Zumiez Inc. reported sales tumbled 35.3 percent in the first quarter ended May 2 and slid 8.6 percent in May. The action sports retailer closed the quarter with 9 percent of its stores opening and ended the month of May with 69 percent open.
Total net sales for the first quarter ended May 2, 2020 (13 weeks) fell to $137.8 million from $212.9 million in the first quarter ended May 4, 2019 (13 weeks). Net loss in the first quarter of fiscal 2020 was $21.1 million, or 84 cents per diluted share, compared to net income of $0.8 million, or 3 cents, in the first quarter of the prior fiscal year. Included in this amount is $1.5 million, or 5 cents, associated with the impairment of the retailer’s right to use assets and fixed assets.
At May 2, 2020, cash and current marketable securities increased $49.2 million or 29.3 percent to $217.2 million, compared to cash and current marketable securities of $168.0 million at May 4, 2019. The increase in cash and current marketable securities was driven by cash generated through operations throughout 2019 partially offset by capital expenditures and $13.4 million of share repurchases through the Company’s stock buyback program prior to its stores closing due to COVID-19. Zumiez ended the quarter with no debt.
“We came into fiscal 2020 in a strong financial position and the new year was off to a good start with first-quarter sales and earnings tracking ahead of expectations through early-March,” commented Rick Brooks, chief executive officer of Zumiez Inc. “Following the outbreak of COVID-19, we closed all of our stores in accordance with state and local guidelines to protect the health and safety of our customers, employees, and the communities in which we operate. We immediately shifted our focus to increasing financial flexibility and directing resources towards continuing to engage and service our customers through our digital platforms. We took many difficult actions but remained committed to our full-time employees across the organization who have helped us create the strong culture and brand that has driven our success. We have made this investment throughout the closures and we believe we are already seeing a return on our investment in our ability to connect with our communities during closure and open stores quickly and safely as government guidelines allow. With a history of managing the capital of the organization and quickly adapting to changing environments, we are confident in Zumiez’s ability to weather this crisis and emerge well-positioned to further expand our market share and resume our long track record of creating value for our shareholders.”
Actions Taken In Response To COVID-19
As part of the COVID-19 response, the company has taken the following actions to preserve financial liquidity and financial flexibility:
- Suspended hiring, laid off virtually all part-time staff, eliminated substantially all planned fiscal 2020 bonuses and delayed majority of merit raises;
- Lowered operating costs, including travel, marketing and other non-essential items;
- Reduced capital spending by delaying or canceling select projects;
- Reduced planned inventory receipts by canceling or delaying orders;
- Suspended rent payments while negotiating rent relief with landlords and delayed or canceled planned new store openings,;
- Extended payment terms for both merchandise and non-merchandise vendor invoices; and
- Paused share repurchases.
Store Re-Opening Update
Late in the first quarter, the Company began reopening some stores with most at reduced hours in accordance with governmental regulations. The Company ended the first quarter with 65 or 9 percent of its 719 stores open. Zumiez ended the period ending May 30, 2020 with 493 open stores consisting of 432 Zumiez stores in North America, 49 Blue Tomato stores in Europe and 12 Fast Times stores in Australia, representing 69 percent of its total stores. All stores are operating under enhanced measures to ensure the health and safety of employees and customers, including
- requiring its employees to wear masks,
- providing hand sanitizer in multiple locations throughout the store,
- implementing enhanced cleaning and sanitation protocols,
- reconfiguring sales floors to promote physical distancing, and
- modifying employee and customer interactions to limit contact.
May 2020 Sales
The company’s total net sales decreased 8.6 percent for the four-week period ended May 30, 2020 compared to an increase of 2.6 percent for the four-week period ended June 1, 2019 primarily based on closures continuing into May with some areas not expected to open until June, offset by better than expected results in stores open and its e-commerce demand. Comparable store sales for locations opened in May as well as its e-commerce traffic increased 79.6 percent. By channel, its open store comparable sales were 38.5 percent and its e-commerce sales were 181.6 percent in May.
Due to the fast-moving nature of this situation and the uncertainty of impacts on revenue and costs, the company previously withdrew its full-year fiscal 2020 guidance. The company is not providing an updated outlook at this time for the second quarter or the year.
Photo courtesy Zumiez