Zumiez Inc. Announces Fiscal 2015 Fourth Quarter and Full Year Results

LYNNWOOD, WA--(Marketwired - Mar 10, 2016) -  Zumiez Inc. (NASDAQ: ZUMZ) today reported results for the fourth quarter and fiscal year ended January 30, 2016.

Total net sales for the fourth quarter ended January 30, 2016 (13 weeks) decreased 6.2% to $242.4 million from $258.6 million in the quarter ended January 31, 2015 (13 weeks). Comparable sales for the 13-week period ended January 30, 2016 decreased 9.5% compared to an 8.3% increase for the 13-week period ended January 31, 2015. Net income in the fourth quarter of fiscal 2015 decreased 24.9% to $13.1 million, or $0.50 per diluted share, from net income of $17.5 million, or $0.60 per diluted share, in the fourth quarter of the prior fiscal year. The results for fiscal 2015 include charges of $1.2 million, or approximately $0.03 per diluted share for exit costs associated with the shutdown of the Company's fulfillment facility in Edwardsville, Kansas. The results for fiscal 2014 include Blue Tomato acquisition charges of $6.9 million, or approximately $0.20 per diluted share, including $6.4 million for the accrual of contingent earn-out payments and $0.5 million for the amortization of intangible assets. 

Total net sales for fiscal 2015 (52 weeks) decreased 0.9% to $804.2 million from $811.6 million in fiscal 2014 (52 weeks). Comparable sales for the 52-week period ended January 30, 2016 decreased 5.3% compared to a 4.6% increase for the 52-week period ended January 31, 2015. Net income in fiscal 2015 decreased 33.4% to $28.8 million, or $1.04 per diluted share compared to net income in the prior fiscal year of $43.2 million, or $1.47 per diluted share. Results for the fiscal year 2015 include approximately $1.5 million, or $0.04 per diluted share, for charges associated with the acquisition of Blue Tomato, and $1.2 million, or approximately $0.03 per diluted share for exit costs associated with the shutdown of the Company's fulfillment facility in Edwardsville, Kansas. Results for the fiscal year 2014 include $6.4 million, or approximately $0.19 per diluted share, for the accrual of contingent earn-out payments associated with the acquisition of Blue Tomato, and $2.3 million, or approximately $0.06 per diluted share, for the amortization of intangible assets.

Cash and Current Marketable Securities

At January 30, 2016, the Company had cash and current marketable securities of $75.6 million, compared to cash and current marketable securities of $154.6 million at January 31, 2015. The decrease in cash and current marketable securities is primarily a result of stock repurchases of $92.2 million and capital expenditures of $34.8 million, partially offset by cash generated through operations of $48.6 million.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "The retail environment in North America over the past several months remained challenging. While we are pleased that our fourth quarter operating results came in ahead of our initial expectations, we are disappointed with our recent performance, particularly the decline in comparable store sales. In addition to our continued efforts to improve our merchandise assortments, we are taking actions to better position our Company for sustained, profitable growth, including implementing a new fully integrated point-of-sale system and optimizing our supply chain. We believe these changes will create a more seamless brand experience across all channels and help drive long-term market share gains. At the same time, we are investing in expanding our European business where sales momentum is strong and our footprint is underpenetrated."

February 2016 Sales

Total net sales for the four-week period ended February 27, 2016 decreased 3.9% to $51.9 million, compared to $54.0 million for the four-week period ended February 28, 2015. The Company's comparable sales decreased 8.6% for the four-week period ended February 27, 2016 compared with a comparable sales increase of 6.9% for the four-week period ended February 28, 2015. 

Fiscal 2016 First Quarter Outlook

The Company is introducing guidance for the three months ending April 30, 2016. Net sales are projected to be in the range of $172 to $175 million resulting in a net loss per diluted share of approximately -$0.07 to -$0.11. This guidance is based upon anticipated comparable sales decrease in the -5% to -7% range for the first quarter of fiscal 2016. The Company currently intends to open approximately 34 new stores in fiscal 2016, including up to 7 stores in Canada and 7 stores in Europe.

A conference call will be held today to discuss fourth quarter and fiscal 2015 year-end results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617) 399-3483 followed by the conference identification code of 22609060.

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 February 27, 2016 we operated 657 stores, including 592 in the United States, 42 in Canada, and 23 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 October 31, 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.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			January 30, 2016				% of Sales			January 31, 2015				% of Sales
Net sales			$	242,434			100.0	%		$	258,569			100.0	%
Cost of goods sold				158,177			65.2	%			160,791			62.2	%
Gross profit				84,257			34.8	%			97,778			37.8	%
Selling, general and administrative expenses				62,754			25.9	%			66,500			25.7	%
Operating profit				21,503			8.9	%			31,278			12.1	%
Interest income, net				90			0.0	%			162			0.1	%
Other expense, net				(606	)		(0.2	%)			(626	)		(0.3	%)
Earnings before income taxes				20,987			8.7	%			30,814			11.9	%
Provision for income taxes				7,838			3.2	%			13,301			5.1	%
Net income			$	13,149			5.5	%		$	17,513			6.8	%
Basic earnings per share			$	0.50						$	0.60
Diluted earnings per share			$	0.50						$	0.60
Weighted average shares used in computation of earnings per share:
	Basic			26,071							28,989
	Diluted			26,200							29,295

ZUMIEZ INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
			Twelve Months Ended
			January 30, 2016				% of Sales			January 31, 2015				% of Sales
Net sales			$	804,183			100.0	%		$	811,551			100.0	%
Cost of goods sold				535,559			66.6	%			524,468			64.6	%
Gross profit				268,624			33.4	%			287,083			35.4	%
Selling, general and administrative expenses				222,459			27.7	%			215,512			26.6	%
Operating profit				46,165			5.7	%			71,571			8.8	%
Interest income, net				529			0.1	%			637			0.1	%
Other expense, net				(833	)		(0.1	%)			(557	)		(0.1	%)
Earnings before income taxes				45,861			5.7	%			71,651			8.8	%
Provision for income taxes				17,076			2.1	%			28,459			3.5	%
Net income			$	28,785			3.6	%		$	43,192			5.3	%
Basic earnings per share			$	1.05						$	1.50
Diluted earnings per share			$	1.04						$	1.47
Weighted average shares used in computation of earnings per share:
	Basic			27,497							28,871
	Diluted			27,673							29,288

ZUMIEZ INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
				January 30,				January 31,
				2016				2015
Assets
Current assets
Cash and cash equivalents				$	43,163			$	20,862
Marketable securities					32,391				133,782
Receivables					12,840				12,653
Inventories					98,299				93,850
Prepaid expenses and other					12,204				11,651
		Total current assets			198,897				272,798
Fixed assets, net					137,233				135,642
Goodwill					54,245				55,852
Intangible assets, net					11,766				13,062
Deferred tax asset					4,634				7,734
Other long-term assets					7,920				8,617
		Total long-term assets			215,798				220,907
		Total assets		$	414,695			$	493,705
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable				$	21,919			$	32,094
Accrued payroll and payroll taxes					12,466				13,047
Income taxes payable					4,066				4,651
Deferred rent and tenant allowances					8,116				7,083
Other liabilities					22,575				24,572
		Total current liabilities			69,142				81,447
Long-term deferred rent and tenant allowances					43,779				42,553
Deferred tax liabilities					-				5,738
Other long-term liabilities					4,817				4,443
		Total long-term liabilities			48,596				52,734
		Total liabilities			117,738				134,181
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; 25,708 shares issued and outstanding at January 30, 2016 and 29,418 shares issued and outstanding at January 31, 2015					135,013				129,094
Accumulated other comprehensive loss					(15,247	)			(11,278	)
Retained earnings					177,191				241,708
		Total shareholders' equity			296,957				359,524
		Total liabilities and shareholders' equity		$	414,695			$	493,705

ZUMIEZ INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
				Twelve Months Ended
				January 30, 2016				January 31, 2015
Cash flows from operating activities:
Net income				$	28,785			$	43,192
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion					30,410				29,167
Deferred taxes					(2,698	)			(610	)
Stock-based compensation expense					4,996				7,520
Excess tax benefit from stock-based compensation					(714	)			(1,355	)
Other					4,009				1,109
	Changes in operating assets and liabilities:
		Receivables			(1,184	)			(2,990	)
		Inventories			(5,953	)			(10,850	)
		Prepaid expenses and other			(133	)			(4,702	)
		Trade accounts payable			(9,103	)			14,744
		Accrued payroll and payroll taxes			(483	)			2,718
		Income taxes payable			1				(23	)
		Deferred rent and tenant allowances			2,613				5,937
		Other liabilities			(1,939	)			6,080
Net cash provided by operating activities					48,607				89,937
Cash flows from investing activities:
Additions to fixed assets					(34,834	)			(35,758	)
Purchases of marketable securities and other investments					(59,286	)			(125,971	)
Sales and maturities of marketable securities and other investments					158,850				87,856
Net cash provided by (used in) investing activities					64,730				(73,873	)
Cash flows from financing activities:
Proceeds from long-term debt and revolving credit facilities					43,173				6,943
Payments on long-term debt and revolving credit facilities					(43,255	)			(9,009	)
Repurchase of common stock					(92,235	)			(19,557	)
Proceeds from exercise of stock-based awards, net of withholding tax					845				6,335
Excess tax benefit from stock-based compensation					714				1,355
Net cash used in financing activities					(90,758	)			(13,933	)
Effect of exchange rate changes on cash and cash equivalents					(278	)			(903	)
Net increase in cash and cash equivalents					22,301				1,228
	Cash and cash equivalents, beginning of period				20,862				19,634
	Cash and cash equivalents, end of period			$	43,163			$	20,862
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes			$	19,630			$	28,770
	Accrual for purchases of fixed assets				1,166				2,372
	Accrual for repurchase of common stock				1,067				-