Zumiez Inc. Announces Fiscal 2020 Second Quarter Results

Everett, Washington, UNITED STATES


Second Quarter 2020 Sales Increased 9.6% to $250.4 Million
Second Quarter 2020 Diluted Earnings Per Share Increased 184.4% to $1.01
Cash and Current Marketable Securities Increased 58.6% to $299.1 Million

LYNNWOOD, Wash., Sept. 10, 2020 (GLOBE NEWSWIRE) -- Zumiez Inc. (NASDAQ: ZUMZ) today reported results for the second quarter ended August 1, 2020.

Total net sales for the second quarter ended August 1, 2020 (13 weeks) increased 9.6% to $250.4 million from $228.4 million in the quarter ended August 3, 2019 (13 weeks). Due to store closures, stores were open for 73.4% of the second quarter of 2020 measured as the total number of store days open in the quarter divided by the total number of store days available. For the stores that were open, comparable sales for the thirteen weeks ended August 1, 2020 increased 37.3% compared to the same period a year ago.  Net income for the second quarter of fiscal 2020 was $25.4 million, or $1.01 per diluted share, compared to net income of $9.0 million, or $0.36 per diluted share in the second quarter of the prior fiscal year.

Total net sales for the six months (26 weeks) ended August 1, 2020 decreased 12.1% to $388.2 million from $441.4 million reported for the six months (26 weeks) ended August 3, 2019. Net income for the first six months of fiscal 2020 was $4.3 million, or $0.17 per diluted share, compared to net income for the first six months of the prior fiscal year of $9.8 million, or $0.39 per diluted share.

At August 1, 2020, the Company had cash and current marketable securities of $299.1 million compared to cash and current marketable securities of $188.6 million at August 3, 2019. The increase in cash and current marketable securities was driven by cash generated through operations including deferment of $41.5 million composed of landlord payments, lower inventory levels, extended vendor terms and deferred payroll tax payments as well as net income improvements related to abatements, credits and expense reductions. This increase was partially offset by $13.4 million of share repurchases through the Company’s stock buyback program prior to our stores closing due to COVID-19 and other planned capital expenditures.
 
Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, “Our teams did a remarkable job serving our customers and delivering these second quarter results during the most challenging operating environment in the Company’s history. As an organization, we successfully executed a quick and safe reopening of the majority of our stores in the quarter, while continuing to lean heavily on our omni platforms to fulfill strong demand for our distinct merchandise offering. Our recent performance amidst the pandemic underscores the strength of our brand and culture and speaks to the ability of our business model to adapt to changes in purchasing behavior while continuing to drive strong earnings growth and cash generation.  With close to $300 million in cash and no debt on our balance sheet, we are set up well to navigate whatever headwinds arise over the coming quarters and emerge from this crisis positioned to accelerate market share in each of our geographies.”

Third Quarter-To-Date sales
The Company is providing quarter-to-date sales through Labor Day, Monday September 7th, as this time period is more comparable to the prior year given the shift in the Labor Day holiday. Total third quarter-to-date sales for the 37 days ending September 7, 2020 were down approximately 14%, compared with the same 37 day time period in the prior year ended September 9, 2019. Total comparable sales for the 37 day period ending September 7, 2020 were down 5.1%. By channel, open store comparable sales decreased 10.7% and e-commerce sales increased 27.4%.

Store Re-Opening Update
The Company ended the second quarter with 645 or 89.6% of our 720 stores open with the primary closures being in California and Australia due to government mandates. As of Labor Day September 7, 2020, 35 stores or 4.9% of the store base remained closed. All stores are operating under enhanced measures to ensure the health and safety of employees and customers, including

  • requiring our employees to wear masks,
  • providing hand sanitizer in multiple locations throughout the store,
  • implementing enhanced cleaning and sanitation protocols,
  • reconfiguring sales floors to promote physical distancing, and
  • modifying employee and customer interactions to limit contact.

Outlook
Due to the fast-moving nature of this situation and the uncertainty of impacts on revenue and costs, the Company previously withdrew its full year fiscal 2020 guidance. The Company is not providing an updated outlook at this time for the third quarter or the year.

Conference Call Information
A conference call will be held today to discuss second quarter fiscal 2020 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 8269508.

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 29, 2020, we operated 720 stores, including 607 in the United States, 52 in Canada, 49 in Europe and 12 in Australia. We operate under the names Zumiez, Blue Tomato and Fast Times. Additionally, we operate ecommerce web sites at zumiez.com, zumiez.ca, blue-tomato.com and fasttimes.com.au.

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 annual report on Form 10-K for the fiscal year ended February 1, 2020 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.

Company Contact:
Darin White
Director of Finance &
Investor Relations
Zumiez Inc.
(425) 551-1500, ext. 1337

Investor Contact:
ICR
Brendon Frey
(203) 682-8200

 

ZUMIEZ INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

 Three Months Ended 
 August 1, 2020 % of Sales  August 3, 2019 % of Sales 
Net sales$250,392 100.0% $228,425 100.0% 
Cost of goods sold 159,542 63.7%  151,229 66.2% 
Gross profit 90,850 36.3%  77,196 33.8% 
Selling, general and administrative expenses 57,738 23.1%  65,523 28.7% 
Operating profit 33,112 13.2%  11,673 5.1% 
Interest income, net 794 0.3%  798 0.4% 
Other income, net 392 0.2%  559 0.2% 
Earnings before income taxes 34,298 13.7%  13,030 5.7% 
Provision for income taxes 8,906 3.6%  4,005 1.7% 
Net income$25,392 10.1% $9,025 4.0% 
Basic earnings per share$1.02   $0.36   
Diluted earnings per share$1.01   $0.36   
Weighted average shares used in computation of earnings per share:        
Basic 24,837    25,199   
Diluted 25,128    25,402   
           
 Six Months Ended 
 August 1, 2020 % of Sales  August 3, 2019 % of Sales 
Net sales$388,164 100.0%  441,353 100.0% 
Cost of goods sold 273,578 70.5%  297,693 67.5% 
Gross profit 114,586 29.5%  143,660 32.5% 
         
Selling, general and administrative expenses 109,322 28.1%  131,019 29.6% 
Operating profit 5,264 1.4%  12,641 2.9% 
         
Interest income, net 1,868 0.5%  1,650 0.4% 
Other income, net 498 0.1%  711 0.1% 
Earnings before income taxes 7,630 2.0%  15,002 3.4% 
Provision for income taxes 3,339 0.9%  5,184 1.2% 
Net income$4,291 1.1%  9,818 2.2% 
           
Basic earnings per share$0.17    0.39   
Diluted earnings per share$0.17    0.39   
Weighted average shares used in computation of earnings per share:          
Basic 24,938    25,144   
Diluted 25,277    25,395   
           

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

      
 August 1, 2020 February 1, 2020 August 3, 2019
 (Unaudited)   (Unaudited)
Assets     
Current assets     
Cash and cash equivalents$133,905  $52,428  $63,846 
Marketable securities 165,227   198,768   124,803 
Receivables 24,811   16,841   21,615 
Inventories 126,701   135,095   151,079 
Prepaid expenses and other current assets 10,560   9,456   11,789 
Total current assets 461,204   412,588   373,132 
Fixed assets, net 106,151   113,051   116,219 
Operating lease right-of-use assets 277,322   301,784   306,056 
Goodwill 60,225   57,099   57,306 
Intangible assets, net 15,577   14,564   14,672 
Deferred tax assets, net 7,080   6,303   6,502 
Other long-term assets 9,337   8,869   8,374 
Total long-term assets 475,692   501,670   509,129 
Total assets$936,896  $914,258  $882,261 
      
Liabilities and Shareholders’ Equity     
Current liabilities     
Trade accounts payable$75,318  $47,787  $82,859 
Accrued payroll and payroll taxes 17,816   23,653   15,582 
Income taxes payable 5,534   4,686   2,895 
Operating lease liabilities 74,558   61,800   58,646 
Other liabilities 30,374   21,784   21,150 
Total current liabilities 203,600   159,710   181,132 
Long-term operating lease liabilities 259,412   284,717   293,450 
Other long-term liabilities 3,858   3,745   3,472 
Total long-term liabilities 263,270   288,462   296,922 
Total liabilities 466,870   448,172   478,054 
      
Shareholders’ equity     
Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding        
Common stock, no par value, 50,000 shares authorized; 25,450 shares issued and outstanding at August 1, 2020, 25,828 shares issued and outstanding at February 1, 2020 and 25,770 shares issued and outstanding at August 3, 2019 165,056   161,458   156,625 
Accumulated other comprehensive loss (3,123)  (12,591)  (12,574)
Retained earnings 308,093   317,219   260,156 
Total shareholders’ equity 470,026   466,086   404,207 
Total liabilities and shareholders’ equity$936,896  $914,258  $882,261 
         

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 Six Months Ended
 August 1, 2020 August 3, 2019
Cash flows from operating activities:   
Net income$4,291  $9,818 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and accretion 12,005   12,514 
Noncash lease expense 30,167   28,318 
Deferred taxes (1,144)  935 
Stock-based compensation expense 3,146   3,214 
Impairment of long-lived assets 2,128   123 
Other (428)  (288)
Changes in operating assets and liabilities:   
Receivables (5,871)  (770)
Inventories 9,926   (22,727)
Prepaid expenses and other assets (937)  (2,115)
Trade accounts payable 27,323   47,275 
Accrued payroll and payroll taxes (6,134)  (5,345)
Income taxes payable (317)  (3,857)
Operating lease liabilities (20,868)  (29,842)
Other liabilities 8,718   (2,090)
Net cash provided by operating activities 62,005   35,163 
Cash flows from investing activities:   
Additions to fixed assets (5,024)  (8,292)
Purchases of marketable securities and other investments (35,720)  (93,288)
Sales and maturities of marketable securities and other investments 71,387   82,123 
Net cash provided by (used in) investing activities 30,643   (19,457)
Cash flows from financing activities:   
Proceeds from issuance and exercise of stock-based awards 545   583 
Payments for tax withholdings on equity awards (93)  (238)
Common stock repurchased (13,417)   
Net cash (used in) provided by financing activities (12,965)  345 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 2,146   (504)
Net increase in cash, cash equivalents, and restricted cash 81,829   15,547 
Cash, cash equivalents, and restricted cash, beginning of period 58,991   54,271 
Cash, cash equivalents, and restricted cash, end of period$140,820  $69,818 
Supplemental disclosure on cash flow information:   
Cash paid during the period for income taxes$4,630  $8,056 
Accrual for purchases of fixed assets 381   2,052