Zumiez Inc. Announces Fiscal 2014 Third Quarter Results

LYNNWOOD, WA--(Marketwired - Dec 4, 2014) - 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 1, 2014.

Total net sales for the third quarter ended November 1, 2014 (13 weeks) increased 11.6% to $213.3 million from $191.1 million in the quarter ended November 2, 2013 (13 weeks). Comparable sales for the thirteen weeks ended November 1, 2014 increased 3.7% on top of a comparable sales increase of 1.5% for the thirteen weeks ended November 2, 2013. Net income in the third quarter of fiscal 2014 increased 32.6% to $15.7 million, or $0.54 per diluted share, compared to net income of $11.9 million, or $0.39 per diluted share, in the third quarter of the prior fiscal year. The results for fiscal 2014 include costs of approximately $0.6 million, or $0.02 per diluted share, for charges associated with the acquisition of Blue Tomato, and 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.

Total net sales for the nine months (39 weeks) ended November 1, 2014 increased 11.2% to $553.0 million from $497.5 million reported for the nine months (39 weeks) ended November 2, 2013. Comparable sales increased 3.0% for the thirty nine weeks ended November 1, 2014 on top of a comparable sales increase of 0.7% for the thirty nine weeks ended November 2, 2013. 

Net income in the first nine months of fiscal 2014 increased 34.5% to $25.7 million, or $0.88 per diluted share, compared to net income for the first nine months of the prior fiscal year of $19.1 million, or $0.63 per diluted share. 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. 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.

At November 1, 2014, the Company had cash and current marketable securities of $108.7 million compared to cash and current marketable securities of $94.2 million at November 2, 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, "We delivered double digit earnings growth in the third quarter driven by higher than expected sales along with lower than planned operating expenses. The merchandising, selling and marketing strategies we've implemented across our global platform are resonating with consumers and strengthening our brand position as a leading lifestyle retailer. We are optimistic about our growth prospects this holiday season and more importantly over the long-term."

November 2014 Sales

Total net sales for the four-week period ended November 29, 2014 increased 12.6% to $70.3 million, compared to $62.4 million for the four-week period ended November 30, 2013. The Company's comparable sales increased 6.3% for the four-week period ended November 29, 2014 on top of a comparable sales increase of 1.7% for the four-week period ended November 30, 2013. 

Fiscal 2014 Fourth Quarter Outlook

The Company is introducing guidance for the three months ending January 31, 2015. Net sales are projected to be in the range $249 to $251 million resulting in net income per diluted share of approximately $0.69 to $0.72, 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 sales increase in the 3% to 4% range for the fourth quarter of fiscal 2014.

The Company currently intends to open 56 new stores in fiscal 2014, including 7 stores in Canada and 6 stores in Europe.

A conference call will be held today to discuss third quarter fiscal 2014 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (857) 244-7312 followed by the conference identification code of 49051764. 

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 29, 2014 we operated 604 stores, included 552 in the United States, 35 in Canada, and 17 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 2, 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 INCOME
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			November 1, 2014				% of Sales			November 2, 2013				% of Sales
Net sales			$	213,341			100.0	%		$	191,145			100.0	%
Cost of goods sold				135,481			63.5	%			120,356			63.0	%
Gross profit				77,860			36.5	%			70,789			37.0	%
Selling, general and administrative expenses				52,885			24.8	%			50,111			26.2	%
Operating profit				24,975			11.7	%			20,678			10.8	%
Interest income, net				147			0.1	%			171			0.1	%
Other income (expense), net				(220	)		(0.1	%)			(587	)		(0.3	%)
Earnings before income taxes				24,902			11.7	%			20,262			10.6	%
Provision for income taxes				9,175			4.3	%			8,402			4.4	%
Net income			$	15,727			7.4	%		$	11,860			6.2	%
Basic earnings per share			$	0.54						$	0.40
Diluted earnings per share			$	0.54						$	0.39
Weighted average shares used in computation of earnings per share:
	Basic			28,857							29,895
	Diluted			29,147							30,257

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Nine Months Ended
			November 1, 2014			% of Sales			November 2, 2013				% of Sales
Net sales			$	552,982		100.0	%		$	497,499			100.0	%
Cost of goods sold				363,677		65.8	%			323,618			65.0	%
Gross profit				189,305		34.2	%			173,881			35.0	%
Selling, general and administrative expenses				149,012		26.9	%			141,339			28.5	%
Operating profit				40,293		7.3	%			32,542			6.5	%
Interest income, net				475		0.0	%			544			0.1	%
Other income (expense), net				69		0.0	%			(907	)		(0.1	%)
Earnings before income taxes				40,837		7.3	%			32,179			6.5	%
Provision for income taxes				15,158		2.7	%			13,082			2.7	%
Net income			$	25,679		4.6	%		$	19,097			3.8	%
Basic earnings per share			$	0.89					$	0.64
Diluted earnings per share			$	0.88					$	0.63
Weighted average shares used in computation of earnings per share:
	Basic			28,832						29,806
	Diluted			29,177						30,240

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			November 1,				February 1,			November 2,
			2014				2014			2013
Assets			(Unaudited)							(Unaudited)
Current assets
Cash and cash equivalents			$	13,785			$	19,634		$	5,315
Marketable securities				94,902				97,521			88,861
Receivables				14,638				10,294			12,844
Inventories				133,411				87,182			126,687
Prepaid expenses and other				12,451				10,021			10,857
Deferred tax assets				6,828				5,194			5,464
	Total current assets			276,015				229,846			250,028
Fixed assets, net				140,364				127,343			129,285
Goodwill				60,551				64,195			64,191
Intangible assets, net				15,047				17,970			18,558
Long-term other assets				7,595				4,049			3,715
	Total long-term assets			223,557				213,557			215,749
	Total assets		$	499,572			$	443,403		$	465,777
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable			$	61,394			$	18,343		$	49,081
Accrued payroll and payroll taxes				10,131				10,581			8,198
Income taxes payable				3,762				4,696			3,768
Deferred rent and tenant allowances				7,176				6,478			5,760
Other liabilities				25,357				21,276			21,076
	Total current liabilities			107,820				61,374			87,883
Long-term deferred rent and tenant allowances				43,264				37,658			41,809
Long-term deferred tax liabilities				1,622				4,649			2,984
Long-term debt and other liabilities				2,666				4,068			7,907
	Total long-term liabilities			47,552				46,375			52,700
	Total liabilities			155,372				107,749			140,583
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; 29,225 shares issued and outstanding at November 1, 2014, 29,619 shares issued and outstanding at February 1, 2014, 30,282 shares issued and outstanding at November 2, 2013				121,703				114,983			115,595
Accumulated other comprehensive income				(1,698	)			4,710			5,131
Retained earnings				224,195				215,961			204,468
	Total shareholders' equity			344,200				335,654			325,194
	Total liabilities and shareholders' equity		$	499,572			$	443,403		$	465,777

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				Nine Months Ended
				November 1, 2014				November 2, 2013
Cash flows from operating activities:
Net income				$	25,679			$	19,097
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion					21,556				19,517
Deferred taxes					(4,735	)			(2,365	)
Stock-based compensation expense					3,258				4,773
Excess tax benefit from stock-based compensation					(558	)			(1,154	)
Other					431				1,228
	Changes in operating assets and liabilities:
		Receivables			(4,259	)			(3,414	)
		Inventories			(47,703	)			(49,206	)
		Prepaid expenses and other			(5,990	)			(2,585	)
		Trade accounts payable			42,971				32,515
		Accrued payroll and payroll taxes			(377	)			(2,831	)
		Income taxes payable			(1,087	)			(2,015	)
		Deferred rent and tenant allowances			6,355				5,856
		Other liabilities			(1,106	)			2,247
Net cash provided by operating activities					34,435				21,663
Cash flows from investing activities:
Additions to fixed assets					(28,972	)			(27,179	)
Purchases of marketable securities and other investments					(74,398	)			(78,175	)
Sales and maturities of marketable securities and other investments					75,652				73,674
Net cash used in investing activities					(27,718	)			(31,680	)
Cash flows from financing activities:
Proceeds from revolving credit facilities					6,056				-
Payments on long-term debt and revolving credit facilities					(2,874	)			(233	)
Repurchase of common stock					(19,557	)			(4,310	)
Proceeds from exercise of stock-based compensation, net of withholding tax payments					3,411				1,308
Excess tax benefit from stock-based compensation					558				1,154
Net cash used in financing activities					(12,406	)			(2,081	)
Effect of exchange rate changes on cash and cash equivalents					(160	)			(166	)
Net increase in cash and cash equivalents					(5,849	)			(12,264	)
	Cash and cash equivalents, beginning of period				19,634				17,579
	Cash and cash equivalents, end of period			$	13,785			$	5,315
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes			$	20,931			$	17,368
	Accrual for purchases of fixed assets				5,046				5,514