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Tiffany Montgomery
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Zumiez emphasizing pricing and asking for higher mark ups

By Tiffany Montgomery
March 13, 2009 9:02 AM

Zumiez is focusing more than ever on offering a full range of price points in its stores and is pushing brands for higher initial markups at every price point level, Zumiez executives said during a conference call with investors yesterday.

The goal is to offer fresh goods at the right price with fewer promotions needed through out the year and to stay price-competitive with other retailers in the mall. Zumiez is taking a hard look across each category and evaluating what consumers are willing to pay for items. The company believes action sports appeals to all socio-economic levels and wants to have a broad range of prices to reflect that, including higher prices if warranted.

Zumiez believes it will be able to compete on price with other retailers as long as they are "rational" with their promotions, CEO Rich Brooks said.

"We're still at the mercy of the market," he said. "Our competition may not be rational."

Rick did note that it is easier to sell brands with limited distribution at full price.

The company also believes it has further opportunity to distinguish itself from mall competitors that it describes as becoming "more and more homogenized" by staying true to its vision and carrying a full range of action sports product, including hardgoods and footwear. Rick said Zumiez's balance sheet - $79 million in cash and securities and no debt - is a competitive advantage, as competitors don't have the financial flexibility to take advantage of opportunities like Zumiez can.

Other highlights from the call:

Fourth quarter

Sales: down 0.9 percent to $125.5 million

Same-store sales: down 13.4 percent

Net income: down 49 percent to $6.3 million

Gross margins: 32.4 percent vs. 38.4 percent in the same period last year

E-commerce comps: up 50 percent

Categories: Footwear best, apparel worst

Full year

Sales: up 7.1 percent to $408.7 million

Same-store sales: down 6.5 percent

Net income: down 32 percent to $17.2 million

Footwear: up double digits. The company continues to expand its footwear offering and presentation. Footwear is also trending to full price selling.

Apparel: down low teens

Inventory: down 13 percent

2009

New stores: 37, less than initially planned. The company said it would wait for the economy to improve before signing any new deals.

Capital expenditures: $23 million, down 19 percent.

Earnings: Expected to be below 2008

Sales trends: Current sales trends are expected to last through fall

Ultimate goal: To end the year in a strong capital position. Rick said Zumiez will not allow inventory to back up this year.

Q1 guidance: Sales between $73 million to $76 million and a net loss of 13 to 17 cents per share.

 

 


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