Zumiez Inc. Announces Fiscal 2013 Fourth Quarter and Full Year Results

Marketwired

LYNNWOOD, WA--(Marketwired - Mar 13, 2014) -  Zumiez Inc. (NASDAQ: ZUMZ), a leading multi-channel specialty retailer of action sports related apparel, footwear, hardgoods and accessories, today reported results for the fourth quarter and fiscal year ended February 1, 2014.

Fourth Quarter Results
Total net sales for the fourth quarter ended February 1, 2014 (13 weeks) increased 1.1% to $226.8 million from $224.4 million in the quarter ended February 2, 2013 (14 weeks). Comparable store sales for the 13-week period ended February 1, 2014 decreased 2.2% compared to a 1.0% decrease for the 14-week period ended February 2, 2013. Net income in the fourth quarter of fiscal 2013 increased 17.3% to $26.9 million, or $0.89 per diluted share, from net income of $22.9 million, or $0.74 per diluted share, in the fourth quarter of the prior fiscal year. The results for fiscal 2013 include a $5.8 million benefit, or approximately $0.16 per diluted share, for the reversal of contingent earn-out accruals associated with the acquisition of Blue Tomato, a $3.3 million benefit, or approximately $0.07 per diluted share, for the correction of an error related to the accounting for rent expenses, and a $0.6 million expense, or approximately $0.02 per diluted share, for the amortization of intangible assets associated with the Blue Tomato acquisition. Also included in the fiscal 2013 fourth quarter results is a benefit to the provision for income taxes of $0.8 million, or approximately $0.03 per diluted share, for the release of a valuation allowance of net operating losses in foreign subsidiaries. The results for fiscal 2012 include $0.5 million of Blue Tomato acquisition related costs and operations, or $0.01 per diluted share in total.

Full Year Results
Total net sales for fiscal 2013 (52 weeks) increased 8.2% to $724.3 million from $669.4 million in fiscal 2012 (53 weeks). Comparable store sales for the 52-week period ended February 1, 2014 decreased 0.3% compared to a 5.0% increase for the 53-week period ended February 2, 2013. Net income in fiscal 2013 increased 9.0% to $45.9 million, or $1.52 per diluted share compared to net income in the prior fiscal year of $42.2 million, or $1.35 per diluted share. Results for the fiscal year 2013 include a benefit of $2.6 million, or approximately $0.08 per diluted share, for the reversal of contingent earn-out accruals associated with the acquisition of Blue Tomato, a $2.7 million benefit, or approximately $0.06 per diluted share, for the correction of an error related to the accounting for rent expenses, a $2.3 million expense, or approximately $0.06 per diluted share, for the amortization of intangible assets associated with the Blue Tomato acquisition, and $1.3 million, or approximately $0.03 per diluted share, for costs associated with the conditional settlement of a California class action wage and hour lawsuit. Also included in the fiscal 2013 results is a benefit to the provision for income taxes of $0.4 million, or approximately $0.01 per diluted share, for the release of a valuation allowance to net operating losses in foreign subsidiaries. Results for the fiscal year 2012 included approximately $7.3 million, or $0.19 per diluted share, of Blue Tomato acquisition related costs and operations and approximately $2.1 million, or $0.04 per diluted share, of costs associated with the relocation the Company's ecommerce fulfillment center to Edwardsville, Kansas and corporate offices to Lynnwood, Washington from Everett, Washington.

Share Repurchase Program
During the fourth quarter 2013 and through March 1, 2014, the Company has repurchased approximately 1.1 million shares of its common stock, at an average cost per share of $22.52, for a total of $24.7 million, which includes 0.7 million shares purchased in the fourth quarter of fiscal 2013 for a total of $15.4 million, and 0.4 million shares purchased in the February period of fiscal 2014 for a total of $9.3 million. As of March 1, 2014, the Company had $5.3 million authorized repurchase funds remaining under its $30 million stock repurchase program announced in December 2013. 

The company is also announcing that, effective March 12, 2014, the Board of Directors of Zumiez Inc. has approved the repurchase of up to an additional $30 million of its Common Stock. The repurchases will be made from time to time on the open market at prevailing market prices and is expected to continue through the fiscal year 2014 that will end on January 31, 2015, unless the time period is extended or shortened by the Board of Directors. The new purchase program is in addition to our existing stock repurchase program that was authorized in December 2013 and will begin once the previously approved repurchase program has been completed.

Cash and Current Marketable Securities
At February 1, 2014, the Company had cash and current marketable securities of $117.2 million, compared to cash and current marketable securities of $103.2 million at February 2, 2013. The increase in cash and current marketable securities is a result of cash generated through operations, partially offset capital expenditures and stock repurchases.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "The fourth quarter proved to be more challenging than we expected both domestically and abroad. Weak mall traffic in December and January created a highly promotional retail environment that pressured our sales and deleveraged our cost structure. The steps we have taken to broaden our revenue base, including evolving our digital capabilities, investing in our team and expanding into Europe, have pressured our operating margin in the face of ongoing consumer headwinds, but we believe will fortify our long-term earnings growth. We will continue to pursue growth strategies that leverage our core competencies while further diversifying our business toward high-growth and high-return opportunities."

Fiscal 2014 First Quarter Outlook
The Company is introducing guidance for the three months ending May 3, 2014. Net sales are projected to be in the range of $156 to $160 million resulting in a net loss per diluted share of approximately $0.02 to net income per diluted share of approximately $0.03, which includes $0.6 million, or approximately $0.02 per diluted share, for the amortization of intangible assets associated with Blue Tomato. This guidance is based on an anticipated comparable sales decrease in the low single digit range for the first quarter of fiscal 2014. 

The Company currently intends to open approximately 55 new stores in fiscal 2014, including up to 7 stores in Canada and 5 stores in Europe.

A conference call will be held today to discuss fourth quarter and fiscal 2013 year-end results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com.  Participants may also dial (617) 614-3471 followed by the conference identification code of 16264394.

About Zumiez Inc.

Zumiez is a leading multi-channel specialty retailer of action sports related apparel, footwear, equipment and accessories, focusing on skateboarding, snowboarding, surfing, motocross and BMX for young men and women. As of March 1, 2014 we operated 552 stores including 512 in the United States, 28 in Canada, and 12 in Europe. We operate under the name Zumiez and Blue Tomato. Additionally, we operate ecommerce web sites at www.zumiez.com and www.blue-tomato.com

Safe Harbor Statement

Certain statements in this press release and oral statements relating thereto made from time to time by representatives of the Company may constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, predictions and guidance relating to the Company's future financial performance, brand and product category diversity, ability to adjust product mix, integration of acquired businesses, growing customer demand for our products and new store openings. In some cases, you can identify forward-looking statements by terminology such as, "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. These forward-looking statements are based on management's current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include, without limitation, those described in the Company's quarterly report on Form 10-Q for the quarter ended November 2, 2013 as filed with the Securities and Exchange Commission and available at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

   
   
ZUMIEZ INC.  
CONSOLIDATED STATEMENTS OF INCOME  
(In thousands, except per share amounts)  
(Unaudited)  
   
    Three Months Ended  
                         
    February 1, 2014     % of Sales     February 2, 2013     % of Sales  
Net sales   $ 226,838     100.0 %   $ 224,405     100.0 %
Cost of goods sold     138,959     61.3 %     138,722     61.8 %
Gross profit     87,879     38.7 %     85,683     38.2 %
                             
Selling, general and administrative expenses     47,579     20.9 %     49,582     22.1 %
Operating profit     40,300     17.8 %     36,101     16.1 %
                             
Interest income, net     167     0.1 %     258     0.1 %
Other expense, net     (682 )   (0.4 %)     (116 )   0.0 %
Earnings before income taxes     39,785     17.5 %     36,243     16.2 %
                             
Provision for income taxes     12,934     5.7 %     13,359     6.0 %
                             
Net income   $ 26,851     11.8 %   $ 22,884     10.2 %
                             
Basic earnings per share   $ 0.90           $ 0.75        
                             
Diluted earnings per share   $ 0.89           $ 0.74        
                             
Weighted average shares used in computation of earnings per share:                            
  Basic     29,790             30,348        
                               
  Diluted     30,139             30,774        
                               
                               
                               
ZUMIEZ INC.  
CONSOLIDATED STATEMENTS OF INCOME  
(In thousands, except per share amounts)  
   
    Twelve Months Ended  
                       
    February 1, 2014     % of Sales     February 2, 2013   % of Sales  
    (unaudited)                  
Net sales   $ 724,337     100.0 %   $ 669,393   100.0 %
Cost of goods sold     462,577     63.9 %     428,109   64.0 %
Gross profit     261,760     36.1 %     241,284   36.0 %
                           
Selling, general and administrative expenses     188,918     26.0 %     172,742   25.8 %
Operating profit     72,842     10.1 %     68,542   10.2 %
                           
Interest income, net     711     0.0 %     1,410   0.2 %
Other (expense) income, net     (1,589 )   (0.2 %)     327   0.1 %
Earnings before income taxes     71,964     9.9 %     70,279   10.5 %
                           
Provision for income taxes     26,016     3.6 %     28,115   4.2 %
                           
Net income   $ 45,948     6.3 %   $ 42,164   6.3 %
                           
Basic earnings per share   $ 1.54           $ 1.37      
                           
Diluted earnings per share   $ 1.52           $ 1.35      
                           
Weighted average shares used in computation of earnings per share:                          
  Basic     29,810             30,742      
                             
  Diluted     30,206             31,273      
                             
                             
                             
ZUMIEZ INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    February 1,   February 2,
2014   2013
Assets   (unaudited)    
Current assets            
Cash and cash equivalents   $ 19,634   $ 17,579
Marketable securities     97,521     85,593
Receivables     10,294     9,467
Inventories     87,182     77,598
Prepaid expenses and other     10,021     9,192
Deferred tax assets     5,194     3,885
  Total current assets     229,846     203,314
             
Fixed assets, net     127,343     115,474
Goodwill     64,195     64,576
Intangible assets, nets     17,970     20,480
Long-term other assets     4,049     5,254
  Total long-term assets     213,557     205,784
             
  Total assets   $ 443,403   $ 409,098
             
Liabilities and Shareholders' Equity            
Current liabilities            
Trade accounts payable   $ 18,343   $ 16,052
Accrued payroll and payroll taxes     10,581     11,057
Income taxes payable     4,696     6,957
Deferred rent and tenant allowances     6,478     4,901
Other liabilities     21,276     18,232
  Total current liabilities     61,374     57,199
             
Long-term deferred rent and tenant allowances     37,658     36,928
Long-term deferred tax liabilities     4,649     5,544
Long-term debt and other liabilities     4,068     6,006
  Total long-term liabilities     46,375     48,478
             
  Total liabilities     107,749     105,677
Commitments and contingencies            
             
Shareholders' equity            
Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding     -     -
Common stock, no par value, 50,000 shares authorized; 29,619 shares issued and outstanding at February 1, 2014 and 30,114 shares issued and outstanding at February 2, 2013     114,983     108,360
Accumulated other comprehensive income     4,710     6,010
Retained earnings     215,961     189,051
  Total shareholders' equity     335,654     303,421
             
  Total liabilities and shareholders' equity   $ 443,403   $ 409,098
               
               
               
ZUMIEZ INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
   
    Fiscal Year Ended  
    February 1, 2014     February 2, 2013  
    (unaudited)        
Cash flows from operating activities:                
Net income   $ 45,948     $ 42,164  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation, amortization and accretion     26,596       22,957  
Deferred taxes     (978 )     (1,630 )
Stock-based compensation expense     4,094       5,996  
Excess tax benefit from stock-based compensation     (1,232 )     (2,094 )
Lease termination costs     405       1,397  
Other     1,842       389  
Changes in operating assets and liabilities:                
  Receivables     (739 )     (2,568 )
  Inventories     (9,968 )     (2,987 )
  Prepaid expenses and other     (1,789 )     (1,125 )
  Trade accounts payable     1,714       (5,626 )
  Accrued payroll and payroll taxes     (426 )     1,207  
  Income taxes payable     (1,484 )     1,843  
  Deferred rent and tenant allowances     2,367       5,469  
  Other liabilities     544       833  
Net cash provided by operating activities     66,894       66,225  
                 
Cash flows from investing activities:                
Additions to fixed assets     (35,969 )     (41,070 )
Acquisitions, net of cash acquired     -       (70,711 )
Purchases of marketable securities and other investments     (124,129 )     (121,003 )
Sales and maturities of marketable securities and other investments     110,479       191,705  
Net cash used in investing activities     (49,619 )     (41,079 )
                 
Cash flows from financing activities:                
Proceeds from long-term debt and revolving credit facilities     4,182       -  
Payments on long-term debt and revolving credit facilities     (4,488 )     (258 )
Repurchase of common stock     (17,556 )     (25,213 )
Proceeds from exercise of stock-based compensation, net of withholding tax payments     1,397       858  
Excess tax benefit from stock-based compensation     1,232       2,094  
Net cash used in financing activities     (15,233 )     (22,519 )
                 
Effect of exchange rate changes on cash and cash equivalents     13       173  
                 
Net increase in cash and cash equivalents     2,055       2,800  
Cash and cash equivalents, beginning of period     17,579       14,779  
Cash and cash equivalents, end of period   $ 19,634     $ 17,579  
                 
Supplemental disclosure on cash flow information:                
Cash paid during the period for income taxes   $ 28,105     $ 27,840  
Accrual for purchases of fixed assets     1,491       1,942  
Accrual for repurchase of common stock     2,112       630  
                 
   
Contact:
Company
Brian Leith
Director of Finance &
Investor Relations
Zumiez Inc.
(425) 551-1500, ext. 1610

Investor
ICR
Brendon Frey
(203) 682-8200

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