Zumiez Inc. Announces Fiscal 2016 Second Quarter Results

LYNNWOOD, WA--(Marketwired - Sep 8, 2016) -  Zumiez Inc. (NASDAQ: ZUMZ), a leading lifestyle retailer of apparel, footwear, equipment and accessories, today reported results for the second quarter ended July 30, 2016.

Total net sales for the second quarter ended July 30, 2016 (13 weeks) decreased 0.9% to $178.3 million from $179.8 million in the quarter ended August 1, 2015 (13 weeks). Comparable sales for the thirteen weeks ended July 30, 2016 decreased 4.9% compared to a comparable sales decrease of 4.5% for the thirteen weeks ended August 1, 2015. Net loss for the second quarter of fiscal 2016 was $0.8 million, or $0.03 per diluted share, compared to net income of $3.2 million, or $0.11 per diluted share in the second quarter of the prior fiscal year. The results for fiscal 2015 include costs of approximately $0.4 million, or $0.01 per diluted share, for charges associated with the acquisition of Blue Tomato.

Total net sales for the six months (26 weeks) ended July 30, 2016 decreased 1.7% to $351.2 million from $357.4 million reported for the six months (26 weeks) ended August 1, 2015. Comparable sales decreased 6.2% for the twenty-six weeks ended July 30, 2016 compared to a comparable sales decrease of 0.9% for the twenty-six weeks ended August 1, 2015. Net loss for the first six months of fiscal 2016 was $3.0 million, or $0.12 per diluted share, compared to net income for the first six months of the prior fiscal year of $6.0 million, or $0.21 per diluted share. Results for the first six months of fiscal 2015 include approximately $1.5 million, or $0.04 per diluted share, for charges associated with the acquisition of Blue Tomato. 

At July 30, 2016, the Company had cash and current marketable securities of $52.3 million compared to cash and current marketable securities of $80.8 million at August 1, 2015. The decrease in cash and current marketable securities is a result of stock repurchases and capital expenditures, partially offset by cash generated through operations.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "We continue to navigate through the current retail environment with a balanced approach to executing our strategic growth objectives and protecting near-term profitability in the face of challenging consumer demand. While our monthly comparable sales improved as the quarter progressed led by solid gains in our men's category, our overall business continues to underperform versus our long-term expectations. Therefore, we continue to manage our expense structure to better align with current trends, which is what allowed us to exceed our bottom line guidance for the quarter. We are confident that we are making the right decisions that will allow us to best serve our customers and expand our global market share while delivering sustained growth and increased shareholder value well into the future."

Zumiez is also pleased to announce that on August 31, 2016, we acquired 100% of the outstanding stock of Fast Times Skateboarding ("Fast Times") for $6.9 million consisting of $5.5 million in cash and $1.4 million in shares of common stock subject to certain pre-closing and post-closing adjustments. Founded in 2008, Fast Times is an Australian specialty retailer of skateboards, hardware, apparel and footwear and currently operates 5 stores and a website at www.fasttimes.com.au. Rick Brooks, Chief Executive Officer of Zumiez, added, "Fast Times is an important component of the Zumiez global retail network and joins our existing operations in the United States, Canada, and Europe. Our intent is to help the Fast Times team grow their operations across Australia leveraging our proven skills in profitably scaling culture and brand. We are all excited about the opportunity and about having a proven local Australian team to lead the way." Andrew Tebb, one of the co-founders and the General Manager of Fast Times, stated, "We are very excited to be partnering with Zumiez and believe that we have found the right team to help us grow in the Australian marketplace and beyond." Fast Times will continue to operate under the Fast Times name and be headquartered in Melbourne, Australia.

August 2016 Sales

Total net sales for the four-week period ended August 27, 2016 increased 2.6% to $89.5 million, compared to $87.3 million for the four-week period ended August 29, 2015. The Company's comparable sales decreased 1.1% for the four-week period ended August 27, 2016 compared to a comparable sales decrease of 10.7% for the four-week period ended August 29, 2015. 

Fiscal 2016 Third Quarter Outlook

The Company is introducing guidance for the three months ending October 29, 2016. Net sales are projected to be in the range of $209 to $213 million resulting in net income per diluted share of approximately $0.21 to $0.26. This guidance is based upon an anticipated comparable sales range of negative 2% to 0% for the third quarter of fiscal 2016. The Company currently intends to open approximately 29 new stores in fiscal 2016, including up to 6 stores in Canada and 7 stores in Europe.

A conference call will be held today to discuss second quarter fiscal 2016 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (574) 990-9934 followed by the conference identification code of 66794557. 

About Zumiez Inc.

Zumiez is a leading specialty retailer of apparel, footwear, accessories and hardgoods for young men and women who want to express their individuality through the fashion, music, art and culture of action sports, streetwear, and other unique lifestyles. As of August 27, 2016 we operated 674 stores, including 605 in the United States, 44 in Canada, and 25 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 April 30, 2016 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
			July 30, 2016				% of Sales			August 1, 2015				% of Sales
Net sales			$	178,272			100.0	%		$	179,819			100.0	%
Cost of goods sold				123,428			69.2	%			122,046			67.9	%
Gross profit				54,844			30.8	%			57,773			32.1	%
Selling, general and administrative expenses				55,980			31.5	%			52,461			29.2	%
Operating (loss) profit				(1,136	)		(0.7	%)			5,312			2.9	%
Interest income, net				28			0.0	%			150			0.1	%
Other expense, net				(256	)		(0.1	%)			(271	)		(0.2	%)
(Loss) earnings before income taxes				(1,364	)		(0.8	%)			5,191			2.8	%
(Benefit) provision for income taxes				(526	)		(0.3	%)			1,978			1.1	%
Net (loss) income			$	(838	)		(0.5	%)		$	3,213			1.7	%
Basic (loss) earnings per share			$	(0.03	)					$	0.11
Diluted (loss) earnings per share			$	(0.03	)					$	0.11
Weighted average shares used in computation of (loss) earnings per share:
	Basic			24,712							28,311
	Diluted			24,712							28,439

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Six Months Ended
			July 30, 2016				% of Sales			August 1, 2015				% of Sales
Net sales			$	351,243			100.0	%		$	357,429			100.0	%
Cost of goods sold				246,440			70.2	%			243,121			68.0	%
Gross profit				104,803			29.8	%			114,308			32.0	%
Selling, general and administrative expenses				109,879			31.2	%			104,870			29.3	%
Operating (loss) profit				(5,076	)		(1.4	%)			9,438			2.7	%
Interest income, net				59			0.0	%			355			0.1	%
Other income (expense), net				242			0.1	%			(156	)		0.0	%
(Loss) earnings before income taxes				(4,775	)		(1.3	%)			9,637			2.8	%
(Benefit) provision for income taxes				(1,800	)		(0.5	%)			3,654			1.0	%
Net (loss) income			$	(2,975	)		(0.8	%)		$	5,983			1.8	%
Basic (loss) earnings per share			$	(0.12	)					$	0.21
Diluted (loss) earnings per share			$	(0.12	)					$	0.21
Weighted average shares used in computation of (loss) earnings per share:
	Basic			24,957							28,726
	Diluted			24,957							28,932

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			July 30,				January 30,				August 1,
			2016				2016				2015
Assets			(Unaudited)								(Unaudited)
Current assets
Cash and cash equivalents			$	19,600			$	43,163			$	22,166
Marketable securities				32,740				32,391				58,624
Receivables				14,576				12,840				15,656
Inventories				131,823				98,299				122,140
Prepaid expenses and other current assets				13,990				12,204				13,189
	Total current assets			212,729				198,897				231,775
Fixed assets, net				136,505				137,233				141,994
Goodwill				55,082				54,245				54,547
Intangible assets, net				12,005				11,766				11,863
Deferred tax assets, net				8,332				4,634				4,713
Other long-term assets				7,908				7,920				8,124
	Total long-term assets			219,832				215,798				221,241
	Total assets		$	432,561			$	414,695			$	453,016
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable			$	60,044			$	21,919			$	46,715
Accrued payroll and payroll taxes				12,754				12,466				11,391
Income taxes payable				507				4,066				1,192
Deferred rent and tenant allowances				8,384				8,116				7,796
Other liabilities				22,089				22,575				31,577
	Total current liabilities			103,778				69,142				98,671
Long-term deferred rent and tenant allowances				43,721				43,779				44,704
Other long-term liabilities				4,815				4,817				4,523
	Total long-term liabilities			48,536				48,596				49,227
	Total liabilities			152,314				117,738				147,898
Shareholders' equity
Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding				-				-				-
Common stock, no par value, 50,000 shares authorized; 24,931 shares issued and outstanding at July 30, 2016, 25,708 shares issued and outstanding at January 30, 2016 and and 27,377 shares issued and outstanding at August 1, 2015				137,102				135,013				132,379
Accumulated other comprehensive loss				(12,802	)			(15,247	)			(14,002	)
Retained earnings				155,947				177,191				186,741
	Total shareholders' equity			280,247				296,957				305,118
	Total liabilities and shareholders' equity		$	432,561			$	414,695			$	453,016

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unadited)
				Six Months Ended
				July 30, 2016				August 1, 2015
Cash flows from operating activities:
Net (loss) income				$	(2,975	)		$	5,983
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, amortization and accretion					14,336				15,644
Deferred taxes					(3,713	)			(2,703	)
Stock-based compensation expense					2,221				2,710
Excess tax benefit from stock-based compensation					-				(713	)
Other					95				626
	Changes in operating assets and liabilities:
		Receivables			(842	)			(3,377	)
		Inventories			(32,766	)			(28,990	)
		Prepaid expenses and other current assets			(2,690	)			(1,306	)
		Trade accounts payable			38,181				15,684
		Accrued payroll and payroll taxes			225				(1,613	)
		Income taxes payable			(4,804	)			(2,996	)
		Deferred rent and tenant allowances			(12	)			2,976
		Other liabilities			(813	)			(948	)
Net cash provided by operating activities					6,443				977
Cash flows from investing activities:
Additions to fixed assets					(11,895	)			(20,021	)
Purchases of marketable securities and other investments					(28,353	)			(38,238	)
Sales and maturities of marketable securities and other investments					28,658				112,093
Net cash (used in) provided by investing activities					(11,590	)			53,834
Cash flows from financing activities:
Proceeds from revolving credit facilities					-				20,223
Payments on revolving credit facilities					-				(15,617	)
Repurchase of common stock					(19,084	)			(58,969	)
Proceeds from exercise of stock-based awards, net of withholding tax					397				379
Excess tax benefit from stock-based compensation					-				713
Net cash used in financing activities					(18,687	)			(53,271	)
Effect of exchange rate changes on cash and cash equivalents					271				(236	)
Net (decrease) increase in cash and cash equivalents					(23,563	)			1,304
	Cash and cash equivalents, beginning of period				43,163				20,862
	Cash and cash equivalents, end of period			$	19,600			$	22,166
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes			$	6,736			$	14,581
	Accrual for purchases of fixed assets				1,835				3,107
	Accrual for repurchase of common stock				254				1,981