ZUMZ - Earnings call transcript Q1 2019

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Operator

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

First Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode.

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

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

of a information results with the that could will the Zumiez's filing be discussed SEC. Additionally, to number cause materially differ information factors concerning in from that actual is available

turn ahead, At Executive the I’d this to call Chief go like Rick Officer. to Please sir. over Brooks, time,

Rick Brooks

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

good Fiscal XXXX is a off start. to

February, our March by a driven and a later Following part April in business in challenging further Easter. accelerated in improved

of first top increased the X% our two quarter. range flat stronger much down quarter, sales trends gain of than This sales X.X% well were X.X% as comparable the guidance of year on anticipated we above over to the was months a For ago. an last

today’s of of financial consecutive quarters. that preference is XX model Our recent scale positive consumer performance as the comparable reflects continued now outstanding delivered challenging merchandize our for well the built and customer-focused and execution strength sales as through has to empowered

key of model. strategy factors upon we well elements call contributing the as primary over to expand our believe Before the competition let that from Chris, reiterate the strength financial I the as me our hand separate the us of

are emerging that do. have starts customers broadly having relentless are leading brands and distributed. of mix by right It we drives our that brands that on product our for a which distinct looking made of and We the customer all up a focus not

been brand is strong connect balance achieve to position our engaging Zumiez with curated with forge audience with our This uniquely able all to partners. way clearly our people down brand target the consistently that the to the articulating the authentic, We’ve in ability showcasing lifestyle level. environment this by includes and relationships local we culture-driven

There stores. are many important and handful customers serve a brands of to may selection our only that

want through many customers different which their Our from miles at even only other. each express individuality unique drive can stores avenues to assortments away

investments technology spent at and point. improving Over to that significant our people the assortments the years, time and customer enhance resources we in localized experience merchandize our touch each

Our but teams amount to thinking only embedded our be effort important today evolve put what how not reflected and our and culture we who in they in generations. is of a customers, hire we and is will understanding into to future will continue how This significant operate.

we It’s managers our teachers that all skills month, managers’ for brought event a format managers together past to again This allows valuable teaches and leaders. a annual great through training our better that be multiyear an retreat.

sends for event to with and our brand energy retail renewed the this their It that enthusiasm managers experience. is cultural our belief and back Zumiez stores

to Our are the trends them. sales and customers, with local of to our our whom authentically and are tune also speak teams, in that many national can important are customers

success to critical our factor is next speed. The

the years order concept e-commerce over our product localized the results now did but shipping our orders into our and stores. hands out the this shut also by expand of the pickup. due operating and structure to competitors distance easier current ago in-store time, in it over down fulfillment to get faster making customers’ now our down all We only cutting offering already we reducing is are faster believe three of Not center we term, of cost digital and deliver to mean one to we which customer have fulfillment long our decision than only leverage, margins most can processing to

we aspect will This be customers’ our to through are needs enhanced serving customers in-store meeting every faster experiences. of Looking the getting ahead, interactions than few we going in and get even digital know more driven are next by to today. over and improved years intimately

to and grow identify to in Finally, emerge globally, we’ve the the and expanded around and scale order with taken our to brand our trends customers our partners locally world. in operating necessary that model internationally work consumer together achieve serving it

platform across Our expansion us digital to with has three reach established our a presence even in countries, allows continents seven further. that strategic physical

each learnings devices applying top quickly that are trends we can which in of We the from spread the ensure cycles and brand to to fashion smart and of and latest on launch from markets best world of and our due now media. anywhere the practices proliferation globally are social

will continue financial contributing long-term drive With we building that our factors regard financial key to results. our to and believe model, contributed to two

First, different. business customer growing as a to in with provide capabilities have maintaining our teen with share continue exceptionally segment and The be nimble, built evolving that we continuously us to lifestyle our be we to a with and retailer, seems of preferences. strategy build unique the market and trends defensible

and the category globally as while again comparable a The with leading us has trends apparel highlighted shown footwear first quarter and in hardgoods we saw shift softer women’s results. men’s sales have business this our for

our we is This comparable ago apparel when meaningful driving the year change positive sales. categories a saw one from

see our the they be continue be XX has focus XX and years sales and price margin of out future. selling something want the into the growth goal we in while that full is to to an continues listening it and in of with This comparable will advantage customer resulted at to Zumiez. the categories Overall, to at believe full brands regard to

combining channel customer. seamlessly empowered age service digital transition a digital an work with as our by positions of done amount physical win we work our tremendous consumer creating sales that Secondly, operating we to in have of into the and model Zumiez today’s to

that are on diluted profit scale to XXXX up loss. X.X% touch inventory strategy all by XXXX first from quarter customer the value per growth today’s between dividends localized teams, of operating share and of $X.XX a we’ve business sales we earnings is $X.XX in delivering the that aligned positioned revenue This one and versus in year’s accessible goals guidance well into paid points, integrated continued and loss integrated fulfillment, and as a trend in world. set and $X.XX XX.X% With for from last increased $X.XX our we

balance financial well that our increased distinct approach long-term. our capturing authentic share and With sheet, model we and continue near generating for confident brand in positioning, the market a set strong up shareholders value I’m to to retailing, and are

to I’ll the that, of With call hand for our financials. his Chris? review Chris

Chris Work

I'm guidance on to start our quarter year. and everyone. review and afternoon, prospective good and discussing first Rick, our with provide some an then second before of sales going a the May quarter update Thanks, on full

to first decrease the sales rates. the partially $XXX.X growth the changes of due first were X.X% first For of $X.X the million increase Contributing positive year’s net foreign quarter currency in million last since XXXX. to comparable end net increased quarter, sales quarter, $XXX.X by seven to of X.X% of offset million compared to stores for of addition and

retail delayed fiscal QX period. down both overall results March tax in slowdown conference and in comparable sales the during X.X% out with an slow February call, XXXX returns started for and our discussed sales we by As impacted

that Looking at growth the shift, and of compared remove the comparable April X.X% the March period to the to business timeframe fiscal of for impact months two over XXXX sales same the of combined over rebounded the X.X% Easter year. producing last last quarter

sales our higher as per average resulted by were increase dollars transaction dollars to per unit quarter, well an During transaction in comparable per the prior transaction. an were retail increase while from first the flat XXXX in driven year. increase as in transaction The units volume

by During comping our the followed and largest Women’s category positive the category the was followed negative was largest comping men’s. accessories. hardgoods by quarter, footwear category

regional to America of decreased international sales, X.X% or sales and which X.X% a net million X.X% perspective, Europe $XXX or From $XX consist Other million. North $X.X net Australia, million. to increased

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

First Gross a occupancy XX.X% quarter compared costs, was the of an store in points The quarter primarily in quarter, basis basis basis XX the point million, was increase margin. to $X.X points of ago. driven our shipping decrease year million leverage by and gross improvement XXXX. XX product XX.X% in first XX increase and to points basis XX in compared costs was $XX.X fulfillment an of profit of margin increase or X.X%

our store basis compared was SG&A expense was year ago. a costs. compared prior quarter year. driven as sales XX was of first The the to to percentage $XX.X $XX.X decrease XX.X% in in the net leverage SG&A by million point XX.X% a in operating million

sales income X.X% compared quarter for X.X% was share income compared in million the the quarter the sales $X quarter year the of of per of first $X.X per first or net was XXXX. share for million net million first with prior XXXX the loss operating or first Operating XXXX. or net $X.XX to Net of of $X.XX $X.X million of quarter $X.X or for loss of

jurisdictions. negative of Our of compared losses was before XX.X% with certain proportion taxes primarily tax change and The exclusion XXXX the across first year the earnings loss the was due rate XX.X% net effective in for our period. to a income ago in the quarter jurisdictions tax rate of or in

anticipate continue effective to approximately our XX%. that annual be We will rate tax

to $XX.X $XXX XX.X% This operations, capital as as related balance growth million of in current by and of primarily Turning May store X, million $XXX million of by remodels. expenditures marketable up cash new to $XX.X million X, May to and was securities flow offset driven XXXX. from the sheet. increased partially increase from Cash XXXX,

million $XXX We ended in XXXX X% quarter up year. first last inventory, with from

the the foreign year-over-year driven global recent our increased grew impact receipts of trends, from count X.X% the currency of inventory primarily store quarter. the sales timing year, prior inventory during translation, by Excluding and

down overall of this from aged inventory last a as percentage total year. time is inventory Our

stock. of quarter, During did not first common any repurchase the shares we our

we stock million remaining on of May authorization. X, As had $XX repurchase our XXXX,

sales Now to our May results. fiscal

X, retail, dollars in offset in X.X% increase period transactions. a increase June offset ended in per a Our unit comparable X.X% decrease X, ended of partially during units comparable The sales XXXX. period an by per sales June the was four-week decrease to due by the increased increase the per for four-week average sales increased transaction driven by for period comparing partially Dollars an increase XXXX in transaction. four-week comparable the transactions

our During four-week was category and positive was category accessories our by largest women’s. comping the followed period, by comping the category followed hardgoods highest Men’s negative footwear.

and by external that complexity our and uncertainty internal growth formulating and in Looking quarter estimating once off second reminding at product guidance again some earnings factors our of XXXX, inherent the I'll sales, involves the margin, impact for everyone that variety start given performance. guidance of

Additionally, do in the as guidance the commentary tariffs. for quarter the the on changes as the in impact well following contemplate year not global

with any We are minimize our working on our impact potential customers. to actively vendors

mind, currently sales X% $XXX are share of earnings in compared with for X.X% the and expect and million between in anticipate sales expected per X.X% share. With be margins that $XXX and Consolidated that XXXX we per range and $X.XX between between per will comparable with to last will year’s total million. we X% $X.XX second to per operating share of the share quarter of increase be earnings $X.XX

I want we’re a XXXX. on you at few how thoughts Now give to looking

are quarters sales. comparable consecutive on XX building of We positive now

a made long-term to as the team we those continue to in XXXX and customers, we’ve well sales investments top we look experience line approach as bottom growth. seamless believe continue drive for to Zumiez will unique that creating merchandizing beyond, we As our our investments and in infrastructure to our make the

our high XXXX shifts both a In in margins mind, heavily XXX digit private of and sales now roughly that reiterating the reduction that mix despite label we previous fiscal from business. expectation product in resulting flat we share fiscal of basis the fiscal across country consolidated cycle growth category XXXX, margins achieved the for of despite believe In XXXX, improving be points. peak in branded With XXXX. in we will are low-single comparable range product point

concepts our business. continue of breakeven losses We a and well The cost managing unit sales the mature overall of concepts rates our cost digit growth low-single across current are manage sales the on and driving focused impact leveraging point. our on comparable America focused have reducing the business. within Internationally, to at closer North we

X.X% of the rate year are an our our currently compared assuming approximately XX.X%. planning rate tax to We are Diluted currently planned as to or of effective year-over-year. growth business full per $X.XX year $X.XX earnings X.X% annual between share XX% to prior for

open North stores America, and in approximately Australia. two in to planning XX new stores stores in We stores are six including in Europe XXXX, seven

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

We excluding non-cash expense, million, from expect the be that depreciation slightly and down prior lease $XX amortization, will year. approximately

We for this to will approximately share are count the be currently estimate. from share the million XX.X Any year repurchases count share during our full projecting our year shares. reduce

with we And open the your that, to operator, like for call would up questions.

Operator

you, sir. [Operator Instructions]. Thank

Our first will come Blair. William question Zackfia of line from Sharon the with

Your line is now open.

Sharon Zackfia

continued Good couple Hi. on of positive questions. comps. the a afternoon. guess I Congratulations

low you a a the out quarter. I had rest of First, we’re little good of what obviously the throughout range of quarter the flat a remainder that there. think surprised hearing I’m easier May end as the for you to are comparisons the the relative had little given the

to So it I the to trends secondarily, could seeing May? have think there of worrisome pun, might anything having if you’re could imagine apparel? you about on there some any are and that dampening have us looks maybe And impacted you’re coming impact, sort some if business And talk how categories, are the that you shift like weather of apparel different out pardon tell you towards recently? but was clearly then

Rick Brooks

side and let guidance pick that with up question. start on me Chris, Let Sharon, I’ll the

probably – the wallet impact think of is I have of about that just earlier the to to did we generally. comments great the business and here going of an back capture I’m So But thing I harking the our some call customer. want weather model the to on about our strength made share

as and lot think can’t is cycles all they has think we media and social And a together retailers entities, been again point so this there’s results seeing shift the we global and of which today. shift a evidence really call of across media results you’re global cool I been a that as QX May the that is think about I do said find the that as ways I our about global in what our to shift it thing further the clearly of well at just trends, work power that’s of because

want comp, comp I anywhere I So can get a to get Sharon. a

know front. You that me well enough on

I’m our us thrilled it model that. way get we So do I’m happy can any to and allows that to

factor, I’m to I’m not where get weather. think I way weather use weather bad with going right in the gains haven’t past, them, for we take to we’re now but like that probably and we weather a the or has retailers happy we’re going saying the excuse that we’ll been be at but to good can go with and

Chris Work

as sales is we’re In regards planning May X how obviously to comp, to level, of and guidance too. that the started flat a our with happy focus to drive out positive Rick And comp said. always

for was a June us comp. comp, potential was softer but I July X look there June year. there. last X.X think should we some a be was at as opportunity It

kind point business of in be with I’m low comp even little that think we driving pretty could factoring high positive – in we a lost end range last leverage and are even earnings low that to perspective on stand year happy of the shows can again of made on comp but periods. an tougher, we’re we the sorry, at from I so still it $X.XX $X.XX a last where our focused having and year-over-year X%, the guiding July $X.XX And year we’re these

we’re think flat develop range. the I a on pretty good. we’ll The overall feeling end, So back

the to drive year always last we can where at looking we we’re be comp. how range kind think but compare just to Our and we of beat the goal would

Sharon Zackfia

up. have Just Do any impact one that follow back-to-school you shifts July?

Chris Work

July. weekends No. shifts. August are significant we’re But through into are from free are There and Obviously, what no all working that. know move we things significant that changes still back-to-school to-date would the like tax there no

Sharon Zackfia

you. Thank Okay.

Rick Brooks

Thanks, Sharon.

Operator

Thank you.

Our line Van next FBR. B. Riley with from of question the come Jeff Sinderen will

now line Your is open.

Jeff Van Sinderen

And that do know more apparel you update few evolving the on leading think remainder anything see thinking store, add broad much, maybe how weather like you back-to-school in us I then my you’re some you for approaches? you brands shift over the charge of the you And business I pent-up on Do last think share demand then you as picture can brewing too means in me year – by micro differ merchandize on you the XXXX, talked about this any terms is Let feel but your about the forward brands? the for next congratulations. year versus but can of and there weather and is the that months?

Rick Brooks

you, way Right. yes, Again, weather cycles Thank the Jeff. that’s I Great. think work.

on seasonal in think you be but you down to back store get you is see markdown that’s There’s I that’s think in frankly of the marked swimwear what If model. period terms mall. categories you clear, a pressure I pressure miss lot of when in already the get you a rates. on one the of in some the in Again, windows tend much believe already miss lot it’s and lot to of our as don’t back. strength mall I – not our of today why heavily a

we I bit a little differently. think things think

retailers’ business seasonal longer can go seasonal in can early business think Our back-to-school in than of I terms September. lot what run a of true

problem. on is back quite have that’s do ever on think we it is don’t others be my as get the you So some back take you don’t I those don’t advantages think get regards. we that I Jeff, the general yes, promotional all but But that some have to weather,

to back-to-school we’re think about with our we’re look where great at partners. positioning to the as cycle, predictably forward I our brand feeling brand relates it As we

why model. Again, and like go I really where footwear, at able time and to we many, are you a tell strength same QX of our new as this – brands. through. a lead, this launch hardgoods five-year in is you things the of relative that years many May cycle. quickly, we’re had It’s had But to I’m take seen business move these can product the cycles we’ve have adjust we continuing these we’ve skate to And of that how it’s the on we’ve still new the here in here. categories the the nimble negative rotation we with times happy know, fast would lot over and seen we’ve We’re

of we’re Now cycles. on a couple year positive

So in run think tend because I just of cycles footwear to footwear the nature of cycles business. windows longer fashion than the

So that as I to going back-to-school then want I we’re value of – in to our going for call, them. Sharon’s we’re go to sales to going to good we will a our with – I the brands, think are be in if also back-to-school that go think window. customers wherever get gains the we’ll said we’re go feel lot response and And able provide value

positioned I it I out. our way has like team think we’re well the and So planned

Jeff Van Sinderen

And more. one outlook just Could sort of there? add a you on give us trends Okay, then the international great. the I could if update and brief

Chris Work

Sure.

and the Canada said feel where consolidated to do strong just and think from comp sort a certainly stand still QX relates right we but of kind was I’ll very We it. – think kind flat. on in I and touch generally to some the This circumstances. about got toughest Europe? Australia line on quicker we driver. where then of the of compare, than our international. given update well about consolidated little the high reiterate last Europe period And the good kind drove our the was a level of we today. quarter give and bit that of a kind over I’ll in – stand things the we so really in it As of all of of XXXX we to roughly direction. was about with starting XXXX in few I Europe stronger comp performed we’re relation in then was we maybe QX move Europe This see our years, breakeven was year first before think a it pretty was XXXX. of in performed business kind QX as is we have And tougher – the in

kind of here. So we push to continue forward

the As think was to it business And good we’re leveraging to times comps. of through. shows drive can a planning our about something a as and and the was driver actually times this in even the how where even that relates May we’re I in prior comp pretty was tough it to that QX, year it that’s for well flow on excited a flattish as

pretty So had it May. strong in results

in and good right we feeling to Europe it well we’re in we’re the as teams the through think are excited we and about the we stand move So and performs where I year. positioned see how place have strategies

Jeff Van Sinderen

my right. All and success continued taking Thanks QX. for questions in

Rick Brooks

Jeff. you, Thank

Chris Work

Thanks.

Operator

you. Thank

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

Your is open. line now

John Morris

and Great. team. really Rick. back Rick, look I on Congratulations beginning comp, so guess it and plan. better it, relative to year good the Hi, was here. on with step I Thanks. at to the delta the much your how impressive Hi, the if Chris

you picture at can directionally sense were outperformance. thinking footwear So where bigger continue a kind the wondering qualitative surprised I’m of same performance the from By overall. if I’m been the see and continue category to give category you or of on hardgoods you must have kind us standpoint least surprised. of a we

some some things kind product specific must have geographically you can certain surprised and of So and from I’m I’m it more plan? if whether areas the shed a wondering look light relative you perspective picture, big you to if wondering there was the back step or from

Rick Brooks

and of sense too, think timing add I’ll Chris Yes, more I his John. comments from about think let I’ll the probably

Again, remarkable, it with turn pretty was. were actually pretty a around run stake The driver business from it speed out became a that for is teams quick would us. skate way prepared after but we changed adjustment did we was obviously, job. continue as and an our category great to skate a it hardgoods thought think played perspective the much I we to

work in products because to to started So able brand our business we partners have really and are get quickly. the we so with back blow through

when about down, were that we business nimbleness nimble model is we also really pretty is of with remarkable. in So the you because that’s likewise so the apparel really And printable. running talk side on that – much

March that’s I transition we the end a we so you inventory even that we I realized in call What the in really can had then surprise March We bounce terms in to back was going after when me this. how clean good quarter with to relatively think be Easter as So in call the being our post don’t shift. period like big think a a big talked incredibly the did strong of QX, in the April. and weeks really speaking and strong with

that as how guess in-store February we to what refund. and – concerning the the was teams we push anticipated I’ll strength marketing our product there, tax by teams to think and was, for teams So the our the tough weather, that give we drive both said, was Chris and hadn’t were I our credit surprised relative but delayed

So all things better. rolled just it but consistently got kind in, of those

that not you my do of else? have back of product but from John, February be results. to the the surprise, And relative strength surprise so the sense bounce the to relative would in anything Chris,

Chris Work

No, nothing additional side. my on

Rick Brooks

Okay.

John Morris

that. on perspective, Rick. gives really you Thank that good Well,

so Okay, about here. tariffs talk quickly

you Mexico, on of sourcing? evolution in that – from whether export from what be total the to you’ll any all think the Well, assortment, for this? maybe what in those have thinking just you’re us to heard Remind may best and mechanisms thinking pressures, but now your us it’s about product – pull or the or of terms may any third how if And read kind And too to of with it. much handle then there China how the Mexico? deal be about of us a handles [ph] what ask I hate how China? I percentage kind is of kinds for you revisit we’ve party coming is much of about

Chris Work

ahead take go Sure, John. I’ll this call. and

this and apparel reads As it’s in global I these of following large the Retail society definitely our all of of amount made with is China say closely. But being as and sort is apparel. anyway. retailers predominately we’ve footwear footwear a are and you all large know, and this estimates we is percentages it that one should and percentage in a are are read are tariffs of disproportionate everything them and globally line very of pay today

a this all is So of challenge for us.

continue to closely. We monitor this really

kind what let been with exposure tariff actual our regards we today and where to has So X.X% tariffs. me U.S. About stand raised the to for in of exposure with of date, our start situation sales other X.X% of have increased our wallets, things seen belts, from like tariffs already hats, – in accessories consolidated really categories. sales to are have been we backpacks, coming China that that and and relates those

material is pricing expanded, this. impact if So like To tariffs offerings, product us. structure. on this increased a much more had a difficult to it’s our all the haven’t for reduce we’re working retailers date, situation But

and talked today from of and QX where today, to label was to at So combined, of our we our is about in in question kind domestically to get That coming private branded XX% China. what about were both last exposure we product XX%. was your the of of said you first year quarter about down out to

So been risk, here. brands our that both and effort parts see still to that’s domestic we’re of to here comp portion on working our manage big diminish straight actively parts something but offering you there’s and a our pretty can a

kind is a the handle, the Mexico, next going quickly product regards of on well. tariffs move to group we is be From of today. things is good our customer scenario the first out a at there speed the being list, But if the next an in the it’s that center XX% exposure as expect a impactful it putting product the here, believe to Again, able this that do the we��re important are was from we quarter perspective case-by-case to levied So having a About how to us. get monitoring part. Mexico. we situation. XX% that again sourced will be additional In is place specifically to and of sort and of

our be vendors increased sourcing managing there We’re working and will believe an this. with Overall, are we cost and buying teams team the our consumer. actively to

a I to what’s think going. a play brand-by-brand path have all that from probably depend where that’s going out How generally will to something depending that’s the perspective where on basis, market. much and along be all on determined it’s within happening and going category-by-category,

of see behind we’re put So of where working, time it we’ll kind and it lot a goes.

John Morris

start great the Thanks. to Well, results going China forward. Good here that’s great on year. luck to and progress

Rick Brooks

I John. appreciate it,

Operator

Thank you.

Our from Research Mitch with next Group. come of question Kummetz line will the Pivotal

Your line open. is now

Mitch Kummetz

my taking questions. a got for you few. I’ve Thank

So first just on me let guidance, the understand.

guys beat your the me. the you I’m the year. just not midpoint guide but you’re you I raising think can range for in kind hoping full that through reconcile of by So of $X.XX QX

Chris Work

Sure, yes.

us guidance at annual for retail it and think the on range where wide today annual but gave give of I good and we of we it the not guidance and state we’re – the confidence trajectory have we pattern to has been pretty pretty our a important given thought on was business.

was to out growth. which $X.XX X.X% So we X.X% earnings laid to $X.XX

position really and current us long got behind call, the go. year our way happy of a XX% as but our we’ve we’re we’ve about have on to said We with

we way range to lot a uncertainty got point our this annual there with with but guidance, at out far of and high So our comfortable go. of there’s the long a definitely feel we’ve as end as

happy like, QX. So we’re we think very felt with I us for okay,

XX% us, any we the move where comfortable we year, But time year. high we end on we’re the to it you to numbers. new guidance. As we the with the as said, we’ll was those if of revisit through continue update end didn’t I behind think feel to going with have thoughts And

Mitch Kummetz

on hurting looks it. of QX is takes margin your margins the QX some I’m shift Got wondering little through mix the guide kind on bit? some on the and on last Maybe you your the the a can of to of us then from And puts midpoint margins walk bit is year. category it guide, margin like and if a of in little down hardgoods

Chris Work

on it’s high the are of into you’re little I’ll the pressure there on our end margins two with for you QX And low or specifically end, that. product that And Sure. guidance bit tell margin. factors really is laying whether a product

lower being it. higher categories. first They’ve you been on product historical the mentioned have The and footwear been hardgoods side. and margin Obviously our mix not

two So a putting share and think I as our the run to little work the we’ve a is and That those areas pressure. that’s they’re within bit said, those buying there business, of gain teams testament margin gains in. being in

a business long runs over margin. it’s but the just international of and at fragmented an that’s a product term, and we and product lower obviously there’s margin planned. on than is The a pressure opportunity higher majority the market more to our is is leads our lower There’s that’s there growth growing a is domestic the piece at rate international opportunity a lot other The growth and lot that’s something business overall are margin our and think there. there store of rates faster our business that distributors market. of a But in

So two leading yes, that it. are to I the those factors think are

I happy earnings $X.XX think the a really comp, we we’re $X.XX compared of on where is before. year showing where to X were we’re a

the So some pressure. there on product margin despite is having growth low comp

Mitch Kummetz

branded sort then than along for national of or you unique as of lastly, much split you you I you. a difference you those performance side sell you in some local the smaller, the kind On look then are a wondering at is a trending of of the apparel Rick, brands. lot the guys kind And if business of late one heritage other? worse quarter, better brands of seeing lines, of know I And more sort question Okay. obviously large apparel, and sell

Rick Brooks

The heritage brands.

is a the comment and is as business big the brands our general a part of the obviously heritage brands ignore footwear Let’s headline.

So that brands and then brands. should answer just I think really It’s the your been trend new the by driven by question.

Mitch Kummetz

right. it, all luck, Thanks. Good Got guys.

Rick Brooks

Mitch. Thanks,

Operator

Instructions]. [Operator you. Thank

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

is line open. Your now

Jonathan Komp

you. Thank Hi.

wanted Just we understand was around to the color continue? to performance wanted I’m to what drove similar shouldn’t ask maybe and one there the or unique was curious just comments follow performance that there. that expect for the anything there just and up on more hardgoods

Rick Brooks

you. I have a skate tell multiyear cycle negative around hardgoods I we wish on could Jonathan, been and

that almost skate the that wracking we of turned virtually the all And modern We nature And trigger of our took asking businesses is globe around we our of hardgoods have off. at is was brains everyone simultaneously been the that what know. business know and All really category this on? just don’t trends.

I think and just we the we’ve hit bottom uptick seen this major it. in

cycles get do, our I as mixes, it can is was skate our you often hardgoods when skate near experience. hardgoods to low believe. we cycles tend a see actually business we multiyear XX-year annual indicate mix of a think I be I as should

a And the cycles business out. think gain play to lot growth relative mix room have for share of next as few our so these years we of I over

this I the and drove just clicked wish and on give was in catalyst it This all could I department. it. clicked oh, a of on It category it. say, So you every

I be gains components; in across the cycles trend is So and global board longboards, those to the want global trend it was pretty and to we board This geographies. think across cycles. the of there all the power cruisers, much why take nature advantage of having

pretty remarkable. again, years business. It’s this it’s seen this of the nature like past. in So is, the we haven’t But not

that I seen at of skate were was just couple think hardgoods We and mix we’ve years our coming back That’s few now why in 'XX and have in seen peak where now these tough reshape about a it. cycles. it’s

where again the businesses are go of doing. the and think dollars that’s I nature it’s we’re great So what and our business

Chris Work

at about when color some Jon, peaked in we we in And XXXX add We XX%. XX% to to and comment. Rick’s just hardgoods landed were in XXXX

is category potential the we result. there about were bit So excited can and for of quite see a growth obviously the you

Jonathan Komp

a Is seasonality as think at Okay. there one up. term? to all that near Maybe just business just we follow

Rick Brooks

see it’s it’s Obviously, we’ll giving. item, is gift still strong typically, And giving then that It the be strong going we’ll college, gift significant a consistent decks and round. a factor clearly hardgoods. relatively of still for up course there perspective. Yes, and sell of moves and holidays cycle the – so be so a of it us to aspect and but it skate year holiday tends back-to-school. is a part kids business some a in right, down on the Particularly the for for the spring to

Jonathan Komp

you implied just today? some Okay, but for levels same-store the targets leverage maybe and understood. you kind margin, of gross margin the for sales kind and then And term the near that how broader year on for a or the are margin I tied of operating need view. points overall know to you about either thinking

Chris Work

going unit Yes, any broken we to this into mature is large be two America of business factors as it’s think not North relatively by grower at our kind a about I think which It’s means. point.

it guidance find a We’re very looking able you’re kind low-single percentage I rate on we’re to seeing grow level SG&A and us to on it that’s think trying of to sales digit seeing ways and a focused sales. gross that as than at why because in do seeing of and less grow leverage margin our at

a as perspective, And a incremental revenue sales. through good pretty is overall growth international expenses And both well the Europe do unit if in those function the here And as across growth North in that, significant both yielding then an on pretty see so higher to you results can managing down that’s America. flow model. it and comes of And growth of you really comp Australia.

you think top growth that low-single a what looking see digit leverage earnings think we’re means on at can from X.X% of the I we’re So about side. kind seeing. what that’s And on comp, point that as we

certainly those of think with the ratios pretty managing do think we and I can over something So types we here. long term well that it

Rick Brooks

add talk together. that still two optimization we as things localization we of example combo lot we We is can the a work about Chris’ comments just around be that talk always And when great I’d faster a about Jon, this. localize believe have a fulfillment and to opportunity and optimization. better, it, we

and in actually a doing customers it We’re better, from and cost faster serving optimize performance perspective.

around your that many optimize of structure. how simultaneously, your America know serve business we think this reduce you do team localize cost better – thought the and has and initiatives North customers So combination I

at. And where good about So we’re to drive. think going Chris that’s we’re pretty I continue feels that what why

I think some we opportunity. have

– actually we we multiyear think some opportunities in I regard. have this

the we’re we’re something continue new and reaping year So of ideas years. next this that’s couple to done part executing in against and benefits the here of of what we’ve going

Jonathan Komp

advantage stock? of why could. to And thoughts any Any the one on you on if care of – some volatility take the any perspective maybe of some didn’t buyback last market the just I take and buy maybe or

Chris Work

Sure.

continue pay in lot stock. will term wide strategy our we is operating. the that to our our back million very value $XX buying historical that a there’s in with our dividends our I with clear a remarks, said good believe And stock of have also there review We prepared have we a volatility is We we’re and the buyback We regularly investment long to in That As outstanding. showing be pretty believe think can over this swings. of be shareholders. buyers. we that opportunistic stock lot good very but said, there’s investment. Board a a how ourselves a It’s still

things value. way over opportunistic stock right do retail pretty those tied going if we And to gets term, that of that be to we I think the just the smaller being the coupled can really maximize with of macro So trends, we’re a some can long shareholder buyers.

really our We So strategy quarterly discussing and is with closely focused that. on work a not really often Board if find spots. basis, on our we’ll it more our

Jonathan Komp

Understood. you. luck. Thank of Best

Rick Brooks

Thanks.

Chris Work

Thanks.

Operator

Thank you. no Instructions]. questions further this And [Operator I’m showing time. at

closing or remarks. Rick hand it Chief So pleasure conference over now to Executive for any Mr. Office, the comments Brooks, my is to back

Rick Brooks

thanks as in to with for the All right. Thank I to Brian. always like say again, appreciate you, Zumiez. all our shareholders investors. always We interest I talk opportunity just your And and

Day everybody. with Labor So for post thank look the to you you we’ll results. forward quarter Thanks, again. second talking And

Operator

for day. you does all we today’s participation on conference. thank your disconnect. Everybody, This may wonderful program a gentlemen, and and have Ladies conclude our

Zumiez (ZUMZ) 6 Jun 192019 Q1 Earnings call transcript