Zumiez first analyst conference call as a public company displayed the company’s ability to ride the fine line between impressing Wall Street and at the same time maintaining a core image that appeals to the retailer’s teen surf & skate audience. Twenty one new stores fueled the top line sales growth along with the comp sales gain.

By category, juniors was the strongest with a comparable sales increase of 20%, while men’s climbed 12% and all other categories increased 8%. The mix between these categories remained relatively consistent with juniors at 18% of sales, men’s at 28%, and all other categories at 54% of sales.

The gross margin gain was due primarily to fewer mark downs year on year, but better wholesale prices and the company’s ability to leverage buying power also contributed to the increase. SG&A expenses increased 110 basis points to 29.2% of sales compared to 28.1%, primarily because of new store operating costs.

In spite of the strong double digit comp-store sales growth in the first half, Zumiez expects to report full-year comps in the mid-single digits for the full-year with the back half staying in the low single-digit range. The first half of the year is historically the slowest period for Zumiez, with back-to-school sales and holiday sales all in the back half. The company expects to realize the majority of its earnings for the year during the next six months.

Zumiez currently has 150 stores in 19 states and expects to have 174 by the end of the year, opening 18 locations in the third quarter and six in the fourth. The company’s long-term goal is to operate 800 stores, growing the base by 20% annually. New stores have been exceeding expectations with the company entering only one new market during the quarter with four stores in Southern California, which management said was like entering an “all-new state.”

For the full-year ZUMZ expects to report diluted earnings per share in the 80 cents to 82 cents range, an increase of 45% over 2004. Management sees a long-term earnings growth rate of 30% as “very achievable.”

Zumiez, Inc. 
Second Quarter Results
(in $ millions) 2005 2004 Change
Total Sales $39.4  $30.6  +28.7%
Gross Profit % 32.4% 29.7% +270 bps
Net Income $0.8  $0.2  +255%
Diluted EPS 6¢  2¢  +200%
Comp Sales +11.3% +6.8%  
Inven @ Qtr-End $42.2  $33.2  +27.3%