Vancouver-based Coast Wholesale Appliances Income Fund (TSX:CWA.UN) managed to maintain sales in a difficult first quarter of the year, which ended March 31, 2009.
Sales fell only 2% to $33.2 million from $33.9 million in 2008's first quarter, primarily because of continued contract sales with developers, designers and builders in Western Canada that remained on track toward completing their projects under development. Contract sales compensated for a year-over-year decline in retail appliance sales.
Morley's Appliances in Ontario, which Coast Wholesale acquired in January, performed slightly below expectations due to the exceptionally challenging environment in the store's market area.
Despite strong contract sales, the decline in retail sales affected profit margins. Earnings before income taxes and depreciation (EBITDA) fell to $2 million from $2.8 million in 2008's first quarter.
First-quarter net income fell to $1.1 million from $1.9 million.
In response to the decline in its gross margin, Coast has eliminated all discretionary spending aside from growth-related expenditures to support its new store in Greater Toronto. It's also cut back on non-essential capital expenditures and is continuing to streamline operations and trim overhead.
The company remains cautious in its outlook for the year as the Canadian economy continues to perform poorly and housing starts for the year are expected to fall substantially below 2008 levels.
Coast Wholesale's unit price range during the past week: between $2.47 and $2.68; 52-week high: $7.85; 52-week low: $1.65.