Zumiez Inc. Announces Fiscal 2014 Second Quarter Results

LYNNWOOD, WA--(Marketwired - Sep 4, 2014) - 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 August 2, 2014.

Total net sales for the second quarter ended August 2, 2014 (13 weeks) increased 11.9% to $176.7 million from $157.9 million in the quarter ended August 3, 2013 (13 weeks). Comparable sales for the thirteen weeks ended August 2, 2014 increased 3.4% on top of a comparable sales increase of 0.9% for the thirteen weeks ended August 3, 2013. Net income in the second quarter of fiscal 2014 increased 57.3% to $7.5 million, or $0.26 per diluted share, compared to net income of $4.7 million, or $0.16 per diluted share, in the second quarter of the prior fiscal year. The results for fiscal 2014 include costs of approximately $0.6 million, or $0.01 per diluted share, for charges associated with the acquisition of Blue Tomato, and the results for fiscal 2013 include approximately $1.7 million, or $0.04 per diluted share, of Blue Tomato acquisition related costs.

Total net sales for the six months (26 weeks) ended August 2, 2014 increased 10.9% to $339.6 million from $306.4 million reported for the six months (26 weeks) ended August 3, 2013. Comparable sales increased 2.6% for the twenty six weeks ended August 2, 2014 on top of a comparable sales increase of 0.2% for the twenty six weeks ended August 3, 2013. 

Net income in the first six months of fiscal 2014 increased 37.5% to $10.0 million, or $0.34 per diluted share, compared to net income for the first six months of the prior fiscal year of $7.2 million, or $0.24 per diluted share. Results for the first six months of fiscal 2014 include approximately $1.3 million, or $0.03 per diluted share, for charges associated with the acquisition of Blue Tomato. Results for the first six months of fiscal 2013 include approximately $3.4 million, or $0.09 per diluted share, of Blue Tomato acquisition related costs.

At August 2, 2014, the Company had cash and current marketable securities of $113.4 million compared to cash and current marketable securities of $95.0 million at August 3, 2013. The increase in cash and current marketable securities is a result of cash generated through operations, partially offset by capital expenditures and stock repurchases.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "We are pleased with our second quarter performance. Our ability to connect consumers with our unique assortment of brands drove higher than expected sales which allowed us to better leverage our expense. Our organization continues to get smarter and more efficient at executing our global omni-channel strategy and we believe there is still runway for added improvement in the years ahead."

August 2014 Sales
Total net sales for the four-week period ended August 30, 2014 increased 9.4% to $94.0 million, compared to $85.9 million for the four-week period ended August 31, 2013. The Company's comparable sales increased 2.0% for the four-week period ended August 30, 2014 on top of a comparable sales increase of 3.0% for the four-week period ended August 31, 2013. 

Fiscal 2014 Third Quarter Outlook
The Company is introducing guidance for the three months ending November 1, 2014. Net sales are projected to be in the range $207 to $211 million resulting in net income per diluted share of approximately $0.47 to $0.50, which includes an estimated $0.6 million, or approximately $0.02 per diluted share, for charges associated with the acquisition of Blue Tomato. This guidance is based on anticipated comparable sales increase in the low single digit range for the third quarter of fiscal 2014.

The Company currently intends to open 56 new stores in fiscal 2014, including 7 stores in Canada and 6 stores in Europe.

A conference call will be held today to discuss second quarter fiscal 2014 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (857) 244-7310 followed by the conference identification code of 92759066. 

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 30, 2014 we operated 592 stores, included 543 in the United States, 34 in Canada, and 15 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 May 3, 2014 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 INCOME
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			August 2, 2014			% of Sales			August 3, 2013				% of Sales
Net sales			$	176,709		100.0	%		$	157,858			100.0	%
Cost of goods sold				115,797		65.5	%			102,738			65.1	%
Gross profit				60,912		34.5	%			55,120			34.9	%
Selling, general and administrative expenses				49,307		27.9	%			47,285			29.9	%
Operating profit				11,605		6.6	%			7,835			5.0	%
Interest income, net				146		0.1	%			158			0.1	%
Other income (expense), net				203		0.1	%			(174	)		(0.1	%)
Earnings before income taxes				11,954		6.8	%			7,819			5.0	%
Provision for income taxes				4,498		2.6	%			3,080			2.0	%
Net income			$	7,456		4.2	%		$	4,739			3.0	%
Basic earnings per share			$	0.26					$	0.16
Diluted earnings per share			$	0.26					$	0.16
Weighted average shares used in computation of earnings per share:
	Basic			28,776						29,842
	Diluted			29,057						30,232

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Six Months Ended
			August 2, 2014			% of Sales			August 3, 2013				% of Sales
Net sales			$	339,641		100.0	%		$	306,354			100.0	%
Cost of goods sold				228,196		67.2	%			203,262			66.3	%
Gross profit				111,445		32.8	%			103,092			33.7	%
Selling, general and administrative expenses				96,127		28.3	%			91,228			29.8	%
Operating profit				15,318		4.5	%			11,864			3.9	%
Interest income, net				328		0.1	%			373			0.1	%
Other income (expense), net				289		0.1	%			(320	)		(0.1	%)
Earnings before income taxes				15,935		4.7	%			11,917			3.9	%
Provision for income taxes				5,983		1.8	%			4,680			1.5	%
Net income			$	9,952		2.9	%		$	7,237			2.4	%
Basic earnings per share			$	0.35					$	0.24
Diluted earnings per share			$	0.34					$	0.24
Weighted average shares used in computation of earnings per share:
	Basic			28,819						29,770
	Diluted			29,182						30,221

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
				August 2,			February 1,			August 3,
				2014			2014			2013
Assets				(Unaudited)						(Unaudited)
Current assets
Cash and cash equivalents				$	22,037		$	19,634		$	19,098
Marketable securities					91,408			97,521			75,901
Receivables					16,611			10,294			15,597
Inventories					119,916			87,182			113,249
Prepaid expenses and other					12,365			10,021			11,474
Deferred tax assets					6,901			5,194			4,849
		Total current assets			269,238			229,846			240,168
Fixed assets, net					138,972			127,343			124,569
Goodwill					63,701			64,195			63,071
Intangible assets, net					16,630			17,970			18,727
Long-term other assets					7,515			4,049			4,428
		Total long-term assets			226,818			213,557			210,795
		Total assets		$	496,056		$	443,403		$	450,963
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable				$	66,636		$	18,343		$	53,596
Accrued payroll and payroll taxes					10,899			10,581			9,674
Income taxes payable					2,147			4,696			111
Deferred rent and tenant allowances					7,091			6,478			5,633
Other liabilities					26,247			21,276			20,546
		Total current liabilities			113,020			61,374			89,560
Long-term deferred rent and tenant allowances					43,627			37,658			41,359
Long-term deferred tax liabilities					2,826			4,649			3,567
Long-term debt and other liabilities					3,977			4,068			7,062
		Total long-term liabilities			50,430			46,375			51,988
		Total liabilities			163,450			107,749			141,548
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; 29,204 shares issued and outstanding at August 2, 2014, 29,619 shares issued and outstanding at February 1, 2014, 30,251 shares issued and outstanding at August 3, 2013					120,060			114,983			113,569
Accumulated other comprehensive income					4,078			4,710			3,238
Retained earnings					208,468			215,961			192,608
		Total shareholders' equity			332,606			335,654			309,415
		Total liabilities and shareholders' equity		$	496,056		$	443,403		$	450,963

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				Six Months Ended
				August 2, 2014				August 3, 2013
Cash flows from operating activities:
Net income				$	9,952			$	7,237
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion					14,099				12,694
Deferred taxes					(3,659	)			(1,384	)
Stock-based compensation expense					2,106				3,165
Excess tax benefit from stock-based compensation					(474	)			(1,168	)
Other					251				282
	Changes in operating assets and liabilities:
		Receivables			(5,641	)			(5,457	)
		Inventories			(32,791	)			(36,064	)
		Prepaid expenses and other			(5,685	)			(3,057	)
		Trade accounts payable			47,953				35,315
		Accrued payroll and payroll taxes			320				(1,344	)
		Income taxes payable			(3,255	)			(6,415	)
		Deferred rent and tenant allowances			6,523				5,263
		Other liabilities			816				809
Net cash provided by operating activities					30,515				9,876
Cash flows from investing activities:
Additions to fixed assets					(18,301	)			(14,505	)
Purchases of marketable securities and other investments					(36,547	)			(38,991	)
Sales and maturities of marketable securities and other investments					41,762				47,760
Net cash used in investing activities					(13,086	)			(5,736	)
Cash flows from financing activities:
Proceeds from revolving credit facilities					2,044				-
Payments on long-term debt and revolving credit facilities					(1,040	)			(153	)
Repurchase of common stock					(19,557	)			(4,310	)
Proceeds from exercise of stock-based compensation, net of withholding tax payments					2,997				876
Excess tax benefit from stock-based compensation					474				1,168
Net cash used in financing activities					(15,082	)			(2,419	)
Effect of exchange rate changes on cash and cash equivalents					56				(202	)
Net increase in cash and cash equivalents					2,403				1,519
	Cash and cash equivalents, beginning of period				19,634				17,579
	Cash and cash equivalents, end of period			$	22,037			$	19,098
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes			$	12,840			$	12,428
	Accrual for purchases of fixed assets				6,929				7,514