Zumiez Inc. Announces Fiscal 2015 Third Quarter Results

LYNNWOOD, WA--(Marketwired - Dec 3, 2015) -  Zumiez Inc. (NASDAQ: ZUMZ) today reported results for the third quarter ended October 31, 2015.

Total net sales for the third quarter ended October 31, 2015 (13 weeks) decreased 4.2% to $204.3 million from $213.3 million in the quarter ended November 1, 2014 (13 weeks). Comparable sales for the thirteen weeks ended October 31, 2015 decreased 7.3% compared with a comparable sales increase of 3.7% for the thirteen weeks ended November 1, 2014. Net income in the third quarter of fiscal 2015 decreased to $9.7 million, or $0.36 per diluted share, compared to net income of $15.7 million, or $0.54 per diluted share in the third quarter of the prior fiscal year. The results for fiscal 2014 include costs of $0.6 million, or $0.02 for charges associated with the acquisition of Blue Tomato

Total net sales for the nine months (39 weeks) ended October 31, 2015 increased 1.6% to $561.7 million from $553.0 million reported for the nine months (39 weeks) ended November 1, 2014. Comparable sales decreased 3.4% for the thirty nine weeks ended October 31, 2015 compared with a comparable sales increase of 3.0% for the thirty nine weeks ended November 1, 2014. Net income in the first nine months of fiscal 2015 decreased to $15.6 million, or $0.55 per diluted share, compared to net income for the first nine months of the prior fiscal year of $25.7 million, or $0.88 per diluted share. Results for the first nine months of fiscal 2015 include approximately $1.5 million, or $0.04 per diluted share, for charges associated with the acquisition of Blue Tomato. Results for the first nine months of fiscal 2014 include approximately $1.9 million, or $0.05 per diluted share, for charges associated with the acquisition of Blue Tomato.

At October 31, 2015, the Company had cash and current marketable securities of $51.1 million compared to cash and current marketable securities of $108.7 million at November 1, 2014. The decrease in cash and current marketable securities is a result of stock repurchases and capital expenditures, partially offset by cash generated through operations.

During the quarter, the Company repurchased 0.7 million shares on the open market for a total of $16.7 million. Year to date through November, we have purchased 3.0 million shares on the open market for a total $77.7 million. Today the company announced that the Board of Directors of Zumiez Inc. has authorized the repurchase of up to an additional $70 million of its Common Stock. 

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "We've moved quickly to reduce expenses to protect profitability in the face of challenging sales trends, which helped us exceed our bottom line guidance for the third quarter. With the fourth quarter off to a slow start combined with tougher sales comparisons ahead, we believe it's prudent to maintain a cautious outlook for the remainder of fiscal 2015 and we are focused on managing expenses and inventory levels during this difficult time. Long-term we remain confident that the strategic course we have set for the company will deliver increased shareholder value in the years ahead."

November 2015 Sales

Total net sales for the four-week period ended November 28, 2015 decreased 10.6% to $62.8 million, compared to $70.3 million for the four-week period ended November 29, 2014. The Company's comparable sales decreased 13.8% for the four-week period ended November 28, 2015 compared with a comparable sales increase of 6.3% for the four-week period ended November 29, 2014. 

Fiscal 2015 Fourth Quarter Outlook

The Company is introducing guidance for the three months ending January 30, 2016. Net sales are projected to be in the range $226 to $231 million resulting in net income per diluted share of approximately $0.40 to $0.46. This guidance is based on an anticipated comparable sales decrease in the 14% to 16% range for the fourth quarter of fiscal 2015.

A conference call will be held today to discuss third quarter fiscal 2015 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617) 614-6206 followed by the conference identification code of 28648169. 

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 November 28, 2015 we operated 659 stores, including 593 in the United States, 42 in Canada, and 24 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 August 1, 2015 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
			October 31, 2015				% of Sales			November 1, 2014				% of Sales
Net sales			$	204,320			100.0	%		$	213,341			100.0	%
Cost of goods sold				134,261			65.7	%			135,481			63.5	%
Gross profit				70,059			34.3	%			77,860			36.5	%
Selling, general and administrative expenses				54,835			26.8	%			52,885			24.8	%
Operating profit				15,224			7.5	%			24,975			11.7	%
Interest income, net				84			0.0	%			147			0.1	%
Other expense, net				(71	)		0.0	%			(220	)		(0.1	%)
Earnings before income taxes				15,237			7.5	%			24,902			11.7	%
Provision for income taxes				5,584			2.7	%			9,175			4.3	%
Net income			$	9,653			4.8	%		$	15,727			7.4	%
Basic earnings per share			$	0.36						$	0.54
Diluted earnings per share			$	0.36						$	0.54
Weighted average shares used in computation of earnings per share:
	Basic			26,467							28,857
	Diluted			26,602							29,147

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Nine Months Ended
			October 31, 2015				% of Sales			November 1, 2014			% of Sales
Net sales			$	561,749			100.0	%		$	552,982		100.0	%
Cost of goods sold				377,382			67.2	%			363,677		65.8	%
Gross profit				184,367			32.8	%			189,305		34.2	%
Selling, general and administrative expenses				159,706			28.4	%			149,012		26.9	%
Operating profit				24,661			4.4	%			40,293		7.3	%
Interest income, net				440			0.1	%			475		0.0	%
Other income (expense), net				(227	)		0.0	%			69		0.0	%
Earnings before income taxes				24,874			4.5	%			40,837		7.3	%
Provision for income taxes				9,238			1.6	%			15,158		2.7	%
Net income			$	15,636			2.9	%		$	25,679		4.6	%
Basic earnings per share			$	0.56						$	0.89
Diluted earnings per share			$	0.55						$	0.88
Weighted average shares used in computation of earnings per share:
	Basic			27,973							28,832
	Diluted			28,178							29,177

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			October 31,				January 31,				November 1,
			2015				2015				2014
Assets			(Unaudited)								(Unaudited)
Current assets
Cash and cash equivalents			$	4,784			$	20,862			$	13,785
Marketable securities				46,342				133,782				94,902
Receivables				15,316				12,653				14,638
Inventories				133,565				93,850				133,411
Prepaid expenses and other				12,987				11,651				12,451
Deferred tax assets				7,686				6,965				6,828
	Total current assets			220,680				279,763				276,015
Fixed assets, net				143,856				135,642				140,364
Goodwill				54,649				55,852				60,551
Intangible assets, net				11,881				13,062				15,047
Long-term other assets				10,004				9,386				7,595
	Total long-term assets			220,390				213,942				223,557
	Total assets		$	441,070			$	493,705			$	499,572
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable			$	47,230			$	32,094			$	61,394
Accrued payroll and payroll taxes				9,765				13,047				10,131
Income taxes payable				3,235				4,651				3,762
Deferred rent and tenant allowances				8,040				7,083				7,176
Other liabilities				20,896				24,572				25,357
	Total current liabilities			89,166				81,447				107,820
Long-term deferred rent and tenant allowances				45,383				42,553				43,264
Long-term deferred tax liabilities				2,293				5,738				1,622
Other long-term liabilities				4,698				4,443				2,666
	Total long-term liabilities			52,374				52,734				47,552
	Total liabilities			141,540				134,181				155,372
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; 26,683 shares issued and outstanding at October 31, 2015, 29,418 shares issued and outstanding at January 31, 2015, and 29,225 shares issued and outstanding at November 1, 2014				133,803				129,094				121,703
Accumulated other comprehensive loss				(13,920	)			(11,278	)			(1,698	)
Retained earnings				179,647				241,708				224,195
	Total shareholders' equity			299,530				359,524				344,200
	Total liabilities and shareholders' equity		$	441,070			$	493,705			$	499,572

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				Nine Months Ended
				October 31, 2015				November 1, 2014
Cash flows from operating activities:
Net income				$	15,636			$	25,679
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion					23,158				21,556
Deferred taxes					(5,223	)			(4,735	)
Stock-based compensation expense					3,843				3,258
Excess tax benefit from stock-based compensation					(714	)			(558	)
Other					1,222				431
	Changes in operating assets and liabilities:
		Receivables			(3,211	)			(4,259	)
		Inventories			(40,571	)			(47,703	)
		Prepaid expenses and other			(1,127	)			(5,990	)
		Trade accounts payable			15,951				42,971
		Accrued payroll and payroll taxes			(3,231	)			(377	)
		Income taxes payable			(964	)			(1,087	)
		Deferred rent and tenant allowances			3,924				6,355
		Other liabilities			(8,217	)			(1,106	)
Net cash provided by operating activities					476				34,435
Cash flows from investing activities:
Additions to fixed assets					(27,115	)			(28,972	)
Purchases of marketable securities and other investments					(58,641	)			(74,398	)
Sales and maturities of marketable securities and other investments					144,446				75,652
Net cash provided by (used in) investing activities					58,690				(27,718	)
Cash flows from financing activities:
Proceeds from revolving credit facilities					33,504				6,056
Payments on long-term debt and revolving credit facilities					(32,393	)			(2,874	)
Repurchase of common stock					(77,697	)			(19,557	)
Proceeds from exercise of stock-based compensation, net of withholding tax payments					678				3,411
Excess tax benefit from stock-based compensation					714				558
Net cash used in financing activities					(75,194	)			(12,406	)
Effect of exchange rate changes on cash and cash equivalents					(50	)			(160	)
Net decrease in cash and cash equivalents					(16,078	)			(5,849	)
	Cash and cash equivalents, beginning of period				20,862				19,634
	Cash and cash equivalents, end of period			$	4,784			$	13,785
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes, net of refunds			$	15,348			$	20,931
	Accrual for purchases of fixed assets				5,487				5,046