Zumiez Inc. reported third quarter comparable store sales increased 14.4 percent for the period ended October 30, 2010, while November 2010 net sales increased 26.2 percent to $40.4 million. November 2010 comparable store sales increased 20.7 percent, versus a comparable store sales decrease of 8.5% in the year ago period. Zumiez CEO Rick Brooks and CFO Trevor Lang discussed the details of the report in a conference call Wednesday, December 1.
“We are pleased our third quarter 2010 financial results exceeded our expectations resulting in the highest third quarter profit in our history,” says Brooks. “We are pleased that the strength we saw in October has continued in November with same store sales again increasing over 20 percent.”
The strong third quarter results and the jump in comparable store sales was driven primarily by company opening 27 new stores in 2010 and late 2009, as well as a “tremendous growth in web business,” which has led to faster trend reads, improved operating margins, and revenue growth that has exceeded company expectations, according to Lang. Comparable store sales on Black Friday were similar to overall November comps, Lang said.
The retailer cited that it will not be alone in facing an increase in product costs early in 2011—a challenge that Zumiez is still building strategies to overcome, according to Lang. Another ongoing challenge for the retailer has been it’s junior’s business, which saw some improvement in comparable sales for November.
“Going back to the end of last year, we started working aggressively to reposition the junior’s business,” says Lang. “Fast fashion hit hard so we worked to get the talent in place and build the model for next year, and we executed on that strategy through this past year. Our margins are up so that strategy has worked. That being said, it’s still a difficult environment. We have been doing better in the last four to five months, and juniors is currently running just around 4 to 5 percent of our sales, so it’s not nearly as important as it is to our competitors, but we do feel like we have some momentum.”
Zumiez hardgoods sales were also positive for November, which is the first time the category has shown significant improvement in years, according to Brooks.
“We have gone after hardgoods a bit differently than we have in past years,” says Brooks. “We have seen some success in the hardgoods business, but we want to be cautious because it’s the first time in four years. Snow has helped us with a good start and that is also the same case for outerwear. We did take a more aggressive stance and we are approaching it differently, but we always buy in cautiously because as you know it always doesn't snow somewhere, so we have to adjust.”
The company’s decision to move its distribution center from Everrett, Washington to Corona, California has been a success, contributing in saving 40 percent of freight costs and improving inventory turns by two to three days, since many of its doors are located in Southern California.
Zumiez also plans to open a handful of new stores in Canada in the coming year, but does not expect that to initially effect its bottom line.
A statement released by Zumiez on Wednesday before the conference call follows:
Zumiez Inc. (NASDAQ: ZUMZ), a leading specialty retailer of action sports related apparel, footwear, equipment and accessories, today reported results for the third quarter ended October 30, 2010 and November 2010 sales results.
Total net sales for the third quarter (13 weeks) ended October 30, 2010 increased 20.0% to $135.9 million from $113.2 million reported in the third quarter (13 weeks) ended October 31, 2009. Comparable store sales for the third fiscal quarter of 2010 increased 14.4% vs. a decrease of 8.0% for the third quarter of fiscal 2009. Net income in the third quarter of 2010 increased 143% to $12.3 million, or $0.40 per diluted share from net income of $5.1 million, or $0.17 per diluted share in the third quarter of the prior fiscal year.
Total net sales for the nine months (39 weeks) ended October 30, 2010 increased 17.3% to $322.7 million from $275.2 million reported for the nine months (39 weeks) ended October 31, 2009. Comparable store sales increased 11.3% in the first nine months of fiscal 2010 compared with a decrease of 13.6% for the first nine months of fiscal 2009. The Company posted net income of $9.2 million or $0.30 per diluted share in the first nine months of fiscal 2010 compared to net income in the first nine months of the prior fiscal year of $0.3 million or $0.01 per diluted share. Results for the first nine months of fiscal 2010 include costs of $2.4 million, or approximately $0.05 per diluted share, associated with the relocation of the Company’s distribution center, and $2.1 million, or approximately $0.04 per diluted share, for the settlement of a previously disclosed lawsuit. Results for the first nine months of fiscal 2009 include a charge of $1.3 million, or approximately $0.03 per diluted share, associated with the settlement of a previously disclosed lawsuit.
At October 30, 2010, the Company had cash and current marketable securities of $98.9 million compared to cash and current marketable securities of $81.8 million at October 31, 2009.
Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, “We are pleased our third quarter 2010 financial results exceeded our expectations resulting in the highest third quarter profit in our history. Our ongoing investments continue to differentiate the Zumiez shopping experience. Our unique assortment of brands, best in class customer service combined with compelling pricing strategies further distinguished our concept from the competition during back-to-school. We are pleased that the strength we saw in October has continued in November with same store sales again increasing over 20%.”
November 2010 Sales
Total net sales for the four-week period ended November 27, 2010 increased 26.2% to $40.4 million, compared to $32.0 million for the four-week period ended November 28, 2009. The Company’s comparable store sales increased 20.7% for the four-week period, versus a comparable store sales decrease of 8.5% in the year ago period.
The Company is introducing guidance for the three months ending January 29, 2011 of net income per diluted share of approximately $0.43 to $0.47. This guidance is based on an anticipated comparable store sales increase in the low double digit to mid teen range for the fourth quarter of fiscal 2010.
We have opened all 27 new stores in fiscal 2010.
A conference call will be held today to discuss third quarter 2010 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617)-213-8067 followed by the conference identification code of 13207595.
About Zumiez Inc.
Zumiez is a leading specialty retailer of action sports related apparel, footwear, equipment and accessories. Our stores cater to young men and women between ages 12-24, focusing on skateboarding, surfing, snowboarding, motocross and BMX. As of November 27, 2010 we operated 400 stores, which are primarily located in shopping malls, and our web site address is www.zumiez.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, source inventory at acceptable costs, 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 31, 2010 as filed with the Securities and Exchange Commission and available at www.sec.gov or http://ir.zumiez.com. 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.