Zumiez Inc. Announces Fiscal 2014 First Quarter Results

LYNNWOOD, WA--(Marketwired - May 22, 2014) - Zumiez Inc. (NASDAQ: ZUMZ), a leading specialty retailer of action sports related apparel, footwear, equipment and accessories, today reported results for the first quarter ended May 3, 2014.

Total net sales for the first quarter ended May 3, 2014 (13 weeks) increased 9.7% to $162.9 million from $148.5 million in the first quarter ended May 4, 2013 (13 weeks). Comparable sales for the thirteen weeks ended May 3, 2014 increased 1.8% compared to a comparable store sales decrease of (0.7%) in the first quarter of 2013. Net income in the first quarter of fiscal 2014 was $2.5 million, or $0.09 per diluted share, compared to net income of $2.5 million, or $0.08 per diluted share, in the first quarter of the prior fiscal year. The results for fiscal 2014 include costs of approximately $0.6 million, or $0.01 per diluted share, for charges associated with the acquisition of Blue Tomato, and the results for fiscal 2013 include approximately $1.7 million, or $0.05 per diluted share, for charges associated with the acquisition of Blue Tomato.

At May 3, 2014, the Company had cash and current marketable securities of $107.8 million compared to cash and current marketable securities of $97.6 million at May 4, 2013. The increase in cash and current marketable securities is a result of cash generated through operations, partially offset by capital expenditures and stock repurchases.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "Our merchandise and selling strategies helped deliver better than expected first quarter results, including positive comps, and continue to distinguish Zumiez as the leading global action sports lifestyle retailer. The investments we've made in our people and systems including expanding our digital capabilities are allowing us to better meet the needs of our North American and European customers and supporting full price selling in a challenging retail environment. We remain confident that our strategic course will continue to yield market share gains and improved profitability over the long-term."

Fiscal 2014 Second Quarter Outlook
The Company is introducing guidance for the three months ending August 2, 2014. Net sales are projected to be in the range of $167 to $171 million resulting in net income per diluted share of approximately $0.12 to $0.16, which includes an estimated $0.6 million, or approximately $0.02 per diluted share, for charges associated with the acquisition of Blue Tomato. This guidance is based on an anticipated comparable store sales result in the range of a low single digit decrease to flat for the second 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 first quarter fiscal 2014 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617) 614-4072 followed by the conference identification code of 17152136. 

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 May 3, 2014 we operated 558 stores including 515 in the United States, 29 in Canada, and 14 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 annual report on Form 10-K for the year ended February 1, 2014 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 OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			May 3, 2014			% of Sales			May 4, 2013				% of Sales
Net sales			$	162,932		100.0	%		$	148,496			100.0	%
Cost of goods sold				112,399		69.0	%			100,524			67.7	%
Gross profit				50,533		31.0	%			47,972			32.3	%
Selling, general and administrative expenses				46,820		28.7	%			43,943			29.6	%
Operating profit				3,713		2.3	%			4,029			2.7	%
Interest income, net				182		0.1	%			215			0.1	%
Other income (expense), net				86		0.0	%			(146	)		0.0	%
Earnings before income taxes				3,981		2.4	%			4,098			2.8	%
Provision for income taxes				1,485		0.9	%			1,600			1.1	%
Net income			$	2,496		1.5	%		$	2,498			1.7	%
Basic earnings per share			$	0.09					$	0.08
Diluted earnings per share			$	0.09					$	0.08
Weighted average shares used in computation of earnings per share:
	Basic			28,861						29,714
	Diluted			29,213						30,183

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			May 3, 2014			February 1, 2014			May 4, 2013
Assets			(Unaudited)						(Unaudited)
Current assets
Cash and cash equivalents			$	21,079		$	19,634		$	14,661
Marketable securities				86,682			97,521			82,986
Receivables				11,478			10,294			10,466
Inventories				97,608			87,182			90,870
Prepaid expenses and other				9,874			10,021			9,456
Deferred tax assets				6,163			5,194			4,104
	Total current assets			232,884			229,846			212,543
Fixed assets, net				131,577			127,343			117,826
Goodwill				65,432			64,195			62,539
Intangible assets, net				17,803			17,970			19,097
Long-term other assets				6,759			4,049			4,979
	Total long-term assets			221,571			213,557			204,441
	Total assets		$	454,455		$	443,403		$	416,984
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable			$	42,989		$	18,343		$	36,210
Accrued payroll and payroll taxes				8,070			10,581			6,745
Income taxes payable				2,324			4,696			971
Deferred rent and tenant allowances				6,574			6,478			5,252
Other liabilities				20,471			21,276			16,307
	Total current liabilities			80,428			61,374			65,485
Long-term deferred rent and tenant allowances				41,995			37,658			38,863
Long-term deferred tax liabilities				3,871			4,649			5,074
Long-term debt and other liabilities				4,022			4,068			6,321
	Total long-term liabilities			49,888			46,375			50,258
	Total liabilities			130,316			107,749			115,743
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; 29,030 shares issued and outstanding at May 3, 2014, 29,619 shares issued and outstanding at February 1, 2014, 30,163 shares issued and outstanding at May 4, 2013				116,111			114,983			110,784
Accumulated other comprehensive income				7,011			4,710			2,588
Retained earnings				201,017			215,961			187,869
	Total shareholders' equity			324,139			335,654			301,241
	Total liabilities and shareholders' equity		$	454,455		$	443,403		$	416,984

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				Three Months Ended
				May 3, 2014				May 4, 2013
Cash flows from operating activities:
Net income				$	2,496			$	2,498
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion					7,009				6,331
Deferred taxes					(1,869	)			(260	)
Stock-based compensation expense					948				1,513
Excess tax loss (benefit) from stock-based compensation					62				(529	)
Other					(26	)			114
	Changes in operating assets and liabilities:
		Receivables			(1,115	)			(1,068	)
		Inventories			(10,011	)			(13,685	)
		Prepaid expenses and other			(2,480	)			(440	)
		Trade accounts payable			24,635				19,848
		Accrued payroll and payroll taxes			(2,543	)			(4,272	)
		Income taxes payable			(2,448	)			(5,415	)
		Deferred rent and tenant allowances			4,374				2,324
		Other liabilities			(2,462	)			(2,557	)
Net cash provided by operating activities					16,570				4,402
Cash flows from investing activities:
Additions to fixed assets					(6,781	)			(6,374	)
Purchases of marketable securities and other investments					(11,714	)			(15,137	)
Sales and maturities of marketable securities and other investments					22,100				17,315
Net cash provided by (used in) investing activities					3,605				(4,196	)
Cash flows from financing activities:
Proceeds from revolving credit facilities					634				-
Payments on long-term debt and revolving credit facilities					(81	)			(77	)
Repurchase of common stock					(19,553	)			(3,680	)
Proceeds from exercise of stock-based compensation, net of withholding tax payments					242				382
Excess tax (loss) benefit from stock-based compensation					(62	)			529
Net cash used in financing activities					(18,820	)			(2,846	)
Effect of exchange rate changes on cash and cash equivalents					90				(278	)
Net increase (decrease) in cash and cash equivalents					1,445				(2,918	)
	Cash and cash equivalents, beginning of period				19,634				17,579
	Cash and cash equivalents, end of period			$	21,079			$	14,661
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes			$	5,783			$	7,266
	Accrual for purchases of fixed assets				4,480				3,534