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Zumiez Q1 09 results: down double-digits, but better than expected

By Andrew Horan
May 21, 2009 1:15 PM

Zumiez reported a $1.7 milion net loss for its Q1 09 today, or 6 cents per dilulted share, compared to positive net income of $1.4 million in the same quarter a year ago.

The Everett, Washington-based mall retailer of action sports goods said it expects Q2 results to show same store declines in the low- to mid-20 percent range, and expects its loss to at least double, to 14 to 17 cents per share.

Same-store sales were down by -15.3 percent compared to the first quarter of 2008, on net sales that declined by -2.4 percent, to $76.8 million, compared to the $78.7 million the retailer earned in the first quarter of 2008.

Still, the numbers beat Zumiez' internal expectations, and are viewed as a positive result during the continuing recession, executives said in a news release issued after  U.S. markets closed today.

CEO Rick Brooks said the better-than-expected bottom line was achieved by stronger product margins. And he said the retailer will continue to keep tight control of expenses and inventory, while working with action sports brands to keep fresh merchandise in its 358 stores.

Zumiez' balance sheet continues to show no long-term debt and $20.6 million in cash and equivalents on hand -- though that's down from the $33 million it reported at the end of its 2008 fiscal year on Jan. 31, 2009.

The company made no mention of Zumiez bid to pay $7.2 million to buy 20 of Active Ride Shop's 21 Southern California stores out of Active's bankruptcy, which we first reported here.

Check back later this afternoon for more details from the Zumiez conference call.

Until then, here's the full text of the Zumiez news release.

Zumiez Inc. Announces Fiscal 2009 First Quarter Results

EVERETT, Wash.-- May, 21, 2009-- Zumiez Inc. today reported results for the first quarter ended May 2, 2009.

Total net sales for the first quarter (13 weeks) ended May 2, 2009 decreased 2.4% to $76.8 million from $78.7 million reported in the first quarter ended May 3, 2008 (13 weeks). The company posted a net loss for the quarter of $1.7 million or ($0.06) per diluted share, versus net income of $1.4 million or $0.05 per diluted share in the first quarter of the prior fiscal year. Comparable store sales for the first fiscal quarter of 2009 decreased 15.3% vs. a decrease of 0.8% for the first quarter of 2008.

"While the ongoing recession continues to pressure sales we were able to deliver first quarter results that exceeded our projections driven primarily by stronger than expected product margins," stated Rick Brooks, Chief Executive Officer of Zumiez Inc.

"Our team continues to do an excellent job managing our expenditures and inventories while at the same time working closely with our vendors to ensure that our merchandise assortments reflect current trends and provide compelling value for our target consumer. This has allowed us to head into the summer selling season with inventory levels in line with our expectations. Given the relative tough comparisons we are up against through August we remain cautious about our near-term prospects, however we believe that our unique concept and strong balance sheet have us well positioned to further expand our market share as the consumer environment improves."

2009 Outlook

The Company is introducing guidance for the three months ending August 1, 2009 of a net loss of approximately ($0.17) to ($0.14) per diluted share. This guidance is based on an anticipated comparable store sales decline in the low-to-mid twenty percent range for the second quarter of fiscal 2009.

We intend to open approximately 36 new stores in fiscal 2009 with an opening cadence similar to fiscal 2008.

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 May 2, 2009 we operate 358 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-K for the year ended January 31, 2009 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
May 2, May 3,

2009 % of Sales 2008 % of Sales
Net sales $ 76,808 100.0 % $ 78,702 100.0 %
Cost of goods sold 54,908 71.5 % 54,142 68.8 %
Gross profit 21,900 28.5 % 24,560 31.2 %

Selling, general and administrative expenses 25,338 33.0 % 22,934 29.1 %
Operating (loss) profit (3,438 ) (4.5 %) 1,626 2.1 %

Interest income, net 357 0.5 % 589 0.7 %
(Loss) earnings before income taxes (3,081 ) (4.0 %) 2,215 2.8 %

(Benefit) provision for income taxes (1,423 ) (1.8 %) 853 1.1 %

Net (loss) income $ (1,658 ) (2.2 %) $ 1,362 1.7 %

Basic net (loss) income per share $ (0.06 ) $ 0.05

Diluted net (loss) income per share $ (0.06 ) $ 0.05

Weighted average shares used in computation of (loss) earnings per share:
Basic 29,314,611 29,012,733

Diluted 29,314,611 29,352,350

ZUMIEZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

May 2, 2009 January 31, 2009 May 3, 2008
(Unaudited) (Unaudited) Assets Current assets
Cash and cash equivalents $ 20,262 $ 33,057 $ 7,622
Marketable securities 60,819 45,525 58,565
Receivables 5,917 4,555 6,315
Income tax receivable 1,879 - -
Inventory 54,051 51,974 58,654
Prepaid expenses and other 5,972 5,614 4,815
Deferred tax assets 2,256 2,588 2,758
Total current assets 151,156 143,313 138,729

Leasehold improvements and equipment, net 75,702 73,932 71,056
Goodwill and other intangibles 13,223 13,236 13,154
Marketable securities - long-term 1,664 1,767 2,000
Deferred tax assets 1,680 1,101 1,631
Total long-term assets 92,269 90,036 87,841

Total assets $ 243,425 $ 233,349 $ 226,570

Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 25,472 $ 15,909 $ 33,769
Accrued payroll and payroll taxes 4,115 4,739 3,772
Income taxes payable - 238 1,121
Current portion of deferred rent and tenant allowances 2,968 2,735 2,424
Other accrued liabilities 7,473 7,600 7,906
Total current liabilities 40,028 31,221 48,992

Long-term deferred rent and tenant allowances, less current portion 25,922 24,177 20,475

Total liabilities 65,950 55,398 69,467

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; 30,116,063 shares issued and outstanding at May 2, 2009, 29,533,067 shares issued and outstanding at January 31, 2009 and 29,306,632 shares issued and outstanding at May 3, 2008. 77,072 75,789 70,739
Accumulated other comprehensive income 16 117 161
Retained earnings 100,387 102,045 86,203
Total shareholders' equity 177,475 177,951 157,103

Total liabilities and shareholders' equity $ 243,425 $ 233,349 $ 226,570

Source: Zumiez Inc.


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