by The Editors on November 21, 2008
On the conference call earlier this week analysts asked several times what the hold up was with the sale of PacSun’s Anaheim, California distribution center and it was obvious that many were worried that something had gone south on the deal. CFO Michael Henry assured everyone that the deal was underway. And he was telling the truth. Today they closed the sale.
The Company has received net cash proceeds of $24.5 million from the transaction. The Company expects to record an after-tax gain of approximately $0.10 per diluted share from the transaction in the fourth quarter of 2008.
This deal not falling through should help assauge the sting that Christmas and Q4 bring.
[Link: MarketWatch]
by The Editors on November 20, 2008
Some people like to give Zumiez grief for being “mall” stores, but when you compare their conference calls with those of some of their competitors what comes through is a surprisingly core attitude about the stores, the brands, and the customers. After the prepared statements Zumiez CEO Rick Brooks and CFO Trevor Lang answered questions and here are some of the highlights
- October had the worst monthly comps in the company’s history.
- Footwear was the strongest segment, apparel was the worst, and skate hard goods are seeing “tough comps.”
- Third quarter gross margins were down 200 basis points driven almost entirely by apparel since the June when everything got promotional.
- New stores (07-08) have been performing at about 65 percent as compared to established stores.
- Company is targeting opening 58 new stores, only 20 percent of them are in the “housing states” and no new stores in Nevada or Florida.
- Snow goods are off to a slow start. Rick Brooks said “We are concerned about the market for snow hardgoods. We’re working very closely with our suppliers. We’re also going to be more aggressive from the price perspective and trying to move the product out the door.
- The company has lowered its costs across the board and stock and performance based incentives are a large part of that.
- Customers continue to drive the brand selection and the business. “Again, our approach is to do what our customers tell us to do,” Brooks said. “The customers are who drive that for us. If the custermers demand more then we will buy more.”
- Zumiez remains dedicated to its small vendors. “In most cases we are our small vendors biggest customers,” Brooks said. “If we have cash then we are a big driver of their liquidity.”
- Zumiez is brand diverse so any problems at some of the larger action sports apparel companies won’t have much affect on them. “Our largest single brand only represents 7 percent of our sales,” Lang said “But we are not so confined to a certain vendor that if one were to go away it would not hurt us.”
- One of Zumiez goals is to get clean on inventory by the end of the year and they feel they have been conservative enough this year to do that.
- The company is still investing in their IT organization and in their ecommerce business because that is an area in which Zumiez continues to see growth.
- There are plans to get very promotional in Q4 however they are not going to simply put everything on sale. “Our promotions are based on a very fine category brand analysis and very focused on how we attach promotions.
The most impressive thing about all of this is the way that Brooks and Lang appear to be all over the current market conditions and appear to have done everything they could to prepare for what everyone knows is going to be a bad quarter. The thing that keeps us optimistic on Zumiez is the fact that they’re still running with absolutely no debt.
by The Editors on November 20, 2008
Action sports mall retailer Zumiez announced their Q3 results today and they weren’t as bad as they could have been.
Total net sales for the third quarter (13 weeks) ended November 1, 2008 increased by 7.9% to $112.2 million from $104.0 million reported in the third quarter ended November 3, 2007 (13 weeks). The company posted net income for the quarter of $6.8 million or $0.23 per diluted share versus $8.1 million or $0.28 per diluted share in the third quarter of the prior fiscal year. Comparable store sales decreased 5.8% for the third quarter of fiscal 2008 compared to a 13.2% increase in the third quarter of fiscal 2007.
According to CEO Rick Brooks, however, “October was the worst montly comp in the company’s history.” The economically hard hit “housing states” are where Zumiez have half their stores and while skate hardgood sales were strong in the first six month, they fell off in the third quarter and the clothing part of the business was hit extremely hard.
Zumiez has seen a slow start on the snow product front. But they say they are committed to finish off the year “clean” on inventory by getting all promotional in Q4 a.k.a. putting things on sale.
[Link: MarketWatch]
by The Editors on November 20, 2008
Helmet maker Giro is looking into leaving its current location in Santa Cruz for a new larger location in Scotts Valley, California, according to a story in the San Jose Mercury News.
Giro, a division of Easton-Bell Sports with other offices in Los Angeles, Dallas and Chicago, has outgrown the 30,000-square-foot building it has occupied in the Harvey West business park since 1994, and will ask the company’s board of directors to approve the move in December, according to Kwai Kong, Giro’s president of specialty retail business.
Not bad when the city of Scotts Valley is throwing in $75,000 in “redevelopment funds” to help them move.
[Link: San Jose Mercury News]
by The Editors on November 20, 2008
Moody’s Investors Service downgraded Quiksilver’s stock on Wednesday thanks to what it calls “a ‘significant’ level of short-term debt in its capital structure, according to a story on Yahoo Business.
Moody’s downgraded the company’s corporate family rating and probability of default rating two notches to “B2” — a speculative or “junk bond” rating five notches below investment-grade status — from “Ba3,” which is three notches below investment-grade status.
The stock has been down to 91 cents this morning, but it’s back up just over a dollar.
[Link: Yahoo Business]
by The Editors on November 20, 2008
It’s that third quarter financial results time of year and Zumiez will be spilling it all for the analysts on their conference call today, November 20, 2008. This should be a good one. Let’s just hope it goes better than the PacSun call on Tuesday. Click here to listen live online: http://ir.zumiez.com.
[Link: BusinessWire]
by The Editors on November 19, 2008
Those with a stomach for SEC filings should bump on over to EDGAR and check out Quiksilver’s 8K filing relating to their sale of Rossignol to Chartreuse et Mont Blanc LLC. The most interesting piece of info we stumbled onto was that selling Rossignol is going to cost Quiksilver $14.7 million.
Transaction costs: $ 9.9 million. Employee-related costs: $ 1.8 million. Other costs: $ 3.0 million. Total costs before taxes: $14.7 million.
That kind of eats into the $40 million Chartreuse et Mont Blanc paid. We didn’t know selling something could be so expense. Quik stock closed down today at $1.04.
[Link: Edgar Online]
by The Editors on November 19, 2008
Administrators at Denver’s Brighton High School decided that the Grenade Gloves stickers they were seeing on student’s cars were promoting “terrorism and violence” and required that students remove the stickers immediately.
Senior Ryan McKim said he and at least five other students were asked by school assistant principal Michael Stoffler to either remove their Grenade Gloves-brand stickers from their cars, or face disciplinary action if they are to park in the student lot. Students pay $40 per year to park in the lot.
After calling around, the misguided vice-principal reversed the decision after getting the the straight story from the PR professionals at Grenade.
Hillary Hutcheson, spokeswoman for Portland, Ore.-based Grenade snowboarding apparel, said the purpose of the grenade is simply to inspire people to be “explosive at whatever it is they do.”. . .“Our motto is, ‘Make gloves, not war,’” she said. “It’s about just being explosive in life, going for it, and going big.”
She also mentioned that Grenade co-founder Danny Kass had recently completed “a tour of military facilities in Afghanistan.”
Part of the company’s purpose is to connect students with “missions,” such as getting good grades, designing a Grenade logo, and sending in their best snowboard trick, to name a few.
Just last week we watched an entire season of Danny and the Dingo and didn’t once hear anything about any “getting good grade missions.” Though we did learn a valuable lesson about the dangers of passing out drunk on the trunk of a moving car.
Somebody give Hillary a raise.
[Link: The Denver Daily]
by The Editors on November 19, 2008
In May, 2008 Walt Disney’s ESPN sued Quiksilver for copyright infringement on the use of the letter “X” in Quik’s Generation X line of clothing.
Then a month later Quiksilver sued ESPN saying they had been using the X since 1994 (two years before ESPN began using the letter for its X Games).
Now a federal judge in New York has ruled that ESPN must face allegations.
The emblem for ESPN’s extreme-sports franchise is “strikingly similar” to the stylized X used by Quiksilver in the Gen X line of clothing, U.S. District Judge Colleen McMahon said in a Friday ruling in New York. . . “Quiksilver thoroughly laid out its long history of many types of X usage,” McMahon said, rejecting ESPN’s bid to dismiss the claims. “Quiksilver has also adequately pled that ESPN’s use of the X mark is likely to cause consumer confusion.”
We kind of hope Quiksilver makes the mouse pay through the nose. They could use some cash right now.
[Link: Los Angeles Times]
by The Editors on November 18, 2008
Today at 1:30 PM PST Pacific Sunwear’s CEO Sally Frame Kasaks and CFO Michael Henry spent a little over 40 minutes answering analyst’s questions. It sounded a lot like good news for people who like bad news. Here are some highlights from the call:
- Juniors sales up 16 percent in the quarter driven primarily by their house brand Bullhead denim and tops.
- Young men’s sales saw a slight decline in denim and tops
- Branded goods represent 71 percent of total sales.
- The company continues to review fashion brands by their collections and no one is a done deal. “I’m not sure I want to refer to any of our brands as tried and true,” Kasaks said.
- Accessory sales were down 28 percent, but they hope to better manage the category to about 15 percent of sales rolling forward
- Inventory are high and the company will be going very promotional in Q4. Sally Kasaks said the company would “aggressively clear inventory while holiday traffic is available to us.. . . We may have bought too much this year, and I will take full responsiblity for that. On the other hand I think we have done a good job managing the new brands.”
- Approximately 100 of the 940 stores are not profitable, 24 are cashflow negative
- PacSun has said all along that they would be closing 30-40 stores a year as part of normal business. They see no reason to close a larger number of stores this year, mostly because getting out of leases is costly and could take up to two years.
- Footwear down to 4 percent of the business; will be 3 percent by the end of the year
- Capital expenditures for 2009 will be cut by over 50 percent to $30 million total.
- The e-commerce business growth is outpacing the retail store environment so “we will continue to fund that.”
- Michael Henry says they are planning for the market to remain tough for the foreseeable future.
Guess we’ll know tomorrow how the market reacts in the stocks that are listed in the upper right hand corner of the site. It doesn’t sound good. To read a transcript of the entire call click here.
On the conference call earlier this week analysts asked several times what the hold up was with the sale of PacSun’s Anaheim, California distribution center and it was obvious that many were worried that something had gone south on the deal. CFO Michael Henry assured everyone that the deal was underway. And he was telling the truth. Today they closed the sale.
