Zumiez Inc. Announces Fiscal 2013 Third Quarter Results

LYNNWOOD, WA--(Marketwired - Dec 5, 2013) -  Zumiez Inc. (NASDAQ: ZUMZ), a leading specialty retailer of action sports related apparel, footwear, equipment and accessories, today reported results for the third quarter ended November 2, 2013.

Total net sales for the third quarter ended November 2, 2013 (13 weeks) increased 6.2% to $191.1 million from $180.0 million in the quarter ended October 27, 2012 (13 weeks). Comparable store sales for the thirteen weeks ended November 2, 2013 increased 1.5% on top of a comparable store sales increase of 3.7% for the thirteen weeks ended October 27, 2012. Net income in the third quarter of fiscal 2013 was $11.9 million, or $0.39 per diluted share, compared to net income of $12.7 million, or $0.40 per diluted share, in the third quarter of the prior fiscal year. The results for fiscal 2013 include costs of $1.7 million for charges associated with the acquisition of Blue Tomato and $1.3 million for the conditional settlement of a previously disclosed California class action wage and hour lawsuit, or $0.07 per diluted share in total. The results for fiscal 2012 include $4.0 million of Blue Tomato acquisition related costs and operations and $0.5 million of exit costs associated with the relocation of our corporate offices to Lynnwood, Washington, or $0.11 per diluted share in total.

Total net sales for the nine months (39 weeks) ended November 2, 2013 increased 11.8% to $497.5 million from $445.0 million reported for the nine months (39 weeks) ended October 27, 2012. Comparable store sales increased 0.7% for the thirty nine weeks ended November 2, 2013 on top of a comparable store sales increase of 8.0% for the thirty nine weeks ended October 27, 2012. 

The Company reported net income of $19.1 million or $0.63 per diluted share in the first nine months of fiscal 2013 compared to net income for the first nine months of the prior fiscal year of $19.3 million or $0.61 per diluted share. Results for the first nine months of fiscal 2013 include approximately $6.3 million, or $0.16 per diluted share, for charges associated with the acquisition of Blue Tomato and the conditional settlement of a California class action wage and hour lawsuit. Results for the first nine months of fiscal 2012 included approximately $8.9 million, or $0.22 per diluted share, of Blue Tomato acquisition related costs and operations and costs associated with the relocation the Company's ecommerce fulfillment center to Edwardsville, Kansas and corporate offices to Lynnwood, Washington from Everett, Washington.

At November 2, 2013, the Company had cash and current marketable securities of $94.2 million compared to cash and current marketable securities of $98.3 million at October 27, 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, the Company's Chief Executive Officer, stated, "The quarter began with a solid Back to School season, and while softer traffic trends returned, we were able to maintain a positive comparable store sales result for the quarter. We believe the investments in our people, merchandise assortment planning and omni-channel capabilities are helping to further distinguish our concept and enabling us to gain market share. We are committed to selling the most compelling mix of brands and products coveted by our customer in a unique, personalized and efficient manner across all channels, and we believe our business is well positioned for the upcoming holiday season and more importantly the long-term."

November 2013 Sales

Total net sales for the four-week period ended November 30, 2013 increased 16.3% to $62.4 million, compared to $53.6 million for the four-week period ended November 24, 2012. The Company's comparable store sales increased 1.7% for the four-week period ended November 30, 2013 compared to a comparable store sales decrease of 4.2% for the four-week period ended November 24, 2012. 

Fiscal 2013 Fourth Quarter Outlook

The Company is introducing guidance for the three months ending February 1, 2014. Net sales are projected to be in the range of $230 to $237 million resulting in net income per diluted share of approximately $0.60 to $0.66, which includes an estimated $1.7 million, or approximately $0.05 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 (1%) to 2% for the fourth quarter of fiscal 2013. The Company is planning to open 59 new stores in fiscal 2013, including 9 in Canada and 6 in Europe.

New Share Repurchase Program

The Company is also announcing that, effective December 4, 2013, the Board of Directors of Zumiez Inc. has approved the repurchase of up to $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 repurchase program supersedes the previously approved repurchase program approved on December 17, 2012, which as of December 4, 2013 had $12.5 million of stock repurchase authorization.

A conference call will be held today to discuss third quarter fiscal 2013 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617) 399-5124 followed by the conference identification code of 42688272. 

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 November 30, 2013 we operated 551 stores including, 513 in the United States, 28 in Canada, and 10 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 3, 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
			November 2, 2013				% of Sales			October 27, 2012				% of Sales
Net sales			$	191,145			100.0	%		$	180,023			100.0	%
Cost of goods sold				120,356			63.0	%			112,948			62.7	%
Gross profit				70,789			37.0	%			67,075			37.3	%
Selling, general and administrative expenses				50,111			26.2	%			45,674			25.4	%
Operating profit				20,678			10.8	%			21,401			11.9	%
Interest income, net				171			0.1	%			235			0.1	%
Other expense, net				(587	)		(0.3	%)			(185	)		(0.1	%)
Earnings before income taxes				20,262			10.6	%			21,451			11.9	%
Provision for income taxes				8,402			4.4	%			8,784			4.9	%
Net income			$	11,860			6.2	%		$	12,667			7.0	%
Basic earnings per share			$	0.40						$	0.41
Diluted earnings per share			$	0.39						$	0.40
Weighted average shares used in computation of earnings per share:
	Basic			29,895							30,957
	Diluted			30,257							31,416

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Nine Months Ended
			November 2, 2013				% of Sales			October 27, 2012			% of Sales
Net sales			$	497,499			100.0	%		$	444,988		100.0	%
Cost of goods sold				323,618			65.0	%			289,387		65.0	%
Gross profit				173,881			35.0	%			155,601		35.0	%
Selling, general and administrative expenses				141,339			28.5	%			123,160		27.7	%
Operating profit				32,542			6.5	%			32,441		7.3	%
Interest income, net				544			0.1	%			1,152		0.2	%
Other (expense) income, net				(907	)		(0.1	%)			443		0.1	%
Earnings before income taxes				32,179			6.5	%			34,036		7.6	%
Provision for income taxes				13,082			2.7	%			14,756		3.3	%
Net income			$	19,097			3.8	%		$	19,280		4.3	%
Basic earnings per share			$	0.64						$	0.62
Diluted earnings per share			$	0.63						$	0.61
Weighted average shares used in computation of earnings per share:
	Basic			29,806							30,884
	Diluted			30,240							31,425

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			November 2,			February 2,			October 27,
			2013			2013			2012
Assets			(Unaudited)						(Unaudited)
Current assets
Cash and cash equivalents			$	5,315		$	17,579		$	10,580
Marketable securities				88,861			85,593			87,751
Receivables				12,844			9,467			11,864
Inventories				126,687			77,598			109,786
Prepaid expenses and other				10,857			9,192			9,560
Deferred tax assets				5,464			3,885			4,881
	Total current assets			250,028			203,314			234,422
Fixed assets, net				129,285			115,474			116,547
Goodwill				64,191			64,576			61,926
Intangible assets, net				18,558			20,480			19,828
Long-term other assets				3,715			5,254			5,413
	Total long-term assets			215,749			205,784			203,714
	Total assets		$	465,777		$	409,098		$	438,136
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable			$	49,081		$	16,052		$	47,331
Accrued payroll and payroll taxes				8,198			11,057			9,996
Income taxes payable				3,768			6,957			7,354
Deferred rent and tenant allowances				5,760			4,901			4,797
Other liabilities				21,076			18,232			18,929
	Total current liabilities			87,883			57,199			88,407
Long-term deferred rent and tenant allowances				41,809			36,928			37,190
Long-term deferred tax liabilities				2,984			5,544			5,407
Long-term debt and other liabilities				7,907			6,006			6,773
	Total long-term liabilities			52,700			48,478			49,370
	Total liabilities			140,583			105,677			137,777
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; 30,282 shares issued and outstanding at November 2, 2013, 30,114 shares issued and outstanding at February 2, 2013 and 31,352 shares issued and outstanding at October 27, 2012				115,595			108,360			106,509
Accumulated other comprehensive income				5,131			6,010			1,840
Retained earnings				204,468			189,051			192,010
	Total shareholders' equity			325,194			303,421			300,359
	Total liabilities and shareholders' equity		$	465,777		$	409,098		$	438,136

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
			Nine Months Ended
			November 2, 2013				October 27, 2012
Cash flows from operating activities:
Net income			$	19,097			$	19,280
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion				19,517				16,661
Deferred taxes				(2,365	)			(2,767	)
Stock-based compensation expense				4,773				4,347
Excess tax benefit from stock-based compensation				(1,154	)			(2,215	)
Lease termination costs				193				1,404
Other				1,035				217
	Changes in operating assets and liabilities:
	Receivables			(3,414	)			(5,007	)
	Inventories			(49,206	)			(36,504	)
	Prepaid expenses and other			(2,585	)			(1,506	)
	Trade accounts payable			32,515				25,578
	Accrued payroll and payroll taxes			(2,831	)			183
	Income taxes payable			(2,015	)			2,425
	Deferred rent and tenant allowances			5,856				5,622
	Other liabilities			2,247				468
Net cash provided by operating activities				21,663				28,186
Cash flows from investing activities:
Additions to fixed assets				(27,179	)			(34,028	)
Acquisitions, net of cash acquired				-				(69,685	)
Purchases of marketable securities and other investments				(78,175	)			(95,268	)
Sales and maturities of marketable securities and other investments				73,674				164,231
Net cash used in investing activities				(31,680	)			(34,750	)
Cash flows from financing activities:
Payments on long-term debt				(233	)			(183	)
Repurchase of common stock				(4,310	)			-
Proceeds from exercise of stock-based compensation, net of withholding tax payments				1,308				534
Excess tax benefit from stock-based compensation				1,154				2,215
Net cash (used in) provided by financing activities				(2,081	)			2,566
Effect of exchange rate changes on cash and cash equivalents				(166	)			(201	)
Net decrease in cash and cash equivalents				(12,264	)			(4,199	)
	Cash and cash equivalents, beginning of period			17,579				14,779
	Cash and cash equivalents, end of period		$	5,315			$	10,580
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes		$	17,368			$	15,077
	Accrual for purchases of fixed assets			5,514				5,154