Zumiez Inc. Announces Fiscal 2013 Second Quarter Results

Company Reports August Sales

Marketwired

LYNNWOOD, WA--(Marketwired - Sep 5, 2013) - Zumiez Inc. (NASDAQ: ZUMZ) a leading specialty retailer of action sports related apparel, footwear, equipment and accessories, today reported results for the second quarter ended August 3, 2013.

Total net sales for the second quarter ended August 3, 2013 (13 weeks) increased 16.9% to $157.9 million from $135.1 million in the quarter ended July 28, 2012 (13 weeks). Comparable store sales for the thirteen weeks ended August 3, 2013 increased 0.9% on top of a comparable store sales increase of 9.5% for the thirteen weeks ended July 28, 2012. Net income in the second quarter of fiscal 2013 was $4.7 million, or $0.16 per diluted share, compared to net income of $2.1 million, or $0.07 per diluted share, in the second quarter of the prior fiscal year. The results for fiscal 2013 include costs of approximately $1.7 million, or $0.04 per diluted share, for charges associated with the acquisition of Blue Tomato, and the results for fiscal 2012 include approximately $2.4 million, or $0.06 per diluted share, of Blue Tomato acquisition related costs, and approximately $1.3 million, or $0.03 per diluted share, of costs associated with the relocation of the Company's ecommerce fulfillment center to Edwardsville, Kansas and its corporate offices to Lynnwood, Washington from Everett, Washington.

Total net sales for the six months (26 weeks) ended August 3, 2013 increased 15.6% to $306.4 million from $265.0 million reported for the six months (26 weeks) ended July 28, 2012. Comparable store sales increased 0.2% for the twenty six weeks ended August 3, 2013 on top of a comparable store sales increase of 11.1% for the twenty six weeks ended July 28, 2012. 

The Company reported net income of $7.2 million or $0.24 per diluted share in the first six months of fiscal 2013 compared to net income for the first six months of the prior fiscal year of $6.6 million or $0.21 per diluted share. Results for the first six months of fiscal 2013 include approximately $3.4 million, or $0.09 per diluted share, for charges associated with the acquisition of Blue Tomato. Results for the first six months of fiscal 2012 include approximately $2.8 million, or $0.08 per diluted share, of Blue Tomato acquisition related costs, and approximately $1.6 million, or $0.03 per diluted share, of costs associated with the relocation of the Company's ecommerce fulfillment center to Edwardsville, Kansas and corporate offices to Lynnwood, Washington from Everett, Washington.

At August 3, 2013, the Company had cash and current marketable securities of $95.0 million compared to cash and current marketable securities of $96.8 million at July 28, 2012. The decrease in cash and current marketable securities is a result of capital expenditures and stock repurchases, offset by cash generated through operations.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "We are pleased with our second quarter earnings results in what proved to be a challenging retail environment. We believe we have compelling merchandise assortments and our efforts to enhance our omni-channel capabilities are yielding positive gains. With significant expansion opportunities still ahead of us, we continue to invest in our people and infrastructure in order to best position the company to deliver sustainable sales and earnings growth and shareholder value for years to come." 

August 2013 Sales
Total net sales for the four-week period ended August 31, 2013 increased 14.3% to $85.9 million, compared to $75.2 million for the four-week period ended August 25, 2012. The Company's comparable store sales increased 3.0% for the four-week period ended August 31, 2013 compared to a comparable store sales increase of 3.7% for the four-week period ended August 25, 2012. 

Fiscal 2013 Third Quarter Outlook
The Company is introducing guidance for the three months ending November 2, 2013. Net sales are projected to be in the range of $187 to $191 million resulting in net income per diluted share of approximately $0.39 to $0.43, which includes an estimated $1.6 million, or approximately $0.04 per diluted share, for charges associated with the acquisition of Blue Tomato. This guidance is based on anticipated comparable store sales in the range of 0% to 2% for the third quarter of fiscal 2013.

The Company currently intends to open 58 new stores in fiscal 2013, including 9 stores in Canada and 5 stores in Europe.

A conference call will be held today to discuss second quarter fiscal 2013 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617)-399-5121 followed by the conference identification code of 46557503. 

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 August 31, 2013 we operated 537 stores including, 501 in the United States, 28 in Canada, and 8 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 May 4, 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.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except per share amounts)
 (Unaudited)
 
    Three Months Ended  
                       
    August 3, 2013     % of Sales     July 28, 2012   % of Sales  
Net sales   $ 157,858     100.0 %   $ 135,066   100.0 %
Cost of goods sold     102,738     65.1 %     88,641   65.6 %
Gross profit     55,120     34.9 %     46,425   34.4 %
                           
Selling, general and administrative expenses     47,285     29.9 %     42,647   31.6 %
Operating profit     7,835     5.0 %     3,778   2.8 %
                           
Interest income, net     158     0.1 %     427   0.3 %
Other (expense) income, net     (174 )   (0.1 %)     611   0.5 %
Earnings before income taxes     7,819     5.0 %     4,816   3.6 %
                           
Provision for income taxes     3,080     2.0 %     2,730   2.1 %
                           
Net income   $ 4,739     3.0 %   $ 2,086   1.5 %
                           
Basic earnings per share   $ 0.16           $ 0.07      
                           
Diluted earnings per share   $ 0.16           $ 0.07      
                           
Weighted average shares used in computation of earnings per share:                          
  Basic     29,842             30,922      
                             
  Diluted     30,232             31,460      
                           
                           
                           
ZUMIEZ INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except per share amounts)
 (Unaudited)
 
    Six Months Ended  
                       
    August 3, 2013     % of Sales     July 28, 2012   % of Sales  
Net sales   $ 306,354     100.0 %   $ 264,965   100.0 %
Cost of goods sold     203,262     66.3 %     176,439   66.6 %
Gross profit     103,092     33.7 %     88,526   33.4 %
                           
Selling, general and administrative expenses     91,228     29.8 %     77,486   29.2 %
Operating profit     11,864     3.9 %     11,040   4.2 %
                           
Interest income, net     373     0.1 %     917   0.3 %
Other (expense) income, net     (320 )   (0.1 %)     628   0.2 %
Earnings before income taxes     11,917     3.9 %     12,585   4.7 %
                           
Provision for income taxes     4,680     1.5 %     5,972   2.2 %
                           
Net income   $ 7,237     2.4 %   $ 6,613   2.5 %
                           
Basic earnings per share   $ 0.24           $ 0.21      
                           
Diluted earnings per share   $ 0.24           $ 0.21      
                           
Weighted average shares used in computation of earnings per share:                          
  Basic     29,770             30,847      
                             
  Diluted     30,221             31,439      
                             
                             
                             
ZUMIEZ INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    August 3,   February 2,   July 28,  
2013   2013   2012  
Assets   (Unaudited)       (Unaudited)  
Current assets                    
Cash and cash equivalents   $ 19,098   $ 17,579   $ 12,610  
Marketable securities     75,901     85,593     84,212  
Receivables     15,597     9,467     12,002  
Inventories     113,249     77,598     99,699  
Prepaid expenses and other     11,474     9,192     9,909  
Deferred tax assets     4,849     3,885     4,019  
    Total current assets     240,168     203,314     222,451  
                     
Fixed assets, net     124,569     115,474     111,411  
Goodwill     63,071     64,576     59,547  
Intangible assets, net     18,727     20,480     19,383  
Long-term other assets     4,428     5,254     5,353  
    Total long-term assets     210,795     205,784     195,694  
                     
    Total assets   $ 450,963   $ 409,098   $ 418,145  
                     
Liabilities and Shareholders' Equity                    
Current liabilities                    
Trade accounts payable   $ 53,596   $ 16,052   $ 57,630  
Accrued payroll and payroll taxes     9,674     11,057     7,637  
Income taxes payable     111     6,957     1,257  
Deferred rent and tenant allowances     5,633     4,901     4,579  
Other liabilities     20,546     18,232     18,566  
    Total current liabilities     89,560     57,199     89,669  
                     
Long-term deferred rent and tenant allowances     41,359     36,928     36,329  
Long-term deferred tax liabilities     3,567     5,544     5,256  
Long-term debt and other liabilities     7,062     6,006     4,454  
    Total long-term liabilities     51,988     48,478     46,039  
                     
    Total liabilities     141,548     105,677     135,708  
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; 30,251 shares issued and outstanding at August 3, 2013, 30,114 shares issued and outstanding at February 2, 2013 and 31,353 shares issued and outstanding at July 28, 2012     113,569     108,360     104,862  
Accumulated other comprehensive income (loss)     3,238     6,010     (1,768 )
Retained earnings     192,608     189,051     179,343  
    Total shareholders' equity     309,415     303,421     282,437  
                     
    Total liabilities and shareholders' equity   $ 450,963   $ 409,098   $ 418,145  
                         
                         
                         
ZUMIEZ INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    Six Months Ended  
    August 3, 2013     July 28, 2012  
Cash flows from operating activities:                
Net income   $ 7,237     $ 6,613  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation, amortization and accretion     12,694       10,658  
Deferred taxes     (1,384 )     (1,177 )
Stock-based compensation expense     3,165       3,037  
Excess tax benefit from stock-based compensation     (1,168 )     (2,065 )
Lease termination costs     100       920  
Other     182       (183 )
  Changes in operating assets and liabilities:                
    Receivables     (5,457 )     (4,452 )
    Inventories     (36,064 )     (26,896 )
    Prepaid expenses and other     (3,057 )     (1,904 )
    Trade accounts payable     35,315       33,583  
    Accrued payroll and payroll taxes     (1,344 )     (2,156 )
    Income taxes payable     (6,415 )     (4,503 )
    Deferred rent and tenant allowances     5,263       4,158  
    Other liabilities     809       (1,120 )
Net cash provided by operating activities     9,876       14,513  
                 
Cash flows from investing activities:                
Additions to fixed assets     (14,505 )     (21,904 )
Acquisitions, net of cash acquired     -       (69,685 )
Purchases of marketable securities and other investments     (38,991 )     (65,655 )
Sales and maturities of marketable securities and other investments     47,760       138,555  
Net cash used in investing activities     (5,736 )     (18,689 )
                 
Cash flows from financing activities:                
Payments on long-term debt     (153 )     (109 )
Repurchase of common stock     (4,310 )     -  
Proceeds from exercise of stock-based compensation, net of withholding tax payments     876       347  
Excess tax benefit from stock-based compensation     1,168       2,065  
Net cash (used in) provided by financing activities     (2,419 )     2,303  
                 
Effect of exchange rate changes on cash and cash equivalents     (202 )     (296 )
                 
Net increase (decrease) in cash and cash equivalents     1,519       (2,169 )
  Cash and cash equivalents, beginning of period     17,579       14,779  
  Cash and cash equivalents, end of period   $ 19,098     $ 12,610  
                 
  Supplemental disclosure on cash flow information:                
  Cash paid during the period for income taxes   $ 12,428     $ 11,624  
  Accrual for purchases of fixed assets     7,514       7,355  
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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