Zumiez Inc. Sees 20% Annual Square Footage Growth Continuing; Eyes 800 Doors…

Zumiez finished off its first fiscal year as a public company with some considerable growth in nearly every metric. When the action sports retailer first went public, it stated that its annual goal was 30% earnings growth, 20% square footage growth, and an operating margin of 8% of sales. This year they have exceeded each of these goals.

Sales for the fourth quarter increased 42.3% to $75.4 million from $53.0 million. Comparable store sales increased 20.7% for the fourth quarter with monthly comps up 18.8%, 20.9%, and 23.2% for November through January, respectively. Gross margin increased 220 basis points to 38.1% of net sales, compared to 35.9% of net sales last year. The improvement in gross profit margin was driven by better vendor pricing, improved initial mark up, and lower mark down, as well as by improved leverage.

SG&A expenses increased to 24.1% of net sales versus 23.0% last year. The majority of those cost increases came from audit fees, additional IR fees, legal fees, and printing fees associated with being a public company. Operating income was $10.5 million or 14% of net sales, compared to $6.8 million or 12.9% of net sales in last year's fourth quarter. Net income for the quarter was $6.8 million or 47 cents per diluted share versus net income of $4.2 million or 32 cents per diluted share in the fourth quarter of the prior fiscal year.

The company opened 35 new stores in 2005 and plans to open an additional 42 in 2006. During a conference call with analysts, ZUMZ CEO Rick Brooks said he thinks the company can maintain 20% square footage growth for the foreseeable future. He feels that Zumiez can reach the 800 store level that many other mall-based lifestyle retailers currently hold.

For fiscal 2006, Zumiez management expects diluted earnings per share of approximately $1.22 assuming a single digit comp-sales increases. ZUMZ has reported positive comps of 17% in January and 28% in February.

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