Zumiez Inc. Announces Fiscal 2016 Third Quarter Results

LYNNWOOD, WA--(Marketwired - Dec 1, 2016) -  Zumiez Inc. ( NASDAQ : ZUMZ ), a leading lifestyle retailer of apparel, footwear, equipment and accessories, today reported results for the third quarter ended October 29, 2016.

Total net sales for the third quarter ended October 29, 2016 (13 weeks) increased 8.4% to $221.4 million from $204.3 million in the quarter ended October 31, 2015 (13 weeks). Comparable sales for the thirteen weeks ended October 29, 2016 increased 4.0% compared to a comparable sales decrease of 7.3% for the thirteen weeks ended October 31, 2015. Net income for the third quarter of fiscal 2016 increased to $10.7 million, or $0.43 per diluted share, compared to net income of $9.7 million, or $0.36 per diluted share in the third quarter of the prior fiscal year. 

Total net sales for the nine months (39 weeks) ended October 29, 2016 increased 1.9% to $572.6 million from $561.7 million reported for the nine months (39 weeks) ended October 31, 2015. Comparable sales decreased 2.5% for the thirty-nine weeks ended October 29, 2016 compared to a comparable sales decrease of 3.4% for the thirty-nine weeks ended October 31, 2015. Net income for the first nine months of fiscal 2016 was $7.7 million, or $0.31 per diluted share, compared to net income for the first nine months of the prior fiscal year of $15.6 million, or $0.55 per diluted share. Results for the first nine 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 October 29, 2016, the Company had cash and current marketable securities of $49.2 million compared to cash and current marketable securities of $51.1 million at October 31, 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, "Our monthly comparable sales trend turned positive in September driven by a solid back-to-school selling season and continued to accelerate as the third quarter progressed. We are pleased with the increase in our top-line which included positive growth in our men's, accessories, and junior's categories. Looking ahead, we believe that our current merchandise offering has us positioned to continue with strong results during the important holiday season. That said, we are proceeding prudently and managing expenses tightly in light of the headwinds currently facing the retail industry. Our primary focus remains on executing our strategic multi-year growth objectives and delivering increased shareholder value over the long-term."

November 2016 Sales Total net sales for the four-week period ended November 26, 2016 increased 10.3% to $69.3 million, compared to $62.8 million for the four-week period ended November 28, 2015. The Company's comparable sales increased 5.7% for the four-week period ended November 26, 2016 compared with a comparable sales decrease of 13.8% for the four-week period ended November 28, 2015. 

Fiscal 2016 Fourth Quarter Outlook The Company is introducing guidance for the three months ending January 28, 2017. Net sales are projected to be in the range of $258 to $263 million resulting in net income per diluted share of approximately $0.60 to $0.66. This guidance is based upon an anticipated comparable sales range of 3% to 5% for the fourth quarter of fiscal 2016.

A conference call will be held today to discuss third 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 21687742. 

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 November 26, 2016 we operated 689 stores, including 608 in the United States, 48 in Canada, and 28 in Europe and 5 in Australia. We operate under the names Zumiez, Blue Tomato and Fast Times. Additionally, we operate ecommerce web sites at www.zumiez.com , www.blue-tomato.com and www.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 quarterly report on Form 10-Q for the quarter ended July 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
			October 29, 2016				% of Sales			October 31, 2015				% of Sales
Net sales			$	221,391			100.0	%		$	204,320			100.0	%
Cost of goods sold				145,213			65.6	%			134,261			65.7	%
Gross profit				76,178			34.4	%			70,059			34.3	%
Selling, general and administrative expenses				59,265			26.8	%			54,835			26.8	%
Operating profit				16,913			7.6	%			15,224			7.5	%
Interest (expense) income, net				(37	)		0.0	%			84			0.0	%
Other income (expense), net				11			0.0	%			(71	)		0.0	%
Earnings before income taxes				16,887			7.6	%			15,237			7.5	%
Provision for income taxes				6,192			2.8	%			5,584			2.7	%
Net income			$	10,695			4.8	%		$	9,653			4.8	%
Basic earnings per share			$	0.44						$	0.36
Diluted earnings per share			$	0.43						$	0.36
Weighted average shares used in computation of earnings per share:
	Basic			24,485							26,467
	Diluted			24,622							26,602

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Nine Months Ended
			October 29, 2016			% of Sales			October 31, 2015				% of Sales
Net sales			$	572,634		100.0	%		$	561,749			100.0	%
Cost of goods sold				391,653		68.4	%			377,382			67.2	%
Gross profit				180,981		31.6	%			184,367			32.8	%
Selling, general and administrative expenses				169,144		29.5	%			159,706			28.4	%
Operating profit				11,837		2.1	%			24,661			4.4	%
Interest income, net				22		0.0	%			440			0.1	%
Other income (expense), net				253		0.0	%			(227	)		0.0	%
Earnings before income taxes				12,112		2.1	%			24,874			4.5	%
Provision for income taxes				4,392		0.8	%			9,238			1.6	%
Net income			$	7,720		1.3	%		$	15,636			2.9	%
Basic earnings per share			$	0.31					$	0.56
Diluted earnings per share			$	0.31					$	0.55
Weighted average shares used in computation of earnings per share:
	Basic			24,798						27,973
	Diluted			24,982						28,178

ZUMIEZ INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			October 29,				January 30,				October 31,
			2016				2016				2015
Assets			(Unaudited)								(Unaudited)
Current assets
Cash and cash equivalents			$	18,001			$	43,163			$	4,784
Marketable securities				31,169				32,391				46,342
Receivables				14,265				12,840				15,316
Inventories				150,623				98,299				133,565
Prepaid expenses and other current assets				14,199				12,204				12,987
	Total current assets			228,257				198,897				212,994
Fixed assets, net				135,325				137,233				143,856
Goodwill				56,920				54,245				54,649
Intangible assets, net				14,900				11,766				11,881
Deferred tax assets, net				9,533				4,634				7,219
Other long-term assets				8,093				7,920				8,178
	Total long-term assets			224,771				215,798				225,783
	Total assets		$	453,028			$	414,695			$	438,777
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable			$	58,088			$	21,919			$	47,230
Accrued payroll and payroll taxes				12,000				12,466				9,765
Income taxes payable				4,310				4,066				3,235
Deferred rent and tenant allowances				8,276				8,116				8,040
Short-term borrowings				11,787				-				1,186
Other liabilities				21,582				22,575				19,710
	Total current liabilities			116,043				69,142				89,166
Long-term deferred rent and tenant allowances				42,715				43,779				45,383
Other long-term liabilities				4,839				4,817				4,698
	Total long-term liabilities			47,554				48,596				50,081
	Total liabilities			163,597				117,738				139,247
Shareholders' equity
Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding				-				-				-
Common stock, no par value, 50,000 shares authorized; 24,899 shares issued and outstanding at October 29, 2016, 25,708 shares issued and outstanding at January 30, 2016, and 26,683 shares issued and outstanding at October 31, 2015				139,758				135,013				133,803
Accumulated other comprehensive loss				(14,698	)			(15,247	)			(13,920	)
Retained earnings				164,371				177,191				179,647
	Total shareholders' equity			289,431				296,957				299,530
	Total liabilities and shareholders' equity		$	453,028			$	414,695			$	438,777

ZUMIEZ INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
				Nine Months Ended
				October 29, 2016				October 31, 2015
Cash flows from operating activities:
Net income				$	7,720			$	15,636
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion					21,178				23,158
Deferred taxes					(4,983	)			(5,223	)
Stock-based compensation expense					3,399				3,843
Excess tax benefit from stock-based compensation					-				(714	)
Other					221				1,222
	Changes in operating assets and liabilities:
		Receivables			(1,361	)			(3,211	)
		Inventories			(51,047	)			(40,571	)
		Prepaid expenses and other current assets			(3,183	)			(1,127	)
		Trade accounts payable			35,873				15,951
		Accrued payroll and payroll taxes			(631	)			(3,231	)
		Income taxes payable			(708	)			(964	)
		Deferred rent and tenant allowances			(1,035	)			3,924
		Other liabilities			(1,459	)			(8,217	)
Net cash provided by operating activities					3,984				476
Cash flows from investing activities:
Additions to fixed assets					(16,829	)			(27,115	)
Acquisition, net of cash acquired					(5,395	)			-
Purchases of marketable securities and other investments					(48,232	)			(58,641	)
Sales and maturities of marketable securities and other investments					49,986				144,446
Net cash (used in) provided by investing activities					(20,470	)			58,690
Cash flows from financing activities:
Proceeds from revolving credit facilities					17,849				33,504
Payments on revolving credit facilities					(5,813	)			(32,393	)
Repurchase of common stock					(21,607	)			(77,697	)
Proceeds from exercise of stock-based awards, net of withholding tax					756				678
Excess tax benefit from stock-based compensation					-				714
Net cash used in financing activities					(8,815	)			(75,194	)
Effect of exchange rate changes on cash and cash equivalents					139				(50	)
Net decrease in cash and cash equivalents					(25,162	)			(16,078	)
	Cash and cash equivalents, beginning of period				43,163				20,862
	Cash and cash equivalents, end of period			$	18,001			$	4,784
	Supplemental disclosure on cash flow information:
	Cash paid during the period for income taxes			$	10,042			$	15,348
	Accrual for purchases of fixed assets				2,236				5,487