Zumiez Inc. Announces Fiscal 2013 Second Quarter Results

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