by The Editors on August 21, 2008
Teen retailers and especially mall retailers have had a tough year this year and Zumiez has has not escaped, however in the second quarter conference call held at 2 PM PST on August 21, 2008 CEO Rick Brooks and CFO Trevor Lang believe the company is doing very well compared to competitors.
Total net sales for the second quarter (13 weeks) ended August 2, 2008 increased by 12.5% to $92.3 million from $82.0 million reported in the second quarter ended August 4, 2007 (13 weeks). The company posted net income for the quarter of $2.7 million or $0.09 per diluted share versus $3.1 million or $0.11 per diluted share in the second quarter of the prior fiscal year. Comparable store sales decreased 1.7% for the second quarter of fiscal 2008 compared to an 11.6% increase in the second quarter of fiscal 2007.
Rick Brooks, President and Chief Executive Officer of Zumiez Inc., stated: “We continue to make positive strides in our ongoing efforts to give our customers a unique specialty retail experience, while controlling costs and effectively managing inventories during this very difficult operating environment. Due to this focus, we exceeded our earnings projection for the first six months of this year. We have opened 39 stores this year and continue to make the investments necessary to build the Zumiez chain to our goal of 800 stores.”
And here are some of the notes we pulled from the call:
- The thing thing that surprised us most is not news to anyone who follows the Zumiez stock. The company has no debt. None.
- Zumiez is focused on remaining true to the brand. “Our business model has the strength of being a branded business model,” Rick Brooks said. “We work with our brands to leverage inventories. We work very closely with the brands . . . we have a very dynamic process of moving product to where it is selling strongest.”
- “This is a very promotional environment,” Rick continued. “This macro economic climate is tough. That is making it much more price point. While I’m not going to comment on specific brand performance, this is how we see it: Those brands that we are carrying that are focusing on distribution in core shop are doing very well.. . . On the other hand there are other brands that have wider distribution outside the core retailers, brands that we’re finding are being price promoted by our competitors in the mall outside the core, and on those we’re having to be price promotional. The places we have to be promotional are with the brands that are in our non-core competitors.”
- The company believes that opening more stores is still the best use of its cash. They are completely focused on the 800 stores target and will open 57 new stores in the fiscal year.
- Performance in the stores was broken up regionally. “California, Nevada, Arizona, was rough. Texas, Illinois, Wisconsin performed nicely for us.”
- “I just want to be clear with the investment community that we feel very good with the returns that we are getting on our stores,” CFO Trevor Lang said.
- eCommerce was up 75 percent in the second quarter and 65 percent year to date. “Our ecommerce business is very strong, yet it is still a very small part of our business,” Brooks said. “We believe that there is a big opportunity to build that business over the next five years. We’re starting to do a number of things along that front.”
- Snowboard business still plays a major roll in quarter four. In October it is about 11 percent of sales and goes to 18 percent by the end of the quarter: “We’ve been doing the snowboard business for a long time,” Brooks said. “Over the last number of years we have taken the strategy that we buy well below what we think we’re going to sell. We chase the weather. Where it snows is where we move the product. Based on the results last year. We are going after the technology driven products at the high end. And at the other end we have shipped more pricepoint driven packages as we get into the season were we can move on some in the price issue.”
- There are no plans to de-emphasize snowboarding.
- Zumiez sales percentages breakdown: footwear 18%, accessory 18%, hardgoods (skate and snow) 14%, men’s apparel 33%, junior 15%, boys 2% percent.
- Investing in information technology organization, is high on the list. Zumiez thinks there are some strategic investments we will make there.
- The company is working to get better deals on real estate on a landlord-by-landlord basis. “We are one of the few growing retailers,” Brooks said. “I think we are a very attractive tenant for the landlords and we try to look at our landlords are partners. We are doing deals with the landlords that value our position and ability to generate sales.
- Sales per square foot is currently running at about $470 versus $500 last year. “We look at total flow through on the business,” Lang said. “We’ll look at our high-volume stores that do more than 800 spsf and we expand them so the sales per square foot may go down but the profitability goes up.
- Regarding the tough economic retail climate: “What we need is for the consumer to feel better,” Brook said. “And when that happens we’ll be doing better.”
And just as Brooks and Lang were about to answer a question regarding employee retention and turnover the Internet broadcast crashed mid response. The operator apologized and we disconnected.
[Link: Zumiez]
by The Editors on August 21, 2008
by The Editors on July 27, 2008
Years ago when we said that Burton would “advertise on the side of a garbage truck if they thought there was a snowboard in it,” we were only joking. Coming this fall to Huntington Beach.
[Link: Active Ride Shop]
by The Editors on July 22, 2008
Okay, so a kid uploads a video of some skating to a NERD song and wins this Active Ride Shop Contest. They get a autographed copy of NERD Seeing Sounds. That’s pretty hype. . . but what the hell are they going to do with an engraved Microsoft Zune? Aside from spending the rest of the summer explaining to everyone that “it’s kind of alike an iPod only it totally sucks.”
[Link: Active Ride Shop]
by The Editors on July 21, 2008
Any wonder why core retailers are getting a little more worried everyday with the “vertical integration” sweeping the industry? Here’s more fuel for the fire. Volcom has just “agreed to acquire the retail operations of Laguna Surf & Sport“ including its two locations in Laguna Beach and Aliso Viejo.”
Laguna Surf & Sport has been a landmark on the Southern California surf and skate scene for many years and this acquisition further demonstrates our dedication to core retail and its importance to Volcom,” said Richard Woolcott, chairman and chief executive officer of Volcom. “It’s great to now be more strongly aligned with one of our longest standing accounts and we look forward to working together even more closely in the years to come.”
Great for Volcom (the stock is up 64 cents on the news), bad for competing Ma and Pa retailers.
[Link: BusinessWire]
by The Editors on July 14, 2008
Every time we read notes from the analysts we’re haunted by something Bob McKnight said, “Analysts are just one letter away.” So with that, here’s what Piper Jaffray is saying about Zumiez.
We are upgrading ZUMZ from Neutral to Buy given our belief that shares have over corrected based on current macroeconomic concerns, irrespective of underlying med- to long-term fundamental growth potential. We believe ZUMZ occupies a unique market niche in the active lifestyle category where demand trends remain relatively firm, evidenced by continued above average comp sales growth rates relative to the peer group. At 300 stores, ZUMZ maintains 20%-plus sq ft growth potential for at least 3-4 years and while we are revising estimates downward and new store contribution remains inferior to historic levels, we think shares reflect these risks.”
If we bought action sports stocks, we’d think about it. What with fashion retail being so hot these days.
[Link: Street Insider]
by The Editors on July 14, 2008
Australia’s Couriermail looks into the back story of The Brothers Neilsen chain of surf shop and what could drive a successful business into collapse. While the brothers aren’t really talking, others seem to point to the vertical integration of the action sports fashion world.
“You could call it the perfect storm,” the former international surfing champion [Paul Neilsen] said of the factors that combined to sink the multimillion-dollar Queensland business. “I don’t want to comment further about it, except that I’m not blaming anyone,” said the 56-year-old Godl Coast company director.
According to an industry insider and former shop owner, vertical integration (control from manufacture to retail) by leading surf brands such as Quiksilver, Billabong and Rip Curl is “putting the squeeze” on smaller independent operators.
And from the retailers’ perspective we know exactly what this “industry insider” is talking about.
[Link: Couriermail.com.au]
by The Editors on July 11, 2008
Surfer Kyle Knox will be signing Hill Family Barrel Blend wine bottles for six hours on Saturday July 12, 2008 at the Carlsbad, California Costco. Apparently, his image is being used on the bottle.
This wine celebrates collaboration between Hill Family Estate and professional surfer Kyle Knox. This wine is a blend of Merlot, Cabernet Sauvignon and Syrah.
Barrel blend, get it?
[Link: Hill Family Estate]
by The Editors on July 9, 2008
Steve & Barry’s LLC, the 276-store Port Washington, NY-based clothing chain that recently signed a clothing deal with big wave surfer Laird Hamilton, filed for Chapter 11 bankruptcy protection today according to a story on NBCSanDiego.com.
The company announced that it was considering a plan to sell all or some of its assets to repay outstanding debt, and was eliminating 172 corporate and field staff positions immediately. The parent company and 63 of its affiliates filed for protection from its creditors in the U.S. bankruptcy court for the Southern District of New York. . . .”The generally poor environment for apparel retailers has reduced funding to our suppliers, landlords and to our company,” Steve Shore and Barry Prevor, co-founders and co-CEOs, said in a statement. “It has become increasingly difficult for us to continue operating normally under these circumstances.”
Somehow, we’re not surprised.
[Link: NBCSanDiego.com]
by The Editors on July 9, 2008
Hermosa Beach’s Spyder Surf has begun communicating with their customers via text message using technology from Sumotext, according to a story in the Easy Reader.
“This is a way to reach our customers right where they’re at. We’ve had huge success with spydersurf.com and other ways of spreading the word about Spyder Surf like newspaper advertising.” Spyder’s Richard O’Reilly said. “But, people don’t usually take their computers down to the beach or to the mountains for snowboarding. The Sumotext system allows us to reach them with messages they want to hear at the time they’re at the beach, skateboarding, or snowboarding.”
Kind of makes it sound like O’Reilly’s never heard of Twitter. If you’d like to check out what Spyder is doing just text SPYDER to 76704 and you’ll be signed up.
[Link: Easy Reader]
Teen retailers and especially mall retailers have had a tough year this year and Zumiez has has not escaped, however in the second quarter conference call held at 2 PM PST on August 21, 2008 CEO Rick Brooks and CFO Trevor Lang believe the company is doing very well compared to competitors.
