Zumiez Inc. Announces Fiscal 2018 Second Quarter Results

Second Quarter 2018 Sales Increased 13.9% to $219.0 MillionSecond Quarter 2018 Earnings Per Share Improved to $0.17August 2018 Comparable Sales Increased 9.5%

Zumiez Inc. (NASDAQ: ZUMZ) today reported results for the second quarter ended August 4, 2018.

Total net sales for the second quarter ended August 4, 2018 (13 weeks) increased 13.9% to $219.0 million from $192.2 million in the quarter ended July 29, 2017 (13 weeks). Comparable sales for the thirteen weeks ended August 4, 2018 increased 6.3% compared to a comparable sales increase of 4.7% for the thirteen weeks ended July 29, 2017. Net income for the second quarter of fiscal 2018 was $4.4 million, or $0.17 per diluted share, compared to a net loss of $0.6 million, or $0.02 per diluted share in the second quarter of the prior fiscal year.

Total net sales for the six months (26 weeks) ended August 4, 2018 increased 13.9% to $425.3 million from $373.4 million reported for the six months (26 weeks) ended July 29, 2017. Comparable sales increased 7.2% for the twenty-six weeks ended August 4, 2018 compared to a comparable sales increase of 3.3% for the twenty-six weeks ended July 29, 2017. Net income for the first six months of fiscal 2018 was $1.8 million, or $0.07 per diluted share, compared to a net loss for the first six months of the prior fiscal year of $5.1 million, or $0.21 per diluted share.

At August 4, 2018, the Company had cash and current marketable securities of $132.9 million compared to cash and current marketable securities of $70.7 million at July 29, 2017. The increase in cash and current marketable securities was driven by cash generated through operations partially offset by capital expenditures.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, “We delivered our strongest second quarter in several years. Our differentiated merchandise offering combined with our authentic brand positioning and seamless multi-channel shopping experience continue to drive robust comparable sales gains. We also expanded product margins by 30 basis points through increased full price selling and meaningfully leveraged our expenses on higher sales. The broad based improvements across our business fueled a marked improvement in profitability compared with a year ago. We are very encouraged by our recent performance, and with the second half of the year off to a solid start, we are heading into our busiest selling season with great momentum.”

August 2018 SalesTotal net sales for the four-week period ended September 1, 2018 increased 9.0% to $107.4 million, compared to $98.6 million for the four-week period ended August 26, 2017. The Company's comparable sales increased 9.5% for the four-week period ended September 1, 2018 compared to a comparable sales increase of 7.4% for the four-week period ended August 26, 2017.

Fiscal 2018 Third Quarter & Full Year OutlookThe Company is introducing guidance for the three months ending November 3, 2018. Net sales are projected to be in the range of $247 to $252 million including anticipated comparable sales growth of between 4.0% and 6.0%. Consolidated operating margins are expected to between 6.5% and 7.0% resulting in net income per diluted share of approximately $0.45 to $0.51. The Company currently intends to open approximately 13 new stores in fiscal 2018, including up to 5 stores in the United States, 7 stores in Europe and 1 store in Australia.

Conference call Information A conference call will be held today to discuss second quarter fiscal 2018 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 7348439.

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 September 1, 2018 we operated 703 stores, including 610 in the United States, 50 in Canada, 36 in Europe and 7 in Australia. We operate under the names Zumiez, Blue Tomato and Fast Times. Additionally, we operate ecommerce web sites at zumiez.com, 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 quarterly report on Form 10-Q for the quarter ended May 5, 2018 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 / (LOSS) (In thousands, except per share amounts) (Unaudited)


	Three Months Ended
	August 4, 2018		% of Sales			July 29, 2017		% of Sales
Net sales	$	218,971	100.0	%	$	192,245		100.0	%
Cost of goods sold		146,436	66.9	%		132,449		68.9	%
Gross profit		72,535	33.1	%		59,796		31.1	%
Selling, general and administrative expenses		65,837	30.0	%		60,558		31.5	%
Operating profit (loss)		6,698	3.1	%		(762	)	(0.4	%)
Interest income, net		238	0.1	%		92		0.0	%
Other income (expense), net		248	0.1	%		(23	)	0.0	%
Earnings (loss) before income taxes		7,184	3.3	%		(693	)	(0.4	%)
Provision (benefit) for income taxes		2,807	1.3	%		(85	)	(0.1	%)
Net income (loss)	$	4,377	2.0	%	$	(608	)	(0.3	%)
Basic earnings (loss) per share	$	0.18			$	(0.02	)
Diluted earnings (loss) per share	$	0.17			$	(0.02	)
Weighted average shares used in computation of earnings (loss) per share:
Basic		24,955				24,689
Diluted		25,188				24,689

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


	Six Months Ended
	August 4, 2018			% of Sales		July 29, 2017		% of Sales
Net sales	$	425,257		100.0	%	373,399		100.0	%
Cost of goods sold		290,136		68.2	%	261,555		70.0	%
Gross profit		135,121		31.8	%	111,844		30.0	%
Selling, general and administrative expenses		130,133		30.6	%	118,841		31.9	%
Operating profit (loss)		4,988		1.2	%	(6,997	)	(1.9	%)
Interest income, net		521		0.1	%	174		0.0	%
Other expense, net		(233	)	(0.1	%)	(472	)	(0.1	%)
Earnings (loss) before income taxes		5,276		1.2	%	(7,295	)	(2.0	%)
Provision (benefit) for income taxes		3,506		0.8	%	(2,239	)	(0.6	%)
Net income (loss)	$	1,770		0.4	%	(5,056	)	(1.4	%)

Basic earnings (loss) per share	$	0.07				(0.21	)
Diluted earnings (loss) per share	$	0.07				(0.21	)
Weighted average shares used in computation of earnings (loss) per share:
Basic		24,894				24,635
Diluted		25,211				24,635

ZUMIEZ INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)


	August 4, 2018			February 3, 2018		July 29, 2017
	(Unaudited)					(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	41,409		$	24,041	$	17,291
Marketable securities		91,500		97,864		53,433
Receivables		20,554		17,027		16,334
Inventories		149,656		125,826		141,782
Prepaid expenses and other current assets		16,169		14,405		15,378
Total current assets		319,288		279,163		244,218
Fixed assets, net		125,141		128,852		131,934
Goodwill		59,336		62,912		60,057
Intangible assets, net		15,470		16,696		15,903
Deferred tax assets, net		4,417		4,174		9,733
Other long-term assets		6,815		7,713		7,022
Total long-term assets		211,179		220,347		224,649
Total assets	$	530,467		$	499,510	$	468,867

Liabilities and Shareholders’ Equity
Current liabilities
Trade accounts payable	$	79,370		$	37,861	$	60,652
Accrued payroll and payroll taxes		15,640		20,650		15,684
Income taxes payable		2,580			5,796		68
Deferred rent and tenant allowances		7,895		8,073		8,393
Short term borrowings		5,623			943		—
Other liabilities		21,274		25,924		23,657
Total current liabilities		132,382		99,247		108,454
Long-term deferred rent and tenant allowances		38,265		39,275		40,795
Other long-term liabilities		4,781		5,073		5,113
Total long-term liabilities		43,046		44,348		45,908
Total liabilities		175,428		143,595		154,362

Shareholders’ equity
Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding		—			—		—
Common stock, no par value, 50,000 shares authorized; 25,520 shares issued and outstanding at August 4, 2018, 25,249 shares issued and outstanding at February 3, 2018 and 25,231 shares issued and outstanding at July 29, 2017		149,961		146,523		143,682
Accumulated other comprehensive (loss) income		(8,101	)	35		(6,676		)
Retained earnings		213,179		209,357		177,499
Total shareholders’ equity		355,039		355,915		314,505
Total liabilities and shareholders’ equity	$	530,467		$	499,510	$	468,867

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


	Six Months Ended
	August 4, 2018			July 29, 2017
Cash flows from operating activities:
Net income (loss)	$	1,770		$	(5,056	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and accretion		13,920			13,520
Deferred taxes		(990	)		(2,456	)
Stock-based compensation expense		3,012			2,500
Other		310			621
Changes in operating assets and liabilities:
Receivables		(4,099	)		(2,092	)
Inventories		(25,993	)		(32,553	)
Prepaid expenses and other current assets		(1,570	)		(995	)
Trade accounts payable		40,815			34,627
Accrued payroll and payroll taxes		(4,785	)		561
Income taxes payable		(2,973	)		(3,372	)
Deferred rent and tenant allowances		(872	)		(521	)
Other liabilities		(2,997	)		(1,016	)
Net cash provided by operating activities		15,548			3,768
Cash flows from investing activities:
Additions to fixed assets		(9,061	)		(12,461	)
Purchases of marketable securities and other investments		(35,046	)		(37,586	)
Sales and maturities of marketable securities and other investments		41,200			42,615
Net cash used in investing activities		(2,907	)		(7,432	)
Cash flows from financing activities:
Proceeds from revolving credit facilities		29,227			1,791
Payments on revolving credit facilities		(24,233	)		(1,791	)
Proceeds from issuance and exercise of stock-based awards		621			370
Payments for tax withholdings on equity awards		(195	)		(172	)
Net cash provided by financing activities		5,420			198
Effect of exchange rate changes on cash and cash equivalents		(693	)		510
Net increase (decrease) in cash and cash equivalents		17,368			(2,956	)
Cash and cash equivalents, beginning of period		24,041			20,247
Cash and cash equivalents, end of period	$	41,409		$	17,291
Supplemental disclosure on cash flow information:
Cash paid during the period for income taxes	$	7,362		$	3,660
Accrual for purchases of fixed assets		3,496			2,550