Zumiez Q4 Profit Zips Up 17.3% Despite Pressures

ZumiezEverett, WA—One-off gains and higher sales helped action sportswear and footwear retailer Zumiez to report a 17.3% hike in fourth-quarter net profit.

This included a $5.8 million benefit related to its acquisition of Blue Tomato, a $3.3 million gain for the correction of an error related to the accounting for rent expenses. It also included a $800,000 benefit to the provision for income taxes.

Zumiez’ fourth quarter net profit rose to $26.9 million, or 89 cents a share, from $22.9 million, or 74 cents a share, a year ago. That handily beat analysts’ estimate for 62 cents a share.

‘Highly Promotional Retail Environment’

Net sales grew 1.1% to $226.8 million in line with a consensus revenue estimate of $226.16 million. Comparable store sales were down 2.2%.

Gross margin improved to 38.7% from 38.2 percent last year, while operating margin increased to 17.8% from 16.1% last year.

But CEO Rick Brooks said the fourth-quarter proved more challenging than expected — at home and abroad.

“Weak mall traffic in December and January created a highly promotional retail environment that pressured our sales and deleveraged our cost structure,” Brooks said. “The steps we have taken to broaden our revenue base, including evolving our digital capabilities, investing in our team and expanding into Europe, have pressured our operating margin in the face of ongoing consumer headwinds, but we believe will fortify our long-term earnings growth.”

During the 52 weeks to Feb. 1, Zumiez’ net income increased 9% to $45.9 million over $42.2 million in the prior year, while sales reached $724.3 million, up 8.2% from $669.4 million.

For the first quarter, Zumiez expects net sales to be in the range of $156 million to $160 million, resulting in a net loss per share of 2 cents to net income of 3 cents, based on a comparable store sales decline in the low single digit range.

Analysts’ forecast is for a profit of 11 cents a share.

The company also intends to open 55 new stores in fiscal 2014, including up to seven stores in Canada and five stores in Europe.

Stifel analyst Richard Jaffe said: “We believe that Zumiez is a well-run business with a corporate culture that is engaging for the consumer and effective in generating earnings growth.”

 

 

 

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