Zumiez Inc. Announces Fiscal 2015 Second Quarter Results

LYNNWOOD, WA--(Marketwired - Sep 10, 2015) - Zumiez Inc. (NASDAQ: ZUMZ) a leading lifestyle retailer of apparel, footwear, equipment and accessories, today reported results for the second quarter ended August 1, 2015.

Total net sales for the second quarter ended August 1, 2015 (13 weeks) increased 1.8% to $179.8 million from $176.7 million in the quarter ended August 2, 2014 (13 weeks). This comparison includes the negative impact of foreign currency translation in the quarter of approximately $4.4 million. Comparable sales for the thirteen weeks ended August 1, 2015 decreased 4.5% compared to a comparable sales increase of 3.4% for the thirteen weeks ended August 2, 2014. Net income in the second quarter of fiscal 2015 decreased 56.9% to $3.2 million, or $0.11 per diluted share, compared to net income of $7.5 million, or $0.26 per diluted share, in the second quarter of the prior fiscal year. The results for fiscal 2015 include costs of approximately $0.4 million, or $0.01 per diluted share, for charges associated with the acquisition of Blue Tomato, and the results for fiscal 2014 include approximately $0.6 million, or $0.01 per diluted share, of Blue Tomato acquisition related costs.

Total net sales for the six months (26 weeks) ended August 1, 2015 increased 5.2% to $357.4 million from $339.6 million reported for the six months (26 weeks) ended August 2, 2014. This comparison includes the negative impact of foreign currency translation for the 26 week period of approximately $9.5 million. Comparable sales decreased 0.9% for the twenty six weeks ended August 1, 2015 compared to a comparable sales increase of 2.6% for the twenty six weeks ended August 2, 2014. 

Net income in the first six months of fiscal 2015 decreased 39.9% to $6.0 million, or $0.21 per diluted share, compared to net income for the first six months of the prior fiscal year of $10.0 million, or $0.34 per diluted share. Results for the first six 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 six months of fiscal 2014 include approximately $1.3 million, or $0.03 per diluted share, of Blue Tomato acquisition related costs.

At August 1, 2015, the Company had cash and current marketable securities of $80.8 million compared to cash and current marketable securities of $113.4 million at August 2, 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.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "We remain confident that our strategic course continues to provide us with compelling opportunities to grow our business and return greater value to our shareholders over the long-term. That said we are disappointed in our recent performance which reflects a slowdown in domestic sales. The response to our merchandise offering fell short of expectations, requiring us to become more promotional than planned to clear slow moving inventory ahead of the back-to-school selling season. We are working hard to quickly address the lack of trend right fashion in our U.S. channels. On a more positive note, the momentum in our European business continues to be strong, reinforcing our confidence in the long-term prospects of this market."

August 2015 Sales
Total net sales for the four-week period ended August 29, 2015 decreased 7.2% to $87.3 million, compared to $94.0 million for the four-week period ended August 30, 2014. The Company's comparable sales decreased 10.7% for the four-week period ended August 29, 2015 compared to a comparable sales increase of 2.0% for the four-week period ended August 30, 2014. 

Fiscal 2015 Third Quarter Outlook
The Company is introducing guidance for the three months ending October 31, 2015. Net sales are projected to be in the range of $202 to $206 million resulting in net income per diluted share of approximately $0.27 to $0.31. This guidance is based on an anticipated comparable sales decrease in the 7% to 9% range for the third quarter of fiscal 2015. The Company currently intends to open approximately 57 new stores in fiscal 2015, including up to 7 stores in Canada and 6 stores in Europe.

A conference call will be held today to discuss second quarter fiscal 2015 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (857) 244-7309 followed by the conference identification code of 75724382. 

About Zumiez Inc.

Zumiez is a leading lifestyle retailer of apparel, footwear, equipment and accessories, focusing on skateboarding, snowboarding, surfing, motocross and BMX for young men and women. As of August 1, 2015 we operated 640 stores, included 578 in the United States, 40 in Canada, and 22 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 2, 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
			August 1, 2015				% of Sales			August 2, 2014			% of Sales
Net sales			$	179,819			100.0	%		$	176,709		100.0	%
Cost of goods sold				122,046			67.9	%			115,797		65.5	%
Gross profit				57,773			32.1	%			60,912		34.5	%
Selling, general and administrative expenses				52,461			29.2	%			49,307		27.9	%
Operating profit				5,312			2.9	%			11,605		6.6	%
Interest income, net				150			0.1	%			146		0.1	%
Other income (expense), net				(271	)		(0.2	%)			203		0.1	%
Earnings before income taxes				5,191			2.8	%			11,954		6.8	%
Provision for income taxes				1,978			1.1	%			4,498		2.6	%
Net income			$	3,213			1.7	%		$	7,456		4.2	%
Basic earnings per share			$	0.11						$	0.26
Diluted earnings per share			$	0.11						$	0.26
Weighted average shares used in computation of earnings per share:
	Basic			28,311							28,776
	Diluted			28,439							29,057

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Six Months Ended
			August 1, 2015				% of Sales			August 2, 2014			% of Sales
Net sales			$	357,429			100.0	%		$	339,641		100.0	%
Cost of goods sold				243,121			68.0	%			228,196		67.2	%
Gross profit				114,308			32.0	%			111,445		32.8	%
Selling, general and administrative expenses				104,870			29.3	%			96,127		28.3	%
Operating profit				9,438			2.7	%			15,318		4.5	%
Interest income, net				355			0.1	%			328		0.1	%
Other income (expense), net				(156	)		0.0	%			289		0.1	%
Earnings before income taxes				9,637			2.8	%			15,935		4.7	%
Provision for income taxes				3,654			1.0	%			5,983		1.8	%
Net income			$	5,983			1.8	%		$	9,952		2.9	%
Basic earnings per share			$	0.21						$	0.35
Diluted earnings per share			$	0.21						$	0.34
Weighted average shares used in computation of earnings per share:
	Basic			28,726							28,819
	Diluted			28,932							29,182

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			August 1, 2015				January 31, 2015				August 2, 2014
Assets			(Unaudited)								(Unaudited)
Current assets
Cash and cash equivalents			$	22,166			$	20,862			$	22,037
Marketable securities				58,624				133,782				91,408
Receivables				15,656				12,653				16,611
Inventories				122,140				93,850				119,916
Prepaid expenses and other				13,189				11,651				12,365
Deferred tax assets				8,210				6,965				6,901
	Total current assets			239,985				279,763				269,238
Fixed assets, net				141,994				135,642				138,972
Goodwill				54,547				55,852				63,701
Intangible assets, net				11,863				13,062				16,630
Long-term other assets				8,966				9,386				7,515
	Total long-term assets			217,370				213,942				226,818
	Total assets		$	457,355			$	493,705			$	496,056
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable			$	46,715			$	32,094			$	66,636
Accrued payroll and payroll taxes				11,391				13,047				10,899
Income taxes payable				1,192				4,651				2,147
Deferred rent and tenant allowances				7,796				7,083				7,091
Other liabilities				31,577				24,572				26,247
	Total current liabilities			98,671				81,447				113,020
Long-term deferred rent and tenant allowances				44,704				42,553				43,627
Long-term deferred tax liabilities				4,339				5,738				2,826
Long-term debt and other liabilities				4,523				4,443				3,977
	Total long-term liabilities			53,566				52,734				50,430
	Total liabilities			152,237				134,181				163,450
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; 27,377 shares issued and outstanding at August 1, 2015, 29,418 shares issued and outstanding at January 31, 2015, and 29,204 shares issued and outstanding at August 2, 2014				132,379				129,094				120,060
Accumulated other comprehensive income				(14,002	)			(11,278	)			4,078
Retained earnings				186,741				241,708				208,468
	Total shareholders' equity			305,118				359,524				332,606
	Total liabilities and shareholders' equity		$	457,355			$	493,705			$	496,056

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				Six Months Ended
				August 1, 2015				August 2, 2014
Cash flows from operating activities:
Net income				$	5,983			$	9,952
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion					15,644				14,099
Deferred taxes					(2,703	)			(3,659	)
Stock-based compensation expense					2,710				2,106
Excess tax benefit from stock-based compensation					(713	)			(474	)
Other					626				251
	Changes in operating assets and liabilities:
		Receivables			(3,377	)			(5,641	)
		Inventories			(28,990	)			(32,791	)
		Prepaid expenses and other			(1,306	)			(5,685	)
		Trade accounts payable			15,684				47,953
		Accrued payroll and payroll taxes			(1,613	)			320
		Income taxes payable			(2,996	)			(3,255	)
		Deferred rent and tenant allowances			2,976				6,523
		Other liabilities			(948	)			816
Net cash provided by operating activities					977				30,515
Cash flows from investing activities:
Additions to fixed assets					(20,021	)			(18,301	)
Purchases of marketable securities and other investments					(38,238	)			(36,547	)
Sales and maturities of marketable securities and other investments					112,093				41,762
Net cash provided by (used in) investing activities					53,834				(13,086	)
Cash flows from financing activities:
Proceeds from revolving credit facilities					20,223				2,044
Payments on long-term debt and revolving credit facilities					(15,617	)			(1,040	)
Repurchase of common stock					(58,969	)			(19,557	)
Proceeds from exercise of stock-based compensation, net of withholding tax payments					379				2,997
Excess tax benefit from stock-based compensation					713				474
Net cash used in financing activities					(53,271	)			(15,082	)
Effect of exchange rate changes on cash and cash equivalents					(236	)			56
Net increase in cash and cash equivalents					1,304				2,403
	Cash and cash equivalents, beginning of period				20,862				19,634
	Cash and cash equivalents, end of period			$	22,166			$	22,037
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes, net of refunds			$	14,581			$	12,840
	Accrual for purchases of fixed assets				3,107				6,929
	Accrual for repurchase of common stock				1,981				-