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Zumiez Inc. Announces Fiscal 2012 Second Quarter Results

Aug 30, 2012 (Marketwire via COMTEX) --Zumiez Inc. (NASDAQ: ZUMZ) a leading specialty retailer of action sports related apparel, footwear, equipment and accessories, today reported results for the second quarter ended July 28, 2012.

Total net sales for the second quarter ended July 28, 2012 (13 weeks) increased 20.4% to $135.1 million from $112.2 million in the quarter ended July 30, 2011 (13 weeks). The second quarter results include our acquisition of Blue Tomato which closed on July 4, 2012. Comparable store sales for the second quarter of fiscal 2012 increased 9.5% on top of a comparable store sales increase of 7.5% in the second quarter of fiscal 2011. Net income in the second quarter of fiscal 2012 was $2.1 million, or $0.07 per diluted share, compared to net income of $2.6 million, or $0.08 per diluted share, in the second quarter of the prior fiscal year. The results for fiscal 2012 include approximately $2.5 million, or $0.07 per diluted share, of Blue Tomato acquisition related costs and operations, and approximately $1.3 million, or $0.03 per diluted share, of costs associated with the relocation the Company's ecommerce fulfillment center to Edwardsville, Kansas and its corporate offices to Lynnwood, Washington from Everett, Washington.

Total net sales for the six months (26 weeks) ended July 28, 2012 increased 21.5% to $265.0 million from $218.1 million reported for the six months (26 weeks) ended July 30, 2011. Comparable store sales increased 11.1% in the first six months of fiscal 2012 on top of 9.9% for the first six months of 2011.

The Company reported net income of $6.6 million or $0.21 per diluted share in the first six months of fiscal 2012 compared to net income for the first six months of the prior fiscal year of $4.5 million or $0.14 per diluted share. Results for the first six months of fiscal 2012 include approximately $2.8 million, or $0.08 per diluted share, of Blue Tomato acquisition related costs and operations, approximately $1.6 million, or $0.03 per diluted share, of costs associated with the relocation the Company's ecommerce fulfillment center to Edwardsville, Kansas and corporate offices to Lynnwood, Washington from Everett, Washington.

At July 28, 2012, the Company had cash and current marketable securities of $96.8 million, compared to cash and current marketable securities of $131.9 million at July 30, 2011. The decrease in cash and current marketable securities is a result of the acquisition of Blue Tomato and was funded by the Company's cash balance, offset by cash generated through operations.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "The second quarter was a productive and transformational period for our Company. We continued to expand our North American footprint while at the same time driving a high single digit comparable sales gain. Our teams continue to execute at a very high level to ensure that our merchandise assortments are relevant and that the shopping experience is unique and differentiated regardless of what channel consumers chose to engage with us. We also took a significant step in our long-term plan to create a global action sports business with the acquisition of Blue Tomato. With established leadership in North America and Europe, we are focused on leveraging our combined expertise to take full advantage of the many expansion opportunities that exist in each of our markets." 

August 2012 Sales
Total net sales for the four-week period ended August 25, 2012 increased 14.1% to $75.2 million, compared to $65.9 million for the four-week period ended August 27, 2011. The Company's comparable store sales increased 3.7% for the four-week period on top of a comparable store sales increase of 4.3% in the year ago period. 

Fiscal 2012 Third Quarter Outlook
The Company is introducing guidance for the three months ending October 27, 2012. Net sales are projected to be in the range of $181 to $185 million resulting in net income per diluted share of approximately $0.42 to $0.45. This guidance is based on an anticipated comparable store sales increase in the 3% to 5% range for the third quarter of fiscal 2012 and reflects a full quarter of operations for Blue Tomato, including approximately $2.5 million, or $0.06 per diluted share, in estimated future incentive payments and the amortization of intangible assets, as well as costs of approximately $1.4 million, or $0.03 per diluted share, associated with the step-up in inventory to estimated fair value in conjunction with our acquisition of Blue Tomato. The Company currently intends to open approximately 50 new stores in fiscal 2012, including up to 10 stores in Canada, with an opening cadence similar to fiscal 2011. The Company does not anticipate opening a material number of stores in Europe in the current fiscal year.

A conference call will be held today to discuss second quarter fiscal 2012 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617)-614-3523 followed by the conference identification code of 54110183. 

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 August 25, 2012 we operated 486 stores, 463 in the United States, 18 in Canada, and 5 in Europe. In the United States and Canada we operate under the name Zumiez and in Europe we operate under the name Blue Tomato. Additionally, we operate ecommerce web sites under 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 April 28, 2012 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 per share amounts)
 (Unaudited)
 
    Three Months Ended  
                     
    July 28, 2012   % of Sales     July 30, 2011   % of Sales  
Net sales   $ 135,066   100.0 %   $ 112,213   100.0 %
Cost of goods sold     88,641   65.6 %     75,151   67.0 %
Gross profit     46,425   34.4 %     37,062   33.0 %
                         
Selling, general and administrative expenses     42,647   31.6 %     33,512   29.8 %
Operating profit     3,778   2.8 %     3,550   3.2 %
                         
Interest income, net     427   0.3 %     434   0.4 %
Other income, net     611   0.5 %     3   0.0 %
Earnings before income taxes     4,816   3.6 %     3,987   3.6 %
                         
Provision for income taxes     2,730   2.1 %     1,396   1.3 %
                         
Net income   $ 2,086   1.5 %   $ 2,591   2.3 %
                         
Basic earnings per share   $ 0.07         $ 0.08      
                         
Diluted earnings per share   $ 0.07         $ 0.08      
                         
Weighted average shares used in computation of earnings per share:                        
  Basic     30,922           30,521      
                         
  Diluted     31,460           31,081      
                         
                         
                         
ZUMIEZ INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (Unaudited)
                     
    Six Months Ended  
                     
    July 28, 2012   % of Sales     July 30, 2011   % of Sales  
Net sales   $ 264,965   100.0 %   $ 218,064   100.0 %
Cost of goods sold     176,439   66.6 %     147,812   67.8 %
Gross profit     88,526   33.4 %     70,252   32.2 %
                         
Selling, general and administrative expenses     77,486   29.2 %     64,150   29.4 %
Operating profit     11,040   4.2 %     6,102   2.8 %
                         
Interest income, net     917   0.3 %     947   0.5 %
Other income, net     628   0.2 %     58   0.0 %
Earnings before income taxes     12,585   4.7 %     7,107   3.3 %
                         
Provision for income taxes     5,972   2.2 %     2,630   1.2 %
                         
Net income   $ 6,613   2.5 %   $ 4,477   2.1 %
                         
Basic earnings per share   $ 0.21         $ 0.15      
                         
Diluted earnings per share   $ 0.21         $ 0.14      
                         
Weighted average shares used in computation of earnings per share:                        
  Basic     30,847           30,432      
                         
  Diluted     31,439           31,072      
                           
                           
                           
ZUMIEZ INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    July 28,     January 28,   July 30,
2012     2012   2011
Assets   (Unaudited)         (Unaudited)
Current assets                    
Cash and cash equivalents   $ 12,610     $ 14,779   $ 14,157
Marketable securities     84,212       158,019     117,744
Receivables     11,255       6,284     10,690
Income taxes receivable     747       -     1,894
Inventories     99,699       65,037     84,394
Prepaid expenses and other     9,909       7,907     7,669
Deferred tax assets     4,019       1,477     2,328
  Total current assets     222,451       253,503     238,876
                     
Fixed assets, net     111,411       89,478     83,713
Goodwill     59,547       13,154     13,154
Intangible assets, net     19,383       -     -
Long-term other assets     5,353       6,022     7,624
  Total long-term assets     195,694       108,654     104,491
                     
  Total assets   $ 418,145     $ 362,157   $ 343,367
                     
Liabilities and Shareholders' Equity                    
Current liabilities                    
Trade accounts payable   $ 57,630     $ 21,743   $ 50,657
Accrued payroll and payroll taxes     7,637       9,062     6,074
Income taxes payable     1,257       5,835     -
Deferred rent and tenant allowances     4,579       4,230     4,138
Other liabilities     18,566       14,706     12,611
  Total current liabilities     89,669       55,576     73,480
                     
Long-term deferred rent and tenant allowances     36,329       32,321     31,501
Long-term deferred tax liabilities     5,256       -     -
Long-term debt and other liabilities     4,454       1,983     1,899
  Total long-term liabilities     46,039       34,304     33,400
                     
  Total liabilities     135,708       89,880     106,880
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; 31,353 shares issued and outstanding at July 28, 2012, 31,170 shares issued and outstanding at January 28, 2012 and 31,094 shares issued and outstanding at July 30, 2011     104,862       99,412     96,468
Accumulated other comprehensive (loss) income     (1,768 )     135     163
Retained earnings     179,343       172,730     139,856
  Total shareholders' equity     282,437       272,277     236,487
                     
  Total liabilities and shareholders' equity   $ 418,145     $ 362,157   $ 343,367
                       
                       
                       
ZUMIEZ INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 (Unaudited) 
 
    Six Months Ended  
    July 28, 2012     July 30, 2011  
Cash flows from operating activities:                
Net income   $ 6,613     $ 4,477  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation, amortization and accretion     10,658       9,574  
Deferred taxes     (1,177 )     1,511  
Stock-based compensation expense     3,037       2,772  
Excess tax benefit from stock-based compensation     (2,065 )     (1,658 )
Lease termination costs     920       -  
Other     (183 )     (78 )
  Changes in operating assets and liabilities:                
    Receivables     (4,452 )     (4,410 )
    Inventories     (26,896 )     (28,073 )
    Prepaid expenses and other     (1,904 )     (413 )
    Trade accounts payable     33,583       33,394  
    Accrued payroll and payroll taxes     (2,156 )     (1,506 )
    Income taxes payable     (4,503 )     (4,674 )
    Deferred rent and tenant allowances     4,158       4,341  
    Other liabilities     (1,120 )     (3,995 )
Net cash provided by operating activities     14,513       11,262  
                 
Cash flows from investing activities:                
Additions to fixed assets     (21,904 )     (9,959 )
Acquisitions, net of cash acquired     (69,685 )     -  
Purchases of marketable securities and other investments     (65,655 )     (72,572 )
Sales and maturities of marketable securities and other investments     138,555       71,358  
Net cash used in investing activities     (18,689 )     (11,173 )
                 
Cash flows from financing activities:                
Payments on long-term debt     (109 )     -  
Proceeds from exercise of stock-based compensation, net of withholding tax payments     347       996  
Excess tax benefit from stock-based compensation     2,065       1,658  
Net cash provided by financing activities     2,303       2,654  
                 
Effect of exchange rate changes on cash and cash equivalents     (296 )     57  
                 
Net (decrease) increase in cash and cash equivalents     (2,169 )     2,800  
  Cash and cash equivalents, beginning of period     14,779       11,357  
  Cash and cash equivalents, end of period   $ 12,610     $ 14,157  
                 
  Supplemental disclosure on cash flow information:                
  Cash paid during the period for income taxes     11,624       5,789  
  Accrual for purchases of fixed assets     7,355       4,217  
                 
Company Contact:
        Brian Leith
        Director of Finance & 
        Investor Relations
        Zumiez Inc.
        (425) 551-1500, ext. 1610
        
        Investor Contact:
        ICR
        Brendon Frey 
        (203) 682-8200