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Zumiez Inc. Announces Fiscal 2020 Second Quarter Results

·11 min read

Second Quarter 2020 Sales Increased 9.6% to $250.4 Million
Second Quarter 2020 Diluted Earnings Per Share Increased 184.4% to $1.01
Cash and Current Marketable Securities Increased 58.6% to $299.1 Million

LYNNWOOD, Wash., Sept. 10, 2020 (GLOBE NEWSWIRE) -- Zumiez Inc. (NASDAQ: ZUMZ) today reported results for the second quarter ended August 1, 2020.

Total net sales for the second quarter ended August 1, 2020 (13 weeks) increased 9.6% to $250.4 million from $228.4 million in the quarter ended August 3, 2019 (13 weeks). Due to store closures, stores were open for 73.4% of the second quarter of 2020 measured as the total number of store days open in the quarter divided by the total number of store days available. For the stores that were open, comparable sales for the thirteen weeks ended August 1, 2020 increased 37.3% compared to the same period a year ago. Net income for the second quarter of fiscal 2020 was $25.4 million, or $1.01 per diluted share, compared to net income of $9.0 million, or $0.36 per diluted share in the second quarter of the prior fiscal year.

Total net sales for the six months (26 weeks) ended August 1, 2020 decreased 12.1% to $388.2 million from $441.4 million reported for the six months (26 weeks) ended August 3, 2019. Net income for the first six months of fiscal 2020 was $4.3 million, or $0.17 per diluted share, compared to net income for the first six months of the prior fiscal year of $9.8 million, or $0.39 per diluted share.

At August 1, 2020, the Company had cash and current marketable securities of $299.1 million compared to cash and current marketable securities of $188.6 million at August 3, 2019. The increase in cash and current marketable securities was driven by cash generated through operations including deferment of $41.5 million composed of landlord payments, lower inventory levels, extended vendor terms and deferred payroll tax payments as well as net income improvements related to abatements, credits and expense reductions. This increase was partially offset by $13.4 million of share repurchases through the Company’s stock buyback program prior to our stores closing due to COVID-19 and other planned capital expenditures.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, “Our teams did a remarkable job serving our customers and delivering these second quarter results during the most challenging operating environment in the Company’s history. As an organization, we successfully executed a quick and safe reopening of the majority of our stores in the quarter, while continuing to lean heavily on our omni platforms to fulfill strong demand for our distinct merchandise offering. Our recent performance amidst the pandemic underscores the strength of our brand and culture and speaks to the ability of our business model to adapt to changes in purchasing behavior while continuing to drive strong earnings growth and cash generation. With close to $300 million in cash and no debt on our balance sheet, we are set up well to navigate whatever headwinds arise over the coming quarters and emerge from this crisis positioned to accelerate market share in each of our geographies.”

Third Quarter-To-Date sales
The Company is providing quarter-to-date sales through Labor Day, Monday September 7th, as this time period is more comparable to the prior year given the shift in the Labor Day holiday. Total third quarter-to-date sales for the 37 days ending September 7, 2020 were down approximately 14%, compared with the same 37 day time period in the prior year ended September 9, 2019. Total comparable sales for the 37 day period ending September 7, 2020 were down 5.1%. By channel, open store comparable sales decreased 10.7% and e-commerce sales increased 27.4%.

Store Re-Opening Update
The Company ended the second quarter with 645 or 89.6% of our 720 stores open with the primary closures being in California and Australia due to government mandates. As of Labor Day September 7, 2020, 35 stores or 4.9% of the store base remained closed. All stores are operating under enhanced measures to ensure the health and safety of employees and customers, including

  • requiring our employees to wear masks,

  • providing hand sanitizer in multiple locations throughout the store,

  • implementing enhanced cleaning and sanitation protocols,

  • reconfiguring sales floors to promote physical distancing, and

  • modifying employee and customer interactions to limit contact.

Outlook
Due to the fast-moving nature of this situation and the uncertainty of impacts on revenue and costs, the Company previously withdrew its full year fiscal 2020 guidance. The Company is not providing an updated outlook at this time for the third quarter or the year.

Conference Call Information
A conference call will be held today to discuss second quarter fiscal 2020 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (574) 990-9934 followed by the conference identification code of 8269508.

About Zumiez Inc.

Zumiez is a leading specialty retailer of apparel, footwear, accessories and hardgoods for young men and women who want to express their individuality through the fashion, music, art and culture of action sports, streetwear, and other unique lifestyles. As of August 29, 2020, we operated 720 stores, including 607 in the United States, 52 in Canada, 49 in Europe and 12 in Australia. We operate under the names Zumiez, Blue Tomato and Fast Times. Additionally, we operate ecommerce web sites at zumiez.com, zumiez.ca, blue-tomato.com and fasttimes.com.au.

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 annual report on Form 10-K for the fiscal year ended February 1, 2020 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.

Company Contact:
Darin White
Director of Finance &
Investor Relations
Zumiez Inc.
(425) 551-1500, ext. 1337

Investor Contact:
ICR
Brendon Frey
(203) 682-8200

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended

August 1, 2020

% of Sales

August 3, 2019

% of Sales

Net sales

$

250,392

100.0

%

$

228,425

100.0

%

Cost of goods sold

159,542

63.7

%

151,229

66.2

%

Gross profit

90,850

36.3

%

77,196

33.8

%

Selling, general and administrative expenses

57,738

23.1

%

65,523

28.7

%

Operating profit

33,112

13.2

%

11,673

5.1

%

Interest income, net

794

0.3

%

798

0.4

%

Other income, net

392

0.2

%

559

0.2

%

Earnings before income taxes

34,298

13.7

%

13,030

5.7

%

Provision for income taxes

8,906

3.6

%

4,005

1.7

%

Net income

$

25,392

10.1

%

$

9,025

4.0

%

Basic earnings per share

$

1.02

$

0.36

Diluted earnings per share

$

1.01

$

0.36

Weighted average shares used in computation of earnings per share:

Basic

24,837

25,199

Diluted

25,128

25,402

Six Months Ended

August 1, 2020

% of Sales

August 3, 2019

% of Sales

Net sales

$

388,164

100.0

%

441,353

100.0

%

Cost of goods sold

273,578

70.5

%

297,693

67.5

%

Gross profit

114,586

29.5

%

143,660

32.5

%

Selling, general and administrative expenses

109,322

28.1

%

131,019

29.6

%

Operating profit

5,264

1.4

%

12,641

2.9

%

Interest income, net

1,868

0.5

%

1,650

0.4

%

Other income, net

498

0.1

%

711

0.1

%

Earnings before income taxes

7,630

2.0

%

15,002

3.4

%

Provision for income taxes

3,339

0.9

%

5,184

1.2

%

Net income

$

4,291

1.1

%

9,818

2.2

%

Basic earnings per share

$

0.17

0.39

Diluted earnings per share

$

0.17

0.39

Weighted average shares used in computation of earnings per share:

Basic

24,938

25,144

Diluted

25,277

25,395

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

August 1, 2020

February 1, 2020

August 3, 2019

(Unaudited)

(Unaudited)

Assets

Current assets

Cash and cash equivalents

$

133,905

$

52,428

$

63,846

Marketable securities

165,227

198,768

124,803

Receivables

24,811

16,841

21,615

Inventories

126,701

135,095

151,079

Prepaid expenses and other current assets

10,560

9,456

11,789

Total current assets

461,204

412,588

373,132

Fixed assets, net

106,151

113,051

116,219

Operating lease right-of-use assets

277,322

301,784

306,056

Goodwill

60,225

57,099

57,306

Intangible assets, net

15,577

14,564

14,672

Deferred tax assets, net

7,080

6,303

6,502

Other long-term assets

9,337

8,869

8,374

Total long-term assets

475,692

501,670

509,129

Total assets

$

936,896

$

914,258

$

882,261

Liabilities and Shareholders’ Equity

Current liabilities

Trade accounts payable

$

75,318

$

47,787

$

82,859

Accrued payroll and payroll taxes

17,816

23,653

15,582

Income taxes payable

5,534

4,686

2,895

Operating lease liabilities

74,558

61,800

58,646

Other liabilities

30,374

21,784

21,150

Total current liabilities

203,600

159,710

181,132

Long-term operating lease liabilities

259,412

284,717

293,450

Other long-term liabilities

3,858

3,745

3,472

Total long-term liabilities

263,270

288,462

296,922

Total liabilities

466,870

448,172

478,054

Shareholders’ equity

Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding

Common stock, no par value, 50,000 shares authorized; 25,450 shares issued and outstanding at August 1, 2020, 25,828 shares issued and outstanding at February 1, 2020 and 25,770 shares issued and outstanding at August 3, 2019

165,056

161,458

156,625

Accumulated other comprehensive loss

(3,123

)

(12,591

)

(12,574

)

Retained earnings

308,093

317,219

260,156

Total shareholders’ equity

470,026

466,086

404,207

Total liabilities and shareholders’ equity

$

936,896

$

914,258

$

882,261

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Six Months Ended

August 1, 2020

August 3, 2019

Cash flows from operating activities:

Net income

$

4,291

$

9,818

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and accretion

12,005

12,514

Noncash lease expense

30,167

28,318

Deferred taxes

(1,144

)

935

Stock-based compensation expense

3,146

3,214

Impairment of long-lived assets

2,128

123

Other

(428

)

(288

)

Changes in operating assets and liabilities:

Receivables

(5,871

)

(770

)

Inventories

9,926

(22,727

)

Prepaid expenses and other assets

(937

)

(2,115

)

Trade accounts payable

27,323

47,275

Accrued payroll and payroll taxes

(6,134

)

(5,345

)

Income taxes payable

(317

)

(3,857

)

Operating lease liabilities

(20,868

)

(29,842

)

Other liabilities

8,718

(2,090

)

Net cash provided by operating activities

62,005

35,163

Cash flows from investing activities:

Additions to fixed assets

(5,024

)

(8,292

)

Purchases of marketable securities and other investments

(35,720

)

(93,288

)

Sales and maturities of marketable securities and other investments

71,387

82,123

Net cash provided by (used in) investing activities

30,643

(19,457

)

Cash flows from financing activities:

Proceeds from issuance and exercise of stock-based awards

545

583

Payments for tax withholdings on equity awards

(93

)

(238

)

Common stock repurchased

(13,417

)

Net cash (used in) provided by financing activities

(12,965

)

345

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

2,146

(504

)

Net increase in cash, cash equivalents, and restricted cash

81,829

15,547

Cash, cash equivalents, and restricted cash, beginning of period

58,991

54,271

Cash, cash equivalents, and restricted cash, end of period

$

140,820

$

69,818

Supplemental disclosure on cash flow information:

Cash paid during the period for income taxes

$

4,630

$

8,056

Accrual for purchases of fixed assets

381

2,052