It’s beginning to sound like a broken record; the constant drumbeat of corporate chief executives telling us how bad the economy is. The latest reminder was courtesy of Zumiez Inc. (ZUMZ) CEO Rick Brooks who blamed the economy for his company’s awful fourth-quarter results.
Zumiez, a leading specialty retailer of action sports-related apparel, footwear, equipment and accessories, said its net income for the quarter declined 49 percent from a year ago to $6.3 million, or 21 cents per share, from $12.4 million, or 42 cents per share last year. Total sales fell by just $1.1 million to $125.5 million, but same-store sales cratered 13.4 percent. Analysts expected earnings of 19 cents per share on sales of $124.8 million, according to Thomson Reuters.
Mr. Brooks stated that fiscal 2008, particularly the second half of the year, was incredibly challenging. “Since September,” he said, “the deteriorating economic conditions have significantly dampened consumer appetite for discretionary items.” As a result Zumiez had to significantly increase its promotional activity across all of retail, most notably in the third and fourth quarters.
He said the company was able to act in quick fashion and were able to manage the business in such a way to remain profitable in all four quarter of fiscal 2008, as the team did an exceptional job in controlling expenses, managing inventory and preserving the unique Zumiez concept.
Brooks said the company will manage its business in 2009 by continuing to focus on the customer. He said that includes having the best sales force on the floor, having the most unique brands available, including hard goods and footwear. He also said the company will continue to offer a multi-tiered price structure so it can continue to serve all customers who are interested in action sports.
Zumiez is assuming the negative trends that impacted the business in the second half of 2008 will continue into 2009 and has planned its sales and inventory receipts accordingly. The cost reduction strategies begun in 2008 will continue this year, and the company has reduced its CapEx plans for 2009, which along with conservative inventory management should leave it with a strong cash and working capital balance throughout the year, according to Mr. Brooks.
Zumiez now says it will look to open 37 new stores this year, or about 11 percent growth, versus prior growth expectations of 50 new stores or about 15 percent growth.
Mr. Brooks says that while he believes the short-term will continue to be challenging, he is optimistic about its long-term future. He says that Zumiez will benefit by staying true to what it is, as competitors become more and more homogenous. He says the company’s balance sheet is a competitive advantage for the company as others in the space don’t have the financial flexibility to take advantage of opportunities.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
