ZUMZ - Earnings call transcript Q2 2019

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Operator

Good afternoon, ladies and gentlemen. And welcome to the Zumiez Incorporated Second Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants are in listen-only mode.

We will conduct the 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 Incorporated includes contains outlook, call statements. forward-looking conference concerning business Zumiez and Today's and statements on all made statements uncertainties. forward-looking These other call subject risks are are on that that not facts based historical to and this be may materially. may differ Actual results

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

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

Rick Brooks

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

We comparable very pleased two-year exceeded of to our quarter and increased both of performance continue quarter and our to as three-year X.X% second positive respectively. a outlook XXth XX.X% bottom results comps sales Comparable basis are marking versus expectations. of quarter flat be the the sales. top second line On X%, business in and consecutive with stack, up X.X%

our profitability. structure into on to powerful long-term strong fuel significant has continues full and a serving strategy, focus which single customers we operating model the translated improvement to combined build selling, a in attention with relentless around Our price the steadfast cost

was high-end our year-over-year Second than guidance to range. quarter $X.XX earnings $X.XX, doubled more which of share $X.XX the above per from

the accelerated comparable the strong quarter, back-to-school ago sales August. into year season consecutive business. our growth As in with period top on momentum third in we of represents and fourth with X.X% the our X.X% has This is comparable sales moved in

centric out the consumer Zumiez clear team's is retail. key ability growth continue that separated distinguish to will elements winner the our and to strategy Our of consistently the from execute a our competition, testament a in has the of future strategy. performance as is to It believe we

let recently, Before both ability to balance those our our environment made forge able down brand of having engaging I includes brands with local our and and for, It global leading and brands to into people, uniquely clearly to through partners the mix elements. and key to consistently the the position, not numbers, hand our allows We've call the authentic customers more with the audience all with the our dig been are connect showcasing starts emerging right we in Chris heightened our that brand distinct a me reach target driven serve distributed. broadly achieve is curated for up This over brand us culture partners products the relations at and by articulating this that that lifestyle our are that of to levels. customers way strong looking level.

our to important customers serve brands of that many areas. There our may a are handful trader only

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

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

approach allows in across customer points in will in how local can them speak authentic who and all organization to evolve to important generations. channels. together serve be today are effort and higher put the to amount is a only what embedded future will they we touch customer across customers, customers, significant understanding teams continue our national of This are teams and and important not authentically we thinking how journey. us with This culture, is the through the that the in to These operate. Our bringing but and to tune of our in our trends all our reflected

success product to cost mean fulfillment faster factor already reducing the speed. customers' stores. hands have down to and most in-store the offering our only our faster next out over our to The one customer processing can We're we and now deliver centers, distances shut localize our the years to concept but decision cutting and time, structure competitors our only is order e-commerce digital to fulfillment than all by pickup. critical now to of the also to get Not we ago three we orders in does leverage, down shipping that due the

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

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

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

we launch each can of from and the brand world markets now in We're and anywhere top our latest from and of to trends on globally from business our devices the that quickly applying to are spread growth, operations, the and exporting and learnings best fashion future which Furthermore, cycles, due seeing we're proliferation more practices primes mature tools results. as international and for social U.S smart good processes ensure our our media. of

Our in in with growing digits. double sales both the the international comparable quarter Australia accelerated and second business Europe in has

seen through improved line first half the as growth operating we With year, strong the the top performance well.

teams, globally the the Tomato are continue a being about of We to build Times business. progress the upon and excited made by and benefit integrated Fast Blue

to major consumer only niche in can the that are our demand. global markets We meet in partners brand our reach retailer lifestyle offer

to ability to our our two we to regard drive contributed, will believe continue over results to improved and long-term. financial With model, the contribute have key

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

women's ago we The sales. sales meaningful first softer half comparable of apparel saw of positive category example have this is results. when XXXX globally in saw a categories leading This men's the hard comparable business we is goods footwear as when change one year our shown our great and the shift driving from and a apparel trends with

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

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

growth continued while half first to growth of and results. through of X.X%. as our we increased back-to-school, capitalize and Longer year. customer We're staying well feel that XX.X% an on operating upcoming market one brand half we growth we've the with how on trend profit value inventory for pleased very And to positioned our the integrated to touch directly contributed in points, business goals the shareholders. and accessible is by are believe today's With operating and capturing aligned true continue for the holiday in to X.X% well our with profit has teams, our long-term by all season, records our I world. are that from XXXX customer, increased and XXXX fulfillment, scale generating This can to on in for on another XXXX, sets of year intense integrated we that the value and focus financial localized strategies, strategy revenue share, we sales XXXX unfolded term, XXX.X% deliver first results delivering sales positioned of culture

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

Chris Work

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

million addition since partially sales of by increased net $X.X currency million year's million million due sales of to from X.X% X.X%, quarter of the last a were the in rates. Contributing offset or to quarter, $XXX decrease and positive in Second $X.X of this to changes stores XXXX. quarter net foreign growth of seven $XXX.X second the second end increase comparable

well as units The transaction. dollars increase resulted average our by per quarter, second from an in driven dollars increase retail transaction transaction per as sales the increase During are volume, higher and XXXX unit transaction. in in per higher comparable an

During category negative comping the our Men's our and comping was by positive largest category, quarter, accessories. hardgoods category, followed followed the by largest was women. footwear

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

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

increase was million, increase Second quarter, The million, second primarily driven quarter and on points XX.X% of XX the of to margin decrease quarter costs, compared basis an $XX.X our distribution of Gross year in XX.X% costs. ago. points gross basis compared the points was X.X% XX by or increase leverage an is $X.X profit XXXX. occupancy of XX and to a basis store shipping in

of point compensation. million driven to accrual of year leverage SG&A sales to XX was of depreciation percentage compared in compared as annual related prior our basis in primarily the and XX% the points a was decrease second cost, The quarter incentive decrease by a was basis of $XX.X year. points basis store XX XXX expense $XX.X SG&A net to million ago. XX.X% including on the

XX.X% of was Operating or to second million, second $X.X $X million, share for income the share XXXX $X.XX the Net $XX.X of to increased per the net in year income quarter for quarter per quarter net XXXX. or of million, sales. $X.XX second income or prior $X.X operating compared net of XXX.X% the or sales X.X% million second up income of to with X.X% compared quarter of

the primarily year to in decrease certain period. XXXX estimated deferred Our effective proportion quarter jurisdictions, tax to the of ago in income rate excluded The XX.X% taxes each rate net in our due was losses or loss effective uncertainty before tax the across due a which of of the annual the compared are to realization for reduction tax and of second XX.X% earnings assets, from our jurisdictions. of was

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

foreign the grew inventory Excluding X.X% of the translation, year-over-year from year. impact prior

Now to our results. sales August

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

highest followed only During in and comping by the hard men's. month. the footwear, Women's the four our comping category positive goods our accessories with negative category week was period, category,

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

following not the impact times in the tariffs. Additionally, of global does contemplate changes

$X.XX in to margins of anticipate minimize sales currently and XXXX, our Consolidated comparable to expected with are We be last operating will earnings and range of X% are compared working between total million. With $X.XX. the X.X%, third actively we the sales expect and per that $X.XX that with X% increase between for year's $XXX with to mind, impact potential will customers. earnings any share quarter X% and be vendors $XXX of we in on million between our

give to thoughts around year-to-date. updated want a performance I few our given Now XXXX you

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

look XXXX back we made investments beyond, to and customers. As on infrastructure, seamless sales experience to we creating continue the that half we've our our believe a of for the

team Zumiez of X% those to previous as well as between growth growth sales in drive bottom to line for in making merchandising, our expectation mind, continue are X% range With to single-digit our in XXXX. investments we annual approach comparable consolidated guidance comparable unique we updating growth. long-term Our the compared to sales and for fiscal top that and low

that experienced as top In peak we towards reduction shifts achieved from of fiscal to-date, have of mix margin. apparel In despite mix footwear, XXXX, line our XXX lower international trending hard higher high improving cycle, include margins as well impacting previous fiscal heavily branded product category point in have a XXXX goods in the basis share growth we a the profit points. private also These margins XXXX have shifts businesses. and than our label which categories, in resulting sales

our than in life upon margins While U.S opportunity, and continue where additional based are businesses operations lower currently international cycle. to grow their product those have they're

shifts of now points margin we expect a between of these mix the to margin XX down our are compared guidance. As to We year product prior XX revising basis flat. our from business, product the in guidance roughly result previous and be annual

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

for year $X.XX up year our earnings are the representing of annual as previous our rate effective are share to growth We XX.X%. compared rate full our XX% XX%. to guidance between $X.XX, $X.XX, of now Diluted of from currently and XX% businesses assuming per be expected and planning prior tax $X.XX year-over-year approximately to between

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

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

down share that are expect half shares. million, full non-cash expense, repurchases We share projecting the prior $XX count depreciation slightly be our million will amortization, from this for count These and year XX.X from reduce back share during approximately of lease our the we to And the excluding currently year be will approximately year. estimate. the

to open operator, call the for that, with like up questions. And we'd

Operator

line our your with And Instructions]. from [Operator question Sharon open. you Thank Zackfia Blair, first William is now

Sharon Zackfia

afternoon. good Hi,

How guidance Sorry strong would for wasn't allocation, couple then for third comp And deceleration activity. But more October? surprise, I'm questions my the a a why of I a and voice the expect looking on guess, on given And quarter, the today. curious, you're September the trend. such there purchase you start in capital little August. in share at

relates So you to could repurchases? talk if as your share of it the about kind thoughts

Rick Brooks

annual I'm earnings be super over of QX over with XX%, Yes. QX growth our to Obviously, our we're and now that as planned guide Sharon. Sure, we've happy those. projected guidance, our well it show relates guide annual and take XX%. happy to the growth our to here guidance to

relates where we it where were by that September think October. much, to pretty interesting lower cadence, comp last did comps plus in much were and a we about as we as was that the August nine obviously, in it's So year followed sales position

at we -- after X, X, So a comp as last X.X year came ended we our and up we QX. guided even about out thought to X at coming with guidance for to in

be there couple couple after back-to-school. for or that what cycles tends clearly, back-to-school, of slowdown seen consumer a So the over we've the of last some to is years,

couple continue drive QX in took here goal into seen very but on obviously, We're the pushing we more little trends over our Now in of for fade conservative around with guide to a quarter right last to we've comp, XX% to that that. approach is hard not still the based years. the

operations historically. balance increase happy where it CapEx. by by good Obviously, side As we've so offset business thinking last capital to driven from flow from cash of XX% been where a year. of what million, super a pretty is year-over-year not change the $XXX.X with lot increase, we're perspective, since up the cash we're really relates and cash from around That stands the

we job we to business as buyback review good doing and you the outstanding, is plan million board. capital of continue know, So a have And cash. still $XX with generating that the

our Our shareholders. to And to what from lastly, think strategy very heard outside to return to past. going look value find business. you've with we'll shareholders. doing invest consistent We're we ways foremost, CapEx. is can going and in first in through us return the that I we're cash business that the the to, We're And

those acquisitions. back in invested invested store customer and And I bringing And We've the company base, we've over both we through invested one the We've web globally. really historically, approach if integrated We've since look Fast stores all we XX% We've gone team. our think acquisition. to both Tomato domestically retail, XXXX. We've and our in and the on experience. executed things. of done our in through Blue bought back Times

we the So in is things. the look going be to to as all kind winners those are I They'll to able do of think be future, what able to retail this do.

we'll at continue move to the execute continue on into as try we We board, with where that future. review the strategy we're to to and

Operator

comes question with next Jefferies. from our And Stichter Janine

line Your is open. now

Janine Stichter

you thoughts Just want on operating margin potential. to get your have any updated long-term

to to being between the in some mix about talked think private and you norms. being just historical to end you're pretty still I label up talk above with this even and you've that international of going goods lower margin close hard high-single-digits the past, year headwinds shift,

private back towards the push past? us as you've this year that, big this private penetration their where double-digit you year. mix think about guidance? some last talk then just merchandise your to thoughts potentially thinking label to corollary merchant And you little chance you about give can you assuming that that Are how in pass in You about had year? a into decline you're get a that a margins bit So in about to you you. seen Thank label how

Chris Work

first Sure, like. operating profit Rick a label, if into maybe I’ll private on on question add and let thoughts the jump and he'd anything then of share couple

an I single-digits. the operating goal is our think, this to from high overall, to perspective, drive profit

As excited we getting kind of that, look which the this think I low about. end we're at of year, to we're

really out laid is we've as kind two-fold. here strategy in the past Our of

As the a fairly perspective. from we store network sales. in North single-digit, of earnings in these at in out and U.S. and looking sales We're about ahead we America, be grow try on that these opportunistic to push forward the really our investments very we think they're can markets, built look low Canada at long-term and in grow how

here Internationally, as of on comments, We're in today how Rick his with the first especially in got lot we optimistic of even QX. the businesses call of performed growth pointed those ahead in a out and super us. the year half

term. we're here markets, profit I at right, the point, good not to global working. think markets double-digits, and the help exporting level. of that's operating we the the getting profit I here to that continue international get like level single-digit single-digit to ways in we're process think going I'm them and looking mature in that some of push the drive if we're we America, higher to our can to customer will but And At kind profit this incubating of do here serve that try overall North concepts already. some not say operating feel really our can and in in here going strategy momentum the we high sort long with we back model which as at can our And to international

so just we're to to relates cycle. label label, done the I branded job here. XX the And it's a heavy private to of label and on private teams, business out in our customer plus the to it whether listen a we're years, within and declines the categories, think, business we despite different that cycles and But a things, we've good have As going managing seen. private in know forth. so from And cross as over a about of lot categories, business brands

going not to label private kind we're on So of comment where the going year. is for

overall, see of label in play need we see that our wants we're back all manage think some private consumer I it. to and seasonal the But half. out how categories going where perform to to the

going think XXXX. business of is the here as from pointed over really business years growth XX% the over we the XX.X% with the to about of product a got as of we've we're I last what in despite is margin what happy good label out of end just couple private

we positioned the good over is about that feel long it So we'll consumer and where business the where see term. takes

Operator

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

line now open. Your is

Jeff Sinderen

back-to-school. you for the the you apparel congratulations the in how question guess I Hi, expect evolve If your this get to everyone. category say more we work a year bit segment through you're Can it period? would once positive one for have we're up. like a still And And kind August, let overall me little apparel holiday thinking seems in niche. back-to-school great on of your and speak follow strong the interim cycle men's for about how branded post about I for business? trended then your of

Rick Brooks

in add strength of don't thoughts to want our go I'll I his start, Chris model. then I mean, too. to and the Jeff, back

and and diversity both brands, Our and model is department as categories of as of categories growth of trending diversity then brands. about brands, course emerging and with well

I game. you want care what I game. this, to to how And I a whether and don't I I'm just care always say, I mix don't get So say which it's of love the going a guys is we apparel. know run

all in right what And really that they doing. is hard they where us now, gains go and customer, have to get what where listen freshness is again are are in time, departments do and goods go. the footwear to Our us we're all teams to frankly. we And fronts stake telling hard tell want super all newness to working they to on our see

the I'll Chris encouraged great. difference and comment on That's And bit little let men's in yes in I'm -- August. by

great drive the a August. world I can even gross side have Jeff, buyers where line. done we're We we today's big around getting drive of get margin in dollars, business. we we run we don't that's in gains. dollars again I on get we'll at drive think the really, dollars. operating margin these our profit newness good can think up results, And a product then I to really gains, can we market lot But gain job cost have And into I the run a controlling of what just margin gain. flow-through, deliver a how don't dollar them. comps, I want, flow-through drive And bottom drive the care want

want will let you our more about terms between apparel? the in to little So Chris, QX drive and customer bit of share change we August that.

Chris Work

here see was business. I obviously, obviously, driven footwear apparel looking things been the two that's sign really of turn and we mean, last goods is absolutely. August down hard as And over at Yes, and in us a to one men's quarters, the are well. has good trended positive it's for

think add ways. Rick of onto to obviously I sales how another works. our And kind of saying, look just many different is example this what we at model

the speaks new trending brands. the these the model, trending to is performed XX August things about significantly at our bottom relation sort the of is, what's of think to tend than better did brand the brands unique bottom we look how trending hey, ways compare is, XX they top brands. again, it top And I really One in just to XX

So really that's thing. a exciting

that again of get ability to ecosystem top couple with to including our nimbleness team's move just out you even it. sales product a sell weren't trends, and number our I generate and stores the then speaks to entire buyers' the And to that to XX, our And our year in-house in teams think two ago. that one, and

this So thing. I is good really think a

As these which the of in our is a play big back-to-school. in brands fleece t-shirt would a imagine, business area, you lot part of in

plays and holiday. And trends stronger to has been here for three-year against see grow we're Back-to-school us through back And good much that obviously indicator how of some the But move so we holiday. we can we year. stacks good continuing that. a there. half We're for of the as into will out we believe two-year up saw

it's be where but So about determined QX guidance. we're good I holiday our on positioned feeling think we're here to with

Jeff Sinderen

to that's if switch And helpful. minute. Okay, then for a international we can

little Wondering holiday. trends more on international. And footwear drivers if any goods on similar you are international if of then the trends lead and Just wonder outlook thoughts a elaborate for hard to there you seeing the can U.S.? the for

Rick Brooks

Yes. add-in, Jeff. that hard and basically and same seeing And turned footwear goods. on headline February But yes globe. almost question the in of accelerated they've late early really at the I'll then goods in all and January, skate spring start have is all time let through strong, the months again in terms your are strong hard to Chris around fact the and we being in

is one those always this. we've this seen that's seen from we've -- me of So areas

be local us. world we global can that buys, know, go the emerging course, brands and you true have quickly to the market become localized As every global around from for in evidence that's of

teams super was the we're exactly asked was. everywhere we we've And we've not we've where catalyst seen is everywhere individuality, fashion part just the as exactly and brands sure what go at not skates, goods is their hard they literally the sticking with in time. the XXs of the seen then customers catalyst, four with a this express authentic core driver our quickly. first time we've But the We've And really when go sure skate the brands seen Remember, go, and with same on we're they like and stayed turns why for what it world developed who consistent being positioned, down This category we trending retro going business. our away with our that it important. how running been a years from are consistency skate. never in is

Our brand partners understand that.

in And a results. of hard to right We're try four to multiyear results authentic. going stay do. we're relative of cycle might other not retailers positive and We're chase goods. skate tough we're And those true it years to now going like

that international more yes, are tell But benefiting businesses, I'm think, you, for So pleased I'll our we're broadly, making. all geographies, the progress just with those really matter. I

the the brand, Our and had we teams works Chris credit execute. in particular, and in we made how on commented been international front, about are hard culture, our and strategy and strong exporting and how again, and want our teams tools the I to processes. have building alignment they've

teams customers As to omni-tools, Europe, finding and marketplace. in we're our our can able the we're of love we into that all we have those apply. that develop tools everywhere markets and And them export course that get of

of tell have I position and of important teams. as kind our lot of business key country-by-country our starting here work near at of of Europe. some in incredibly strongest environment having markets would is And Europe. The And pleased Europe, basis. dedication building that our ourselves and a the in on really hard response in in been course, recession. to we're I to So scale our a improved well in a point, I'm this them Germany Europe, out, really we think you I particular, do what a of tough seeing have with business, big yet, there driver because is comps should driver and they of say, doing an But in very a of our we're economic they're that

about So encouraged that. I'm really

best-in-class work around it's to our our even have more categories. So and team have think put and then hard in and processes our and it's brands export done, the trend of place ability drive practices a to internationally our teams tools practices result. our And combination cycles so, I

expansion consistently and individuality, his on before It's any this this see express are again that we want marketplaces. about this our global trend global customers. is if high distribution thing about customers across with serving is, international really add has our across brand One that, very all again, a also long-term who partners retail about And it's I to And I'll consistent Chris he serving add we're the basis. thoughts, on let cycles, seeing markets. brand cycles quality

do to of have and we lot around to our presence going why be Europe as Australia, yet world, are And excited platform. in continue is about to I'm the in and we build we the only long-term that in a markets work

platform are the to you that because partners, niche XX are cam cycles would been. think We trend that or to going we next the that get serve lifestyle know they're as five our I years, I they've brand have tough going retail in only tell in our even faster.

and So opportunities practices to idea its out our advantage and partners. our the and best processes international the execute then rolling best-in-class best those of businesses very expansion, of we our idea the to things and business, good cycles, globally that's fast to help driving of to them take for we across brand be results. against practices that whole yield need get our strong there have processes, and whole of optimize present and themselves trend international To

think most those term, in long business. excited things are we I So I'm how the the international terms of think about, Jeff, about

in think both only our the in fact, I partners position very a retailer And brand way. customers niche, in lifestyle in positioned doing we're serve have the I for think this and unique we to marketplace this.

Jeff Van Sinderen

I was sure weigh Chris there? Okay, to going wasn't in if

Chris Work

on, Rick Switzerland other said, well. add our touch color Austria tell think Germany, about mean, talked as thing only that I you would holiday what about asked you more the Yes, excited and would is super I stores we’re to Jeff, Rick to and about I in I some and

and the into guidance grow we over there, as business, other our continue and their part and to of is diversified the super snow couple in Obviously, QX, a stores Germany and the years, and where places. ability of think better comp. so on big annual last QX Northern of how here were our excited class a that’s weather while the going I of performing but Netherlands still and positive business to holiday is part elevated leverage trends here. together. obviously part more than big gone, here all in of business working that’s do to than dependent do a we’re we big the where have of over other XXXX. any for the what web still It’s our we’re signs year, are the and overall, the drive are XXXX we into a And optimistic, have here that’s always it's And we built much result We’re thoughts about on and

Jeff Van Sinderen

success. continued and thanks Okay,

Operator

our from you. Research. Thank Kummetz And Mitch next comes question with Pivotal

open. line is Your now

Mitch Kummetz

for taking thanks questions. my Yeah,

when for of was up of if was a opened me down part little wrong, drill I'm Just -- Germany correct Germany a on And you’re wasn’t to kind correctly, that hoping bit, a I Rick the that Germany struggle. guys that comp big say to you you surprised I nice if bit a of in the recall seeing Europe.

go Tomato And the that profitability Some think pressure well. didn’t the on of Blue puts so stores of some business. the I

systems, understand, And the of of out? guessing in the of probably productivity, lack it sparked you Did is it in still Is else like kind of are something changed? business. And turnaround that terms a help rest has leadership, something sort it stores Germany? I'm is European the what’s still me figure

to how there are So, to if much stores opportunity of comping maturity ramp, those kind sense that as trying sort I'm so? better like is just get they understand make of a

Rick Brooks

again Mitch, and make our about web we’re Yeah, leader getting comments in of the results want our my I Germany. it and Europe to platform is stores, our platform. comp, Germany does sure across but terms in and good clear

just that gauge. feel be about that. in we a We’ve so said, good we’re markets, in as Germany player how a But want markets those we’re about new is new Austria Just think platform. in within throughout couple performing of well I well stronger clear in healthy doing doing we’re Switzerland. been Chris to the

German with we parties we worked leader think lot a German from market, and it’s knew, couple factor work some the market consumer And from to stores, to that us marketplace. from and tough to knew was start the that a trust understand beginning in three of it really to have opening we in market the things. of entered before take we of we marketplace. would did had the such is the I believe outside And us help our Germany five to a work. years done that So, a We of crack, a

some more Mitch, ideas of and because The it's of done, important customer recognition work we're what rolled customers we're take programs of serving been I retail time there experience to we're it in U.S. good and So markets it for the of engagement which and out started is they doing, the level think the scale the training I build a are they've our -- we’ve we're is is and the for customer simply I while work that’s the a in part marketplace, been in across think, we’ve dedication through from large delivering that hard customers. at fact the really a we're seeing bit our Germans is the trust think and fact our what that. Europe. that And new highest here from hard to gaining accept a store I terms our businesses tell ever can our team, localized stores to little doing

So of in our in European think peak, all-time customers. stores at of interacting the are our is an with engagement I how sales teams terms they

reaping our opportunity function are We're from in in the So years, hold. to across business also you seeing benefits the them as training it's really and more emerging Getting brands best and start we've you out of better three flowing like seeing that really after processes, Mitch tell executing emerging did programs the that brands, the brands. have trending the take but work would put about that it's more and I engagement, are rolling practices is, Germany. we better

are is in performed I German we we of us. as which to the expect how concept lower with our and a in starting base, And of scale opportunity on that a just productivity marketplace. And that think this takes and gaining relative Austria are time would those Switzerland. -- all I this marketplace, gaining in the bit comment acceptance things some benefit this So

have some do as to to able the I significant ramp run few consumers. we effort we results over execute think next are continue strong our opportunity and up in to productivity years to So serve we this our

Mitch Kummetz

Chris, guys, a when If the of I optimization let that’s like points, improved a was standpoint? appreciate really orders. discussion But your with the at you I just stores, were shipping of could that some initially shipping function right. there business? well hopefully better color. you're that was the towards shipping, gotten distribution And correctly. you actually I your in move I XX know the that you heard I'm that or that margin wondering then basis scale and think think split out from issues trade that you've by just mentioned -- that e-commerce getting Great to that driving area I not distribution gross improvement what's us if shipping case

Chris Work

quarter, of four obviously leverage little our cost leverage we're that a helping, within things walls that within distribution outside moved you on DC first BXC in our absolutely are the to this, store specifically. are out right. And some second was had we to as in Absolutely, we cost bit the system, helped the structure fixed variety to have some network. things create now that our go some are here and some value that in out of DC, the the product something the There all six Mitch around stores. we taken provide of fruition some initiatives around there perspective, a the moving around and that is we relate has months some working of we getting shipping have of of are into actually levels This comp shipping as the

to types that where to increases see across overall those some other around split saw within on, we seen we shipping that's how allocated a able it's upfront we we all through together area, come things. customers, split in really and show country it's with times, how do optimize we times .So with We've to challenges shipping continue something algorithms of trade product challenges orders. how and at do to of We offset product shipping the do work optimize those value we're

And the leveraging working pretty the impact, So be lot cost I rate to a we're a the where at of the be to through things with of leverage carriers happy at hard it's located like distributions wage we cost, been area optimize business. you're from think or in out whether take and/or with, in it first minimum to shipping perspective, obviously super California. we've center we effective really months. Zumiez specifically our six distribution can But incredibly creative to work an try

Rick Brooks

is areas for we Chris' a it, other thing the area to roles us, we means people comments within what the define key the serving of what are trade continue the hard this, even Mitch roles how on for trade of work And add I'd stores concepts within And the of customers. area. to trade

we against -- beyond of level. the we're execute how at and do this definitions discussion higher have We now moving a

of demand and our really trade have area, buyers meet our day and much teams with is responding product a better consumer to it. every We new demand, well you we're competitive as guess, are, would around consumer in to are total measures available how that, getting at

et cetera, getting the delivered we shipment cetera. course, to that to that more gain the showing play we’re so et then, it, that again, consumers, in have all we a of And consumer, multiple what more in higher faster delivering of share want And to get means consumers expectations. into of as customer's benefits will these the fast cetera, factors having being And from them, area. et every trade of do

of to we single available and we This we’re organization, and of hard areas stores, improve it, us execution, me about serve More functionally within for the in And how of on do of demand. customers, great every working role of is Chris the right. work our the managers split continuous mentioned, always key to we is really I we the is have as day a understand every those area. lot So do us concept role improve making How it the single effort in day potential think we do cross something more that. this to see splits, a this the to playing how that products, progress teams trade one set to out, it. understand meet

Operator

Jonathan question Baird. from with next Komp And comes our

Your line open. is now

Jonathan Komp

or you few more to last seen opportunity you talked over to I scaled different, individual months. particular, that in what's changed new want scaled? just type than quickly? that hot out, emerging reaching want so really of the trends to about that's see And want to ask in we've the penetration, And to about high-single-digit the you've brand ask past, you type specifically, trends scale some I the And for maybe ever maybe what's [Whada] called especially quicker some mid also, I allowing and perhaps of brands you brands more sales ask, I of just when hot. if they're the you've then recent that's know

Rick Brooks

in I show we're Jon buyers program seeing the of they well how our to customers. to constantly stores for mean up I There's you don't answer clear one our I be think anything tell are ability. here no new whole many that each for rolling would react ability It's out based We to brands to. new brand. on

rolling new our new We believe track we're brands. year on goals and I rollout a for brands of continue this lot to out

respond up able to customer then is to actually too in respond to many quickly ability way their to the and we still our So that brand in that improvement the you we I positioning ton it of to And adoption, partners we’re yet here. their demand need and is on being for room that end marketing job customer have to of customer up have gaps able get how respond. And to better yet demand and we execute our the it would market. tell to of brand a

then in too rather we it too, but product to use at of nothing. better And system, our any have see improve edge our teams brand product, is and to the ton products want it to through or serve customers of much buy that, it it are having with rather to because last looking a serve was at just and our through flow running those We'd thing all all partners go stores both have see out once better, of how the us on our do maybe to product. consistently can than

in work with reworking, consumers. what behalf So those and we of brand ecosystem on working I for lot a rethinking yet here our consumer do our the would of niche that partners tell have you to does who

unique what about I don’t anything there’s different here. So doing and think we’re

at of can to I listen to our what better product particularly do so drove quickly and quickly we base, would and the tell we to need as in marketplace always the a manageable this the product, we just you screenable we marketplace. react edge, react of than get to are standing try even consumer to said in We’re very terms doing in Chris to August lot stay, really react our that ability

we’re key Jonathan in I don’t there’s doing. what think So, is anything different message

And pace. any want our of don’t best out they all absolute and and retail meet Our for execute with how this for is young scale fast we up job the job and work brands be then that to can help help anyone, areas to of how the there, of to our to then determine -- course deliver they to partners them partner to brand partner world. do want demand their expertise, fast product. work We we brand our go in for go, is them, customers’ decide they together we mutual

executing better So I again, of se, even the the move get lot getting my at is is don’t speed new a think, for better perspective, have from that at per news it’s will we’re the it. good we room anything consumer to today. But

Jonathan Komp

speed per it maybe of well the the advantages consumer that your current in seen say you you forward hasn’t the what as provides maybe or would but model try of guess more -- relative attitude follow se, seeing, and you’re I think as up, new advantageous the seems you’ve the openness And model environment a and changed current the consumer past? to to the brands. going your given Do the trends

Rick Brooks

cycles now is model what’s and brands know as trend us do the And trend this, come, our to customers that’s think next. the relative our to find place I exactly built to to My we the the but cycle not of with of trend our others for a cycle. XX’s. front is, Retro team product like right trending cycles very front expectation have the at those there

we’re job at good our areas, to in is doing it. to there, be so, And pretty lead those I think

and challenge trend forward up years XX to going we speed is five are cycles Jonathan years next that the big that look I be really even to going I think more. as our believe over is

to trend so cycles wherein you all that global to And have demand, kick where and we have global we think even in have down faster. meet brand if think off to together to again I going how about you sit demand, that be are work

creating the platforms, and So on both with demands our about the that are those kinds meet we to just think how Chris actually things trying about fast working expectations U.S. might will what and the one we in those customer to our going are of we be new or and test future. try some things we’re executing and really export be to as And customers here able as I faster here retail and that. for higher the have things talked of to platform international big in we’ll

get going to even faster, brand for niche be I So, up of can our maybe product. consumer demands we’re is But always in looking I for be alley think cycles continuous right that trending area. retailer and our respond in improvement this this to lifestyle the the the think as yes, global only

Jonathan Komp

much has the And Okay, follow you’re expansion looks really second for even not pretty significantly. embedding margin first half outlook, though It one last Chris. like great. half up the expanded

the seeing to product So if there? those fourth factors quarter, assumptions, the for and margin and you’re could the just comments maybe third behind what include also just on you wanted understand

Chris Work

into kind overall operating growth. leads and let me product Yes, the as margin start margin of with that

of a right goods we of Just my having to script, the a most product in hard were in perspective, a from lower called product margin here, couple footwear the that’s relation being challenges model highest things year a some the items ago. trending apparel than and margin product categories out trending now that specifically have the margin comments the on is that of and

also issues the growing at So a then domestic pace we top-line internationally, faster a mix have there. than entities. And is

they're in internationally where So product a their also have cycle. overall margin life on lower these right based

product on XX So margin. would We That an guided XX. get together take be some to to acceleration down two year to items drag the there. seeing we if those you are

in where acceleration second have and been half We first an we’ve from in quarter. the the back

example guidance QX for margin basis end. XX at product top the the So down around has points

So really related. mix all

some margin just increases the of some In it’s as of we our margin about plays how and that’s international both pretty fact, rate entities. mix the It's performing trending. our best within entities categories well there. international challenge increase our in We how matter margin good seen we’ve feel as in creating see a together

margins is the pretty phenomenal top-line operating and relation here well. In had We’ve the front year. to of how as and overall had in obviously the growth the great half growth we’ve

We are that of in not as our back planning year and two kind top-line be but based strong stack to again the on half comp. three

quarter saw really some initiatives not and up, things as in couple planning were well with that like also down slightly things we're how actually as QX was helpful We them. QX, we we’ve as had some cost a have in noted had the associated you SG&A savings prior that some QX

going front smaller some out are half. to move call there have will back from to but We to the significant dollars half not

is think or and I high that the that little bit our more give with planning roll and So shot as the all going we're to best half. meet a do our beat to through half end conservatively back obviously that of we’re always here goal we to back

Operator

next Davidson. from comes [Operator Our John question Morris D.A. with instructions]

Your line is open. now

John Morris

those talking back-to-school. that results terms up the on in shifts picking in the everybody guess were the of Chris one, of on benefits last saw, you great congratulations some talking on you probably about you just what And any at can going for I on the that where bigger of enumerate not were just to the you so question? end but pieces, -- there significant the us last just up about of pick they’re

Chris Work

incentive there. Yes, incentive accruals on this the quarter that some year-over-year. and generally I year, we We're have second slightly and out. have think just some really level, other a moved through is how the track are second mean store of levels, There growth of that’s out we moved the above that and items more our so of target bigger target have perspective were last increasing around the cost on year. therefore timing dollars few played from our accelerating benefits I quarter the Through out marketing

opened stores SG&A year QX our to add this have and So will for example growth we QX. in still some which

we QX and QX in growing seeing as things to little what the high happy forecast double-digits Obviously So we're those didn’t and types move experience at here therefore of is still earnings for full the that play XX% will be heavy year the of are year softer. out in end. earnings front where and growth over a we the half here

John Morris

hard geographically. sourcing within this control? question but initiatives also, you're got China question, But whatnot. I’ve a different? which the hadn't last of it working of on respect to What kinds terms are on, really since But seen with of work to we’ve different your to the or or -- talked tariff be and I kind goods China, more here, anything though is And quarter, one hate and in have the tariff sub trade diversifying any ask thought before, you since about last even

on just that us goods? on hard give then maybe So the update and park

Chris Work

Sure.

with managing overall to already around So able kind were the perspective, to tariffs, those QX, our work we guys, mitigate work to of and went strategy. we that of higher a into we've brands we indicated tariff, subject accessory on with categories. felt few of have since update that from any sourcing overall as meaningful primarily been To-date, it to just you effect, tariff an have impact not categories had do those as our XX% were as level the

This percentage there actively you're we've are to Obviously, been and mitigate effect But footwear Apparel footwear apparel into because XX% XX% through of went unique this. starting brand us, about ago. of of business XX working from currently as many is really large XX% brands at our down portfolio XX% for product do the and more is of tranches position tariff. in a within from first a aware. September all sales. we quarter XXXX, our This new about to of that our months with the Xst such seeing this come have high down so are scenario But month, China. second our quarter we're of about from little XX% for and

own our label that and see private can brands with you our So ourselves we’ve position differently. started to

that don't from is product exposure piece maybe the we other with these do, is, the China have much caution because that so think I others our I numbers of screen print.

So the coming of still diminishes of the added things a of is raw or is obviously and States, where the like the the China value blanks lot in that what's lot good, out which here a and value of imported impact tariffs. being the

this be lay issue But point, that this perspective case year, try we FX means that includes to includes for the where And savings look and planning goes. exposure have scenario, an chain share other customer, which vendors, process. vendor to value scope is and we offsets, at our responsive in process we're our from continue kind through and seen right? our where supply our the goal with retailers, work like to gone haven't maintain the still in overall we're rates we'll the with working to to decrease our And cost prices, to light our scale the really move So to in this partners monitoring While also with production. production, and delivering have. of raising which some And we all manufacturers. a it. able of out of moving last different finding may potential it's less for to they see have we have This within that brands smaller opportunities

of question depends not goods And hard around hard impacted the I of really goods, much goods, you skate on actually is the last had type think hard here. the it

overall the the to to regards have component. do spot of like safer the of like we But side skate on the of things hard Some and the feel be that more trending business. international goods snowboards in is a what's

Operator

Brooks, And time. Chief over like the closing at Thank to questions remarks. you. I'm Officer back turn this further would not for any I to Rick now call showing any Executive

Rick Brooks

always in the I just our of the of our guidance and doing about the relatively we’re optimist laid through you, really as out interest we conservatively what I year thank And we’ve rest for record to their view Thank and think as want strong earnings. Daniel. another ability everyone, but Zumiez again yet deliver to in year path

hope look to great your everybody. and results, then towards back we we’re So, forward you, third Thank holiday interest. early in to talk We and about season. appreciate a looking December our with you getting quarter

Operator

conference. Ladies all and thank you you disconnect. in wonderful concludes have today’s gentlemen, for day. program, participating a may This today’s and Everyone,

Zumiez (ZUMZ) 5 Sep 192019 Q2 Earnings call transcript