did not go into detail about exact numbers. West Marine declined an interview request from IBI following that announcement.

"We recognize that the company has been heavily and repeatedly impacted by uncontrollable events," said Harris, during the conference call, referring to last year's hurricanes in the Southern US, and rainy weather this year in the Midwest and Northeast. "But our costs are too high and so we are taking immediate and decisive action. We are implementing a new store base and overhead expense model on which new strategies can be implemented. In order to reduce embedded costs, we are taking a zero-based approach for operating efforts."

Harris said that besides the store closures, "non-store reduction targets" would be implemented this year "with potential cost benefits of 300 basis points."

The company has also undertaken a program to pare down excess inventory, according to several of its vendors. "That involved sending back products worth hundreds of thousands of dollars for some vendors," said one manufacturer, asking not to be named. "This has been unprecedented, and very hard for some manufacturers, since West is the industry's largest customer."

But Harris said in the August 8th conference call that West Marine has to "move swiftly towards building a new business that ensures sustainable growth." He told one financial analyst that future store closures would be evaluated on a "case by case" basis, but that he did not expect more mass store closures like those announced during the call.

(25 August 2006)

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