ZUMZ - Earnings call transcript Q3 2018

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Operator

Good afternoon, ladies and gentlemen. And welcome to the Zumiez Inc.

Third Quarter Fiscal 2018 Earnings Conference Call. At this time, all participants are in listen-only mode.

We will conduct a question-and-answer session towards the end of the conference.

like everyone I'd Safe the begin, language. Harbor we to of remind Company's Before includes Zumiez comments call conference Today's concerning Inc. business outlook and contains forward-looking statements. and call based statements made uncertainties. subject forward-looking all that and statements These may to on risks this historical that upon not are facts are other be may results Actual materially. differ

I cause At Zumiez's information Executive like information be that Brooks, would could factors discussed concerning this filings differ call to is Rick of number results Additional in with Officer. will SEC. the materially time, a available the to turn that actual from to Rick. the over Chief our

Rick Brooks

start the to Hello, remarks is us numbers. Chris joining our Then and fourth performance regarding future you and with handing I'll will on the today thoughts Chief our will With call some that, Financial to After third quarter. Officer. we quarter me through everyone thank Work, before share you our call begin take brief the about few Chris your for open who today's questions. call. a the call the to the I will

year from Our the third of a side, loss range. On week guidance the The volume by $X.XX quarter into the and increase point mid-single-digit and which back-to-school quarter share, that margins XXX high-end moved ahead out we of ended earnings up a us in of our a $X.XX and quarter second quarter. is sales basis of the of third at $X.XX per period. ago, comparable gain combination high selling priced gross was solid full the season helped highlighted throughout successful offset

that differentiated diverse points, a presented experience through all globally. seamless that the service by the our touch Our ongoing success are teams to continue continue deliver strength assortments by to customer consumer of across world-class shopping our accompanied driven and be

November comparable a sales of with Friday sales transaction comp Black fourth the highlighted by marked off The is to quarter third consecutive X.X% ninth solid growth the quarter quarter comparable and weekend our X.X%. start And gains. of of

year-to-date fiscal and confident operating our all sales outline Chris our later in we’re with exceptional for gains remain the and pleased forecasting our all outlook and cash these in sheet. growing growth, strengthening which growth, We’re earnings profit results will items for balance while consist of and strong call. XXXX, you

that As our the to with we market and look equally at well year and we Zumiez positioned believe to beyond, continue share is mind next important expand share consumers.

serve Our see our of lifestyle how we on world calls relentless about driven consumer to from belief on have our earnings order continue reflect during to future we will to to back-to-school adjusted empowered do reinforce successfully, test, this today's the conference culture brand focus and We've them. serving think learn to the our changing based we and how recent stems operating on concepts. further. the In enhancing and talked focus evolve will continue and and during model unfolding presentations industry adapt our retail performance those our we

of Let again restate some views. me our

have we but moved a a with transacting isn't in going rather the store consumer increasingly which toward retailer. empowered a lines channels, online, on buying blurred less the into retail or trusted channel With between world focused

of global type the same rotating this and we at winner within of down digital emerging the consolidation believe be which between cycles where so barriers faster the the holds positioned In brands segment physical which consumers this for coming driving forcing the are for can individuals level from the new speed to much demand With global consolidation, are ever pace in is in Throughout and true industry. to than a environment that lifestyle access created worlds inefficiencies go market. the trend of transparency and increasing in can retail dominant information, communicate, nature. that being The is market in local out at our before. we

by struggle in the we state others created from to of constant While keep up, the retail. believe to continue will change being opportunities Zumiez benefit

ways on touch going about me a we're Let few this. other

the First, identifying they to both trends we continue new or matter and product to marketplace, enabling build process to and locally are the looking offer no the us. with interact on when in choose of brands globally, consumers us where our

which recruiting, our used with training to customers. our personalized more and connections, strong sales we've Second, culture is drive human-to-human resonating

they're customers learning From which these through enhancing what personalize communications and service the the method the our sales interact each expect learnings, of aspect customers with for to the business customer that continue they physical elect our about in and we with the the more our us. across We optimizing speed looking get digital lifecycle. experience, customers' further

with customers and improving continuously internationally Third, meet our continents us the customers in ideas strategic and learning past. in fourth, to allows upon brands. reach global includes to that assisting our domestically to a with to their fulfillment, localized Zumiez partners Stash we their changing have our in emerging established both rapidly emphasis presence a around to included our testing countries This from further. on And is enhancements expectations. evolution we’re across in seven globally. together inventing presence local digital three This serve scale brand us with allows brands, This work even and

and we’re in think a evaluate the of transforming with consumer number ways points touch success new within measuring us optimal new phase about empowered world challenging how ecosystem. the future we in our to So

We to success year to Chris XX sustained authentic distinct that approach drive will has the hand positioning with confident over our the call today's review Chris? to continue it I maintain will throughout financial, our that, With and Zumiez as empowered serving to history. consumer for brand combined are our culture commitment

Chris Work

on afternoon Thanks full a perspective review the on current Rick results. of XXXX going and provide I’m before a fourth third update to I'll our guidance then quarter good and with our discussing start our year. brief quarter November everyone.

the the to positive million stores to This Contributing was Third is quarter. several end from movement increase addition XXXX. in into last shifted year's of approximately of from since increased third net quarter X.X% of season net of and this X.X% of in sales the sales versus which which QX $XXX.X growth quarter of in by comparable this $XXX.X million loss nine the the $X.X back-to-school the year early third year. are QX offset days retail August, million calendar, last partially the

well comparable per partially lower units per unit driven During offset XXXX in in third in retail, transaction an quarter, higher dollars by were the as transaction. increase average volume, The our dollars by transaction increase from increase as resulted per transaction. sales

category comping women's men's, to positive hard and million. to which negative a category followed to international our footwear comping net sales only $XX.X North our X.X% $XXX.X From million. goods quarter, perspective, X.X% the America largest the increased by Europe net decreased sales, regional consist accessories, and of During was Other was Australia, category.

American impact translation, North sales and international the currency of X.X% foreign Excluding other grew the sales net net grew for quarter. X.X%

$X.X SG&A million increase XXXX and or calendar XX net the basis in points in store XXXX compared Operating of XX gross points compared XX.X% of XXX cost. was improvement the the XX of quarter This compared profit XXXX. resulted was primarily net ago. of basis XX million X.X% from points quarter XX.X% basis a third shift expense accrual was income costs, $XX.X an operating net third-quarter driven XX or shipping $XX.X XX.X% in XXXX. compensation. ago. to to million $X.XX by of calendar $XX.X annual Third in the million million point income deleverage included basis compared affirmation with million sales $XX.X QX SG&A quarter improvement an million, to of increase the fulfillment year. quarter, point was the in related inventory in basis retail points our driven Net corporate quarter cost of into third was third XX.X% compared for third and of headwind increase which approximately to prior movement $XX.X incentive of XXXX. a was primarily the in points sales per $X.X This offset higher $X.XX share, income percentage or increase of year discussed. X.X% and QX the as a in operating The was X.X% million or increase the XXX of shift or $X.XX compared $XX.X of basis sales Gross revenue an year for million basis out third of share to quarter per and XX basis to the income $XX.X XXXX product shrinkage, quarter net in by the points was margin for of in our in by the per previously with margin of increase share

in effective the period. tax quarter XX.X% of with offset late the Our exclusion compared last the rate tax ago tax federal the passage for XXXX U.S. to The Europe. was rate partially losses due an of net reform decrease of year following reduction in third by year, was in XX.X%

operations, XXXX by November as was from and We in new to up from growth $XX.X XX.X% expenditures, in to marketable with offset the million of store XX% XXXX. million million up securities by XXXX, balance of current driven partially third $XXX.X cash year. remodels. million related quarter Turning primarily the $XX.X flow as and sheet ended inventory, million capital increase last increased cash $XX.X X, to $XXX.X XX, of This of from October

Excluding by holiday translation, receipts season. planned anticipation grew of from the vendors year, inventory foreign inventory the in brought fourth currency the of timing primarily products year-over-year for XX.X% prior impact we ahead of the quarter of driven the in as certain

year-over-year significant our for seen and or November. expect be year-end at growth below sales the We in growth a at the in will the already the decrease have growth year, of inventory XXXX at end fiscal our

our sales November to results. Now,

comparable increase by in a Total per unit $XX.X increase an compared a due increase for four-week sales by sales the ended transaction. December decrease December four-week transactions per to four-week Dollars in ended comparable period in units during period XX, X.X% period X, million increased compared the an ended comparable for XXXX. X.X% November XX, ended November sales million average X, for in four-week of That period partially driven decreased Our to X.X% XXXX to retail. offset increased four-week net period by transaction to for sales was the offset dollars XXXX. transaction, a $XX.X XXXX per the increase decrease the

During accessories women. was followed Hard comping negative positive our the category highest was period. the for footwear only our comping category goods by category, four-week period, the and men's,

the with growth, that XXXX range of net performance. margins $XXX XX% involves be at Looking diluted XXXX, uncertainty X% year I'll guidance of fourth reminding comparable variety of and quarter our product the sales quarter to we approximately week by This Last and to $X.X of earnings operating that and increase when the per currently expected year In million worth quarter detriment everyone extra profit fiscal $X.XX once for earnings it $X.X or in this Europe to per million $X.XX Stash comparing year certain in we worth in share. profit year, that Last million valuation in deferred and and were expect with our operating margin total external and With to fourth $X.XX our the $X.X fiscal is revenue 'XX. fourth $XXX XX.X% operating quarter. included also to for Consolidated Last anticipate and per inherent last included in million $X.XX sales estimating important mind, program earnings and tax compared formulating growth are million when per of included $X.X XXXX. internal million. margins some complexity adjustments. and in million will quarter. XX% share sales, related comparing in year the allowance sales, full again XXrd to year, was year's given fourth tax an This was to quarter. to note year sale $X.XX prior between We $X.XX XXXX that share for guidance off in million approximately in rates few factors effective will be deferred impact a rate adjustment prior our XXXX. There between assets to the XX.X% compared be XXXX. the the $X.X in a and X% the anticipates $X.X against recorded share booked in comparison between operating that to that week meaningful sales fourth loyalty guidance to in prior start

believe the earnings I per Before sales full growth our year. year we a let mid up, mid that for in touch high the will just to to and wrap between comparable operating on $X.XX the few continue teens XXXX, me we and full on Consistent guidance thoughts single-digit share. previous with growth, profit achieve fiscal $X.XX

shows growth We are and and with annual sales per we of putting solid the QX and significant year are very growth between implied XX% share, gains, XX%. of together, which our pleased earnings inclusive operating profit guidance

of seven We XXXX. XXXX are including in This in rate plan we planning opened in XX Through North XXXX. tax of North our in XXXX, business new fiscal effective balance to more of fiscal This and to brings America, five in as open our Europe. Europe approximately assuming have one store X, rate count an new XX compares effective XXX, annual and store XXX total Australia. an including the seven December for We for to of X, stores, XX.X% tax December America XX%.

be the to in store majority openings $XX remodels. spend will $XX The of capital expect capital for this expenditures year XXXX compared million dedicated be fiscal XXXX. and to We to approximately full million planned new

full depreciation operator, to we'd We $XX million approximately And projecting for expect share like amortization prior the lastly, will that, the be for count up year our that million the and XX.X are to approximately questions. line currently open be with we year. shares. call And in with

Operator

[Operator question our line Research. from And Pivotal Mitch of comes Kummetz Instructions] the with first

open. line is now Your

Mitch Kummetz

I've few. you the go guess, to with I -- QX comp. got out versus I’m stores to is possible digital? that going you, it start on break Chris, a Could

Chris Work

some year, way coming relates some part We the at ahead to the The into look that overall. the to but Europe, had quarter. we through but it quarter. third the in it This web not specifically was and of about talked We've can. we penetration I promotional grow as is lot only a our we our of look certainly this that think aged at able the the prior not we strategy of we much. were situations in the And second past. We moving were as by web pretty did about online. that In that of stores, in inventory. do talked And

the saw Europe, online more And overall. we down sales margin we so see did go but products in web dollars

at better the in twice much our definitely have sales the that like to exclude is is Tomato web, If store overall But with comps I quarter. web So comp the it. the Blue is would and way line we we growing quality much the say for store approximately comp. the very would

one focus is these or the aligned And analysis, how working So pushing we about feel importantly, good about whether how America good in for North I both data channels is of really were not the is we channels two are looking our internationally, are. channels our overall we how all of sales. closely all us our showing focus together our channel And serve and are more because think both other, working. or to feel customer, growing

Mitch Kummetz

were that that of I improvement there product margin you there And year mentioned very one got in say I've were and quarter? that, way promotions margin strong and Europe for was margins Europe? fourth there to product lapping. quarter. going Blue follow-up obviously much know in any opportunities the the some ago Is there to can in attributable you Rick. Chris product Tomato that how is Actually the a were there But much you

Chris Work

that what falls think -- inventory. as I a I with is our would we're we not say with company love

to have through the we So it inventory, pretty challenges quickly. when we with try move

in that QX be fourth it able Europe, the relates margin as So the a that was opportunity some XXXX. utilized strong push say also the as will margins very to entities through we I product will all in third-quarter. third America it majority his quarter quarter. pointed Rick had of There of the but North were selling out in to in lot product in throughout we priced And full were prepared the quarter. the across third comments,

impact. was Europe pretty Europe, a So just it but meaningful wasn't

Mitch Kummetz

across a started? Are correct talk am maximizing and But Rick, of then, process terms along the in mean where you the what more past, any that? like order trade in And that I areas area are you've doing on pilot think specifics any you've about maximize to you that wrong. than areas. others you it share of is further that any there you are a looking and business at opportunity what can talked program you've where in done trade you trade examples in I Can if seen your the about basis give, me I opportunity?

Rick Brooks

is, I -- quite but still Sure, process. working I you Mitch. early for in we're been a actually the glad tell to that very that would talk on believe topic, believe area Trade we've about while I

example about local we can So in of and assort we've one trade And previously areas demand in area obvious area serve an the total an area customers. a is localized the most geographic total that’s to that marketplace talked fulfillment. trade we

based tools to product not just Orders that's So and infrastructure looking assortments upon they for order is Mitch, working right algorithms. of demand a of -- we've we ideas time. on a planned in But that routing at location total that when lot we've some order go the we a long that's about we so, management, the one and -- and to investment because go have the simple got probably but simplest don't about randomly in been been based place, acquired the the marketplace. in made this do technology, investment

in happen. think where put should choose digital we we the can we terms that demand fulfillment So of where

but for to us. they it's idea But probably they is very they they are simple simple hard successful sound -- actually all been one simple most don’t of do. this hard -- really are the sound So -- or

omni-channel lot out we laid we progress are -- have on a intend of and areas all like we laying more do, whole in we trade out did lot tend XXXX. the on of a that Mitch, to just making we've what been and roadmap a initiatives progress in series on we a to of on make efforts, make So progress

areas and business. intend export this we platforms other do we goal American where to technology to we as our So the one innovation would of parts our to of is the the learnings in do them where be here, North innovate world those marketplace

things a with defining. We're people spend elements from So we this what work these and is people locations, all different in of role concepts profitability assortment of of the on on it’s new trade require area, have thinking on. planning keeps all going are are roadmap defining the process. of a working And on of different Chris's these areas do team lot around in yet to more to in the going time works. the just specifically Mitch, sorts again, around and going -- lot measurement how to

and really have Mitch, that five could other couple we I it’s next I over think -- transformative And think a one I years. really idea, business. the for three a ideas, of think couple the big think to be big I

going interact trade hard, out in area how of local to one been the making is serving ones, customers with fundamentally go and us. the think I want You’re because really about see they market to us sure it important most

think in product that in important form We and really have charge they're empowered. that’s customers the market to I

not how channel to we and get they the and it. Our market the job sure product local want matter is the make have to that

And the in These partner are this way So this although the on meeting big and their customers within broad you local might markets. base. of are a lot fast all we and extending to important. needs reinventing efficiently ecosystems imagine going the focused of idea vendor so reasons are other this into these our service of concepts to is tie that ideas one of --

Operator

you. Thank

the Baird. comes question of next Our Jonathan line with Komp from

Your line open. is now

Jonathan Komp

the including little then follow for in readings color seen want about you've up business to would And up a just November get the the one just guidance on quarter, lower maybe of I more more maybe while. what little the in ask and bit across more X% flat comps. recently, a the to be a about

the I’m the should and trends out. changes So how of drivers the or guidance you've if any seen as just diagnose some wondering we reading you big be we put

Chris Work

overall see QX. will can this. looking of and start Well, the the guidance try I guidance, comp back I November And piece would go to me I through before let jump And with will to your the and I I if answer as had at is the I start some reason then a with to has time we trend bit. look will little be back and in the as little a phenomenal bigger seen the a the back lighter. moved and school This has we because, we've QX definitely as piece gone things know, we trough August where slowed of out over you think gotten

we So as certainly QX, that again we have component think here. to think I

being fact We years we've some that and comp couple comp. also here good both pretty being have for X.X the QXs with the last of at X.X that before year had at last year the

is in period. we see, that at Monday and We you as Black comp. his important peak the November think expect came Monday, Thursday Thanksgiving, would X.X% through we section about the planned, of how But about did ahead November Friday, ran obviously, that mentioned in obviously, up as cyber that. we're Rick weekend, X.X%. So happy QX during as was we positive

closer quarter, now Christmas, the stores expect here continue important Christmas have online to thought the to light week years largely expectation between will we then few up. we that seen our about are So transition the we by as we've we some as and is this will And get business. driven that the as and trough

and where driven to that, assumption our to we to came at. that are metrics So we're X get that's path X similar the assume a where and in to around

the this have time, estimate point important for at So that back. around we will estimates our think quarter. holiday fourth extent reasonable the I we exceed week, a come we set in obviously significantly that to But

the of to going shareholders have we and well that’s QX results, how the We as estimates results, it. reasonable positive week, light we that our both generate planted returns important it's annual in think as pretty for for that

Jonathan Komp

maybe the phenomenon seeing a wondering any consumer four maybe period. been if or quarters just patterns, follow-up, go non-peak Do And lower there's troughs during the six versus think back the you in I'm some you ago? I'm think the in about has Or there been forward that brands terms drive in a of just enough natural pattern. to change any behavior if trend caused traffic not is that emerging pattern? I'm there trying that's despite change

Chris Work

I good Yes, second multiyear this we've this as his we it been mean periods June example have back-to-school. a before. headed before things got year we think run where July was on seen and of of I pretty in the back-up quarter soft lit into within

seen quarter, we've I I well here this. marketplace. I you some mean the So had within think we've the now we've periods nine of as pretty over product performed we've pretty unique also think and last know

think periods nine performed product we in had. uniqueness time the even within -- of trough quarters the I performed there of we we've last were based so well that on And where just the

drive cycle normal our is normalized always will year. a what And basis, a QX is in and will in a planned that there row of see. we But comp play I goal factors is stacks quarters-on-quarters to quarter the have. third this in. I on that would think we a But throughout cycle, this Now, expect from so be think the be to that positive comps done we've to those

Jonathan Komp

I'm in are comps. of order from it implying X% expansion some all year operating the even making And that maybe last And adjustments of you just ago wondering on various looks to plus quarter the one parts. the moving margin like thinking some about me, fourth the

that's puts if looking type you forward? relationship can or for comps of continue and what takes, ahead, Looking the need the various that all

Chris Work

is So your analysis correct.

overall to in grow with the an income help all excluding a those profit planning that been reform light of operating EPS well tax has are and We as obviously adjustments perspective. from

in comments this as forward, at long-term 'XX leave grow we we here comps still over sales in companies be the reasonable this I'll however, together grow to clip our think is we that from our a for and of call. March time will plan I'll and goal try -- America specific that when our earnings. and here you in away more we'll our spend is tell go QX mature do can XXXX North around stay I

So really really high that experience and have to cost mange that centered investments driving have need focused around projects. you means customer return that. And outside to you of

here internationally, Europe focus in our as look of in North these we America. that’s refer growth to maturities and are so both a of still have them. we'd And what room Australia our concepts, And ahead as lot

really base so the good about we're we to specifically Australia our Europe building I felt And in And feel forward. think well. going leverage and that we ability that, base a good in as

be So and our growth rate, a value plan also driving high the concept earnings we entities still have growth over growth web leverage plan. but return will those seeing be unit long-term at the as top is the that can we will we grow in those in line and higher NPs well as

Rick Brooks

then just move the annual objectives I I that we've good that little a add bit forward. how want side. too Jonathan, think I planners And and always five-year plan our budgets and been mean turn to five-year to we into really our plans from planners

rising have think think we lot in when retail look I so what which advantage -- a and other at is a of shipping this of model wages world, over And real structural particularly issues we business rising consumer in costs. some I today, retailers really business

want sense I give been how over addressing of we've to So just you the years. a

and Chris things has you're talked we think the results I the do in the think is about that can reasons about that we the some of seeing as one So here of longer term.

way planning care investments we important challenge new commerce don’t about our in new in engine, cost So routing that consumers example. real wages address behind cost algorithms, business new it's if was a investments way. all we number other in of have don’t think made fulfilled store new the that of the our think leverage, some if And think around think one systems, costs to localized we was strategies. lot goes I new the retailers a those business is serve fulfillment that for It’s advantage a order that we how the care order our consumer, cost both and really that’s through it's allows have over have the sale, and building We really all and restructuring us because structure. fiscal a a we towards store I to to theory our cost, management only of And structure shipping sale we're to the structurally shipping yet structure. digital assortment

control with manage and can fast Our how the really the process really splits we order algorithms still also down in and consumer. to play are be

wages seasons, the the digital model holiday have the we we into think store On never in sales moved our where our more physical last labor stored in -- physical I two system. side, sales

We see this do that year. again can we if will

cycle. what it that’s sense and think I trying that. winning this we we've business proven as you execute to models world against that think the I come what been to rethink yet be do is this through in But gives is a business model

service levering Jonathan, think can sorts this and have about serving all of other power of structure we do about going we one cost our towards what new ideas, ways consumers. Now, we forward as

we’re interact, structure our that lever you’re think so efficiently we're been fast seeing we the ways localize that’s able and reasons is of want there model around significantly levering may couple is to of we have achieve it viewed going one years to So consumer own. grow earnings and one in retailers those and products, are for the to channel, be have them, the that over I the to and last for really going it's do structure one other cost them not really however

Operator

comes our of from B. the Van And you. Sinderen question with next Thank Riley Jeff FBR. line

is now line open. Your

Jeff Van Sinderen

just say, let is a questions. multipart me this And

you thinking the a next is moderating can if you think what next you So comp to we about, the growth that and operating expenses then in store should Or that me comps bit. bit, store appreciate you for we QX. year you for Should your expected rising, with finally about? digital then the digital and year? brick-and-mortar comp then give sense how bear going guess, guess, there you I I'd is may comp I the you think shift a guidance with be are comps versus a U.S. into would there think be to -- comp? the costs comp And comp store And of what revenue similar it. year. drivers what for speak to are with need next And growth gross other little Can leverage a guidance main to bakes get what And in QX shipping margin? if and wages us the

Chris Work

the QX probably the color with we'll Well, let which give most question, start on. me

a gross different So points relates we of margin QX to as XX few roughly guidance, down planning a And function points. it are to things. basis is that XX basis

week, you that I'll XXrd First, hit program both year. as year, as well both adjustment, the the we remind the the prior Stash prior adjustments in loyalty the had sales deferred in

those this against detriment So margin to benefit year. we in had And measure a the as year. we gross were prior obviously

going we're all on quarter. how of From question those we're window to that we you our over low and model five-year we of a is I and the the to and John's a XXXX again grow answer I on at mature about that's prior fourth goal a our hold point, are grow What about comps. thinking have longer what giving times, is build potential think to can single-digit and lever to continued our drivers color talk took gross so maybe is margin than perspective on entities, when out that XXXX. what detailed So leverage that I hope in

be growing think think that of maturity that’s single-digit. to that that. it's units levers store, regards would area component. matters In that prudent plan plan But I point. And the it business or to on on not matter levers don't a comps try ahead I for doesn't web low back comes to because to again our it build to Rick's grow Now, it to trade

is I stress. think continue this something that to we

an Maybe that together consumer. building matter is look so that doesn't serve are together the the having this a put our on world. and an we so just of in it to C-mall, that working them when in A-mall A-mall a And And are area, trade something both We impact consumer. and a major is And of And is volume something through has to around Monday where do is quick. experience. holiday, lot that A-mall. customer but place, can because the all C-mall weekend integrated both the and go I guess school back grab what need having to a and it's the they're help and a to Thursday C-mall fulfillment

how works see one it. with ways of but we different just that's their So It lots that's example. ecosystem

the together the all see underperforming we that areas it think a And and that that or and we store our but great clip us versa. tell creating for in experience, this a When long-term, we we to. not data have think expect demand web grow team be see those on I engaging I would how comps at it's typically see stronger. web in vice customer. a stores the When web higher will would are works experience, So service great the have we a we great our brand stores

And works all it. the is party us continue looking U.S. model we web the thing of see still we're when ahead to same of web majority which unit And open in strong where the is, we of and it that we here that in is see with together growth globally, So one we us stores, we a benefits presence. how our Europe in the saw for built Europe had massive pretty the growth, at

see we us saw thing we like the customer into domestically those markets that And same creating when to haven't our see framework magnified. help had And we a we so, go continue the point we where it's is. to in U.S.,

the and and the about long-term. two feeling on strong ever planning those around have how together, scale trade working think assortment better is and are contents those all than in to So, I drive line these are bottom how working a the area model things filling the we over discussed we're call all and things to

Jeff Van Sinderen

questions. answer Okay, bunch to great of that's a really complex a

there trend the Just on of something I also, should terms be notable know brand may topic. brands anything your, if about follow-up, there? thinking say, your top three we Is there in don't And a I think is I in as to slow? starting you about may anything the do that how or I influence an the street guess at business trend your think Or Is going the be if you forward all? the terms about guess street in street on changing shift happening trend? of how

Rick Brooks

we think top they released the and top XX think we as calls. XX know to part these how of I brands give and as the Yes, in typically try you about some color do brands

said or sales in XX quarter months been have first last nine to concentration in we we for relation it growing at nine months. brands quarters, like to our the continue that a meaning few Just see quarter, we those brands, top some first to as look as the to percent of overall

mix seeing the are June we concentration brands been as about They grow. these they those to to them continue of the in of about that we've third a talking had, We talked since of more brands have Zumiez So quarter. on unique big kind three grow percent as continue being did XXXX. really

the in over about our X we three to just of XX% are this there of talk of kind so, at And that together, brands sales largest being X%. again them which point

too. there I concentration we of perspective, see some streetwear mean seeing are think do. and this I just piece overall still growth we some what the a From So is

that art As stores action I a some even find just can and we kind classify and fun you would in message. our know of and have music sports brands represent think I

of seen would XX been turnover think of of months kind to I nine first the that So think we've out we of had in in here and we're There our to laid and consistent mix we're plays year and those are what go I no into say quarter streetwear that sell in doing. change I and with brand, relation important see the all pretty all that's parts last in what of I types to or streetwear that portfolio. brands our important brands but come the brands we what turnover brand XX% total different brands. We doing, still see of are the

Chris Work

mantra Jeff, we new brands point in our that, as eye and add brands. is a keep our to another data new that I'd pipeline of Chris's just answer just here close

target to have a this So, for number of and we new pipeline we do continue launching brands to good hit expect year. our

in the years. So, weakness seeing to competing brands pack emerging brands out, important of growth. is really year course that and the we're that out into not brands move three years, to we're from one two are years of of the about that's us market. in they market young And these those launching this of important new And to going terms become in coming move now emerge and will young any from

of I always seeing that think terms emerging is sign in us. strong So, a for we're encouraging pipeline and brands

Operator

Stichter Thank our with of you. from next And question line comes Jefferies. the Janine

open. Your line is

Janine Stichter

and of I Was in was that I due just that a at expectation there sales any you and there you a some gross had be guidance to markdowns to margin XX they margins maybe basis to end kind of XX gross received. mostly points, because move for inventory any slow inventory inventory? as down that to caught the ask off that the the it bit are the was bit inventory. guard? and want through there to the timing the little And about Is said, to think we then take little quarter shift the embedded of about know brand

Rick Brooks

we can out, take. I really sales. being the call was quarter. the caught guard Yes, mean was XX.X% This inventory for by off as I not did up

In fact, have ahead trying bit quarter, if little a our was have the said, plan. market you, that you X.X% I would in would third assets tell of would run comp we in could we

at in brands couple then the in did guard there. that we a So, were I don't we certain about We of talk little our fact and end off light, August categories. a the exit August think September as call of caught we were

strength chased anticipate pretty quite but ready even the and a at for obviously that it bit, didn't As at. the we move comp because a plus back-to-school it we was were of nine through we are level strategic where we was, at

this bring up. So, to we'd some it our reason of ahead really that saying, working planned move fourth in for was of some through we and adjustments like and we've strategy to the like hey, We're we as third of and made our strategic of have inventory and the part vendors important the with set was time, ready part quarter the quarter.

the overall mentioned my inventory it think or significantly I growth mentioned through as down we compared in of I November, that from XX% to we year the end So is the October. as prior at remarks, move prepared was

And The in very sales. that at are for We in. with below growth bringing quality is current you'd rate really an age inventory. our feel be the in of about the overall, planning that good expected year we to or where

is guidance gross margin, be As quarter, fourth the but about margin meaningfully. in to the around gave I there and down expected product some not we QX think

product is been strong a this months. peak really think seriously in margin, each in it run-up last the function in We've two in I we've of more product product margins. the how of margin nine years the last represented few first over years

be to we assurance in think we a And to really and so, like but recognize have to this a be in really large in -- been, try obviously light have some position. planned year. good is that the I spot good it's where exiting is rate expect I overall, There's do inventory sales feel of we growth nothing alarmed. a

Janine Stichter

year, I against make then you third us also pretty think you since a able progress lot were to headwind from And shrink, what big and gross on margin. like? in Last just of you quarter that. the Can just looks remind had the strength

this So how are recovery you compared thinking to in quarter about year? shrink last of fourth the year the

Rick Brooks

really are we asked. Yes, glad you

XXXX, definitely was we through that. XXXX. move internal really working work few action components not be something there of put is and quite It good together strength it. talking that about and in get together the we some to that a to move to have had we not were about it's you easy levels were because it action that came plan now think I the there, is plan when challenges through. we through And proud something of shrink The as teams talking a certainly to we

positive against plan, we done So, really teams results. the executing the now see plan, and putting this they've of work and that of quarter has our but together are that proud is we sometime, third taken

about is points as it call third in we got leverage planned within our some leverage the out in call, quarter and guidance quarter well. the XX As that out we of of fourth basis we think an working we can here some we XXXX be this still is again. that have where to make through traction area on initiatives will This remainder year of something continue and into and

some proud really good again through this together leverage and seeing and of So I of working teams result think coming we’re the and it. because

Operator

you. Thank

D.A comes next Morris of Our John question with from Davidson. line the

line now Your open. is

John Morris

to P&L were inventory any this, the consideration and now asked, as concerned? two puts lay, I the on as pulled this you and I questions think one my then of wondering, question. just any about XX the that's I'm I that of got kind I but that of we Most is and days maybe second far mean One, that takes way is ask. is. And there want know takes understand supposed forward the puts to I So if why.

don’t I go I planned help to know had actually that really something little thoughts are am women's you lines With Or to to the more well. doing wondering about that Is business. some down. doing on I’m wait proactively forward? your categories, whether the there. more could it need to of are footwear kind bit the initiatives what men's you go just line about of hard color coming, wondering of that, lines kind back? are there hard for and hard not you or a business but speak it come Rick

Rick Brooks

sure Just make I’m to John. clear,

of part and another XX playing that was to is Your it that relative that was forward pass days the days right. on the now related first XX tariffs question forward, push to,

John Morris

does kind that being cost well are to thought why -- But know the inventory just cost any impact or be Yes, and reasons like inventory do clearly, of actually carrying exiting explained of whether really advantage there things the the replenish I’m and explained perhaps beginning alternatively, of was or to lining primary change there so quarter position wondering actually to here it levels, could that I’m wondering thinking or there you've is the not could an additional one in just that guys wondering not, you and why is really terms you And think and a you a just that? not in quicker I’m silver you whether that’s how I’m you -- baked the it. in advantage and quarter actually be actually stores, about that you, forth. that.

Chris Work

I let to we that about exited ways end risk hard as Rick when head always more are QX. an we and it overall systems while let minimize perspective, overall standpoint question mean me take looking the forward, I this wanted sure answer into inventory to then that customer the lot was to about front for making an of quarter. will this this was right their From of less related helpful in have process here. the expense pull tariff, really good stuff as from our Well, the product work the through and its facing we and

the shipping the cost quarter. So, of the will and cost like that through distribution work within and some things

hard P&L us this at regard minimal tariffs In and to super probably it's benefit item there's overall, not hit that So, an point. there.

future adjustments could like and the really that. non-product And as of it changes things China our side made from we’re also look a that we it big We but of impact continue monitoring it a is imported represent staying and have contemplating to fixtures like managing as relate there, hasn’t to material supplies related top expect, of and watching. it had would on we to-date, you portion and what product some are

tariffs definitely something monitoring. not very So, closely, this to we're it managing but impact an strategy was here, our inventory of as related big in

Rick Brooks

And question, trust we're don't that me, departments we constantly on like down. -- John, something to the goods run it's hard not

trying cycle for of a So, in a couple works hard been for things we're but years the difficult through as new skate number cycle, particular product a team constantly a has -- difficult of now.

side. goal where and off push brands this the the in again, case, business. come inventory But try be on keep with consumers have So, to in the fundamentally yes, team to embrace to within the new of to But this line inventory managed a with cycle and get we skate the we'll relative planning forward, would sales we're things, particular the cycle the again. new

and many, many like been plus Now through here. this times with years new. cycles XX We've with over isn't skate my skate, this

and So, brand pushing on the as uniqueness cycles we're we relative in model and usually that our are right long which diversity, category, the is like we're forward would premise diversity, key in this. not to always business as assortment, great lifestyle fall built gains cycle. used the usually lifestyle, department can have run in trend is things a that And category the whole great that again, to the we on trending,

the a I hard don't we're come what view of back unusual, So, pushing on yes, can drive find today the result working there, has to is and where edges to all it. to three we we experiment to do but customer are

Chris Work

our of the just actually mean is mid think I watched I something from our at up for is largest And which now it driver, it the right. down we overall strength XXXX, from XX% down to been I'd And quarters. this of if add, to model, look John, like four go teens. the was XXXX sales, we footwear, it's

it think over on we've cycles the what if I in run is over departments, overall and really you look of we're we that the different seen running So, through our history business out at comp this focused is

Operator

you. Thank

Blair. of the Zackfia comes Sharon line next William from question with Our

line Your open. line Zackfia, is Sharon open. is your

Sharon Zackfia

little larger be fourth So, expectation in the just Europe And fourth that's think you how comp impacting Europe. late, there. all, if I suspect wanted a business then the snow I about going apologize Europe I I part bigger the given or I a profitability got business growth scaling? but Can bit Europe in forward. at and on of to that that is talk to a secondarily, impact ask the given And quarter, path is about quarter will profitability the

Rick Brooks

great. Okay,

Let quarter. me with fourth the start

a lot in still fourth curve are kind concept an planning that you of as maturity pretty being of would more with quarter early in their stores comp ahead frame strongly and guidance Europe a that stages here the our early to of are younger planned. is expect, where We

but margin pull first in has in had. been to that first throughout months back did nine led about dollars. kind pull was the comping So, QX really talk Europe comp of the back, -- there some product better for they We positively was

So offset term. a to increased important factor for where think the is plays to be profit, and definitely than out profitability. Europe its how of long want to margin I which we is sales, more growth the the In an loss and path it regards

We at our this the are this that, will loss for And than point good continuing a are have think we the forecasting and be next few years. it XXXX. path that XXXX I less we for was in get to to to profitable push pretty

down to I a think is few what items. that comes different

what go or built to we and all, the leadership We're scale beyond from. stores year ending and this right really we team is has that think that. level First going infrastructure entity at can the I like have grow is XX investment there, well here feel in we the the place we something of put right of that infrastructure department-by-department the across to have that XX means

investment. stores So going need are not the a corporate incremental to

we and lot different street of looked that's good have a different stage really I lot there think I product those over over six piece and learning's work we we involved using a that think the a initiatives few year street that customers, roadmap years. part think think over in do stores, the pretty there's first we've with for the we of a have Europe years testing coming of off the mall things the a with markets. I our been and we think brand that lot from of tried the in last to with how continually As that so framework we high of here lot been bring I and we've mentioned in pass of doing online the are location, and stores, we're guys and formats over a during on right to here type had have perspective, got Europe, some stores, few at store years, picking progression roadmap about were the what stores, with next partners to I I high right the Europe, the in great different think

to in it So entity our a just would we Europe against based North being short American profit with entity the get margin more operating were many can network. through think it's absent room profitable as some and on sales then brands grow slightly really lower to do We the the we that to very profitability. a percent something your level expect focused here expect operate challenges at to distributor challenges of we profit commencement a path execute on the with that there

volume top labor site. the that's things that we predominately have with and other continue and and something like will to that there higher to on So things of some but work are on the cost real-estate

it good I kind working think we’ve plan got to profitable. a bring and So that through of

Sharon Zackfia

And on can cash you thoughts maybe question, if more that one I us can for sheet? balance are in your sneak what on update the

Rick Brooks

Sure.

we we've in grown my as every and back When really cash outside And current good through we of utilize what that's do working third shares here our laid think out were are decision ours. type to shares way really about to with for which we our in quarter, to look run time, of and tree, we know, quarter been the a cash to the return our pretty think about where we the intentional a far investments we and meaningfully, starts shareholders. at for business nice the cash, is of board our focus in I I there current you beyond stock. a investment the business, bought say, to back have and pretty extent through how get cash period down. that As the comments thus real pretty look investments buying of with We that,

board will of go. they where used sounding and a to we them should with think meet We board continue our as

cash. obviously three the we last good expect to make has continue grow that to think will really we a Our evaluate investment the cash against to focus months job And XX been for done we obviously, the fourth here quarter, continue and those decision all grow I we've of there. as of board, through and different our and options with community update to

Operator

Thank you. of And the we with Komp have a follow-up Jonathan line question from Baird.

now Your open. line is

Jonathan Komp

of I you the of on ask what the you response I indirect you if tariff worst wanted after include to -- or more XX-day your estimate scenario case the truce in vendor the base? this Chris, miss in to be kind if your in just to period that China Could just would expose currently. update us question. a those

Chris Work

Yes, just over we’re I obviously, vendors. XX% third-party mean, in

of of if where make But are look at overall their of at sourcing XX%. discretion around our to product. we kind to right and we we choose So, look they if their it's out China,

as our private is both vendors produce of a that own So, label. our well what as combination

of China it. do continue is and out it watch of product to portion we good we that’s why obviously coming have our So,

Jonathan Komp

hard hypotheticals, the the down just broad that contingency of know kind about ability shift you've talk are about? but thoughts curious And any over out have to scenario production it’s about given or timetables any gone and thought if or but there, just I of different you about path discussions different

Chris Work

new around quite thought is short This not the yes. We a answer bit is, for that. I mean put of us.

was, risk concentration private label that at our is speed, label. thought best but for looking and product and in we the own things and think all balancing made that doing products the decades our and private been like months, have that I where just last with to XX we've about as things quality I not speech pricing

is, answer the yes. So,

label, them, discussions of in the try our monitor for outside we determine of with to that China We lot and best what's have work going directly their and have in we will continue factories private to and our consumer shareholders. and with active own on we with situation

Operator

Rick remarks. no Brooks like the showing not would I’m And time. call you. Thank questions turn closing back this for to to now further I at

Rick Brooks

happy will Thank in all and results. to we wish end want everyone interest everybody. year everyone to Zumiez. look in thank just And their talking forward again you. holiday, for of to I our Thanks Again you a for Chelsea. March

Operator

gentlemen, program. conference. This and for in your you Ladies participation today's thank the concludes

Everyone, great have You may disconnect. now day. a

Zumiez (ZUMZ) 6 Dec 182018 Q3 Earnings call transcript