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

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