Core action mall retailer Zumiez management seemed very happy about their reported $0.79 per share net income in 2010, but the earning didn’t come from any increase in business, but rather from some “fishy” accounting tricks, according to a story on Forbes.com.
Zumiez (ZUMZ), a retailer of cool action apparel turned to an old account ing trick to boost its 2010 earnings by 13%. Digging through the foot notes of its 10-K filing, we found that ZUMZ increased the useful life estimate of its lease hold improvements. . . This change in accounting estimates reduces the company’s depreciation expense by $2.7 million after-tax and increases GAAP earnings by 13%.
But that’s apparently not the only trick in Zumiez accounting bag, according to writer David Trainer.
Increasing useful-life estimates is not the only accounting trick in ZUMZ’s bag. Further analysis of the financial footnotes also reveals that the com pany carries over $310 million (nearly 50% of its market cap and over 120% of reported net assets) in off-balance sheet debt. This large, hidden liability means the valuation of the stock is much higher and riskier than it appears.
Apparently, Zumiez is shifting over to the “whatever it takes” program.
[Link: Forbes]
Smoke and Mirrors….trust me
Have you seen a Zumiez store? I wonder if the accounting is as organized as their stores.
Have you seen Rick Brooks the CEO? Dude is a NERD.
Zumiez is Hot Topic with griptape…
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