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Zumiez reports growth for 2008, but tough second half and shrinking sales for Q4

By Tiffany Montgomery
March 12, 2009 1:05 PM

Zumiez, the Pacific Northwest-based industry retailer that bills itself as the "core store in the mall," today reported a 7.1 percent increase in net sales for 2008.

But heavy discounting pushed net income for the year down to $17.2 million, compared to $25.3 million for all of 2007, the company said.

The deteriorating economy in the second half of the year contributed to a decline of .9 percent in net sales for Q4, the company reported. Comps for the quarter were off by 13.4 percent, after a 4 percent gain for Q4 '07.

Net income for the quarter was $6.3 million, or 21 cents a share, compared to $12.4 million Q4 '07.

Zumiez forecast for Q1 '09 predicts a loss of up to 17 cents a share and the retailer expects comp declines in the high teens.

CEO Rich Brooks cited the $79 million in cash and equivalents on Zumiez' books at the beginning of 2009 as one reason the retailer believes it is positioned to weather the recession and emerge stronger when the downturn wanes.

I'll post tomorrow out of the conference call later today.

Here's the company's statement:

EVERETT, Wash.--(BUSINESS WIRE)--Zumiez Inc. (NASDAQ: ZUMZ - News) today reported results for the fourth quarter and fiscal year ended January 31, 2009.

Total net sales for the fourth quarter (13 weeks) ended January 31, 2009 decreased 0.9% to $125.5 million from $126.6 million reported in the fourth quarter ended February 2, 2008 (13 weeks). The company posted net income for the quarter of $6.3 million or $0.21 per diluted share, including a non-cash, after-tax charge of $0.02 per diluted share associated with the impairment of store related assets, offset by a lower tax rate worth $0.02 per diluted share. Last year, Zumiez reported net income of $12.4 million or $0.42 per diluted share. Comparable store sales decreased 13.4% for the fourth quarter of fiscal 2008 compared to a 4.0% increase in the fourth quarter of fiscal 2007.

Total net sales for fiscal 2008 (52 week period) increased 7.1% to $408.7 million from $381.4 million reported in fiscal 2007 (52 week period). The company posted net income of $17.2 million or $0.58 per diluted share versus $25.3 million or $0.86 per diluted share in the prior year. Comparable store sales decreased 6.5% in fiscal 2008 compared to an increase of 9.2% in fiscal 2007.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated: "Fiscal 2008, particularly the second half of the year, was incredibly challenging. Since September the deteriorating economic conditions have significantly dampened consumer appetite for discretionary items.

"As a result, we saw a significant increase in promotional activity across all of retail, especially during the third and fourth quarters. We reacted in quick fashion and were able to manage our business in such a way to remain profitable for all four quarters of fiscal 2008. In light of the unprecedented environment, our team did an exceptional job controlling expenses, managing inventory, and most importantly, preserving the unique Zumiez concept.

"We begin 2009 confident that our strong balance sheet which includes approximately $79 million in cash, cash equivalents and current marketable securities, no debt and lean inventory levels, combined with our competitive advantages will allow us to successfully manage our business through this difficult macro environment. While longer-term we believe we are well positioned to drive increased profitability and greater shareholder value once the economy improves."

2009 Outlook

It has always been our goal to openly communicate actual results as well as our forward looking guidance with investors and other constituencies. In this spirit we plan to give guidance for the quarter we are currently operating in. However, due to the current market conditions and uncertain consumer environment, particularly in the back half of the year, the Company is discontinuing the practice of providing specific annual guidance until conditions normalize and visibility improves. Our current intention is to open approximately 37 new stores in fiscal 2009 with an opening cadence similar to fiscal 2008.

The Company is introducing guidance for the three months ending May 2, 2009 of a net loss of approximately ($0.17) to ($0.13) per diluted share. This guidance is based on an anticipated comparable store sales decline in the mid to high teen range for the first quarter of fiscal 2009.

A conference call will be held today to discuss fourth quarter results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617)-213-4854 followed by the conference identification code of 63259192. Telephonic participants can reduce pre-call hold time by registering for the conference in advance via the following link:

https://www.theconferencingservice.com/prereg/key.process?key=PEW68MBQ6

About Zumiez Inc.

Zumiez is a leading specialty retailer of action sports related apparel, footwear, equipment and accessories. Our stores cater to young men and women between ages 12-24, focusing on skateboarding, surfing, snowboarding, motocross and BMX. As of January 31, 2009 we operate 343 stores, which are primarily located in shopping malls and our web site address is www.zumiez.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 November 1, 2008 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 OPERATIONS

(in thousands, except share and per share amounts)

(Unaudited)

Three Months Ended

January 31,  February 2,  2009

% of Sale 2008
% of Sales Net sales

$125,464 100.0%
$ 126,606 100.0%
Cost of goods sold 84,855 67.6% 78,039 61.6%
Gross profit 40,609 32.4% 48,567 38.4%

Selling, general and administrative expenses 31,923 25.5% 29,229 23.1%
Operating profit 8,686 6.9% 19,338 15.3%

Interest income, net 399 0.3% 551 0.4%
Earnings before income taxes 9,085 7.2% 19,889 15.7%

Provision for income taxes 2,788 2.2% 7,447 5.9%

Net income $ 6,297 5.0% $ 12,442 9.8%

Basic net income per share $ 0.22 $ 0.43

Diluted net income per share $ 0.21 $ 0.42

Weighted average shares used in computation
of earnings per share:

Basic 29,248,917 29,002,852

Diluted 29,610,709 29,321,680

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(Unaudited)

Twelve Months Ended

January 31, February 2, 2009

% of Sales 2008

% of Sales  Net sales

$408,669

100.0%

$381,416

100.0%
Cost of goods sold 274,134 67.1% 244,429 64.1%
Gross profit 134,535 32.9% 136,987 35.9%

Selling, general and administrative expenses 109,927 26.9% 98,042 25.7%
Operating profit 24,608 6.0% 38,945 10.2%

Interest income, net 2,059 0.5% 1,722 0.4%
Other income 36 - 3 -
Earnings before income taxes 26,703 6.5% 40,670 10.6%

Provision for income taxes 9,499 2.3% 15,344 4.0%

Net income

$17,204

4.2%

$25,326

6.6%

Basic net income per share

$0.59

$0.89


Diluted net income per share

$0.58

$0.86

 

Weighted average shares used in computation
of earnings per share:

Basic 29,126,889 28,608,818

Diluted 29,694,112 29,322,337

ZUMIEZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(Unaudited)



January 31, February 2, 2009 2008
Assets
Current assets
Cash and cash equivalents

$33,057

 

$11,945


Marketable securities 45,525 64,587
Receivables 4,555 4,775
Inventory 51,974 48,721
Prepaid expenses and other 5,614 4,440
Deferred tax assets 2,588 1,089
Total current assets 143,313 135,557

Leasehold improvements and equipment, net 73,932 65,937
Goodwill and other intangibles 13,236 13,154
Marketable securities - long-term

1,767

-

Deferred tax assets

1,101

1,447


Total long-term assets 90,036 80,538

Total assets

$233,349

$216,095



Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable

$15,909

$19,672


Book overdraft

-

7,384


Accrued payroll and payroll taxes 4,739 5,097
Income taxes payable 238 47
Current portion of deferred rent and tenant allowances 2,735 2,136
Other accrued liabilities 7,600 9,060
Total current liabilities 31,221 43,396

Long-term deferred rent and tenant allowances, less current portion 24,177 18,097

Total liabilities

55,398

61,493


Commitments and contingencies

Shareholders' equity

Preferred stock, no par value, 20,000,000 shares authorized; none
issued and outstanding
- -

Common stock, no par value, 50,000,000 shares authorized;
29,533,067 shares issued and outstanding at January 31, 2009 and
29,002,852 shares issued and outstanding at February 2, 2008.
75,789 69,297
Accumulated other comprehensive income (loss) 117 464
Retained earnings 102,045 84,841
Total shareholders' equity 177,951 154,602

Total liabilities and shareholders' equity

$233,349

 

$216,095

 


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