ZUMIEZ INC Q4 2012 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Dave King - Roth Capital Partners - Analyst : Thanks. Good afternoon, guys. companies.

Question: Dave King - Roth Capital Partners - Analyst : Rick, I think you've talked in the past about the e-commerce business kind of owning the low volume weeks, generally, and how you may have left some money on the table in the past as a result of not having as much of a robust business there and I guess to what extent -- particularly in the context of the 22% increase we saw this quarter, but to what extent do you think that's weighed on your recent comp results? Can you talk about some of the investments you're making to help turn that around and then -- or made and how it helped turn that around and how we should think about how you'll benefit going forward.

Question: Dave King - Roth Capital Partners - Analyst : Sure. And that helps in -- do you care to provide any more color in terms of what you're specifically doing now, today, as you look forward in terms of this omnichannel concept and how that should benefit you going forward. Because I know when we've talked in the past, you've talked about leaving some money on the table there just because it did take you guys arguably a little bit longer to start building that kind of stuff because you were methodical in your approach to doing it.

Question: Dave King - Roth Capital Partners - Analyst : All right. Sounds great. Thanks so much.

Question: Jeff Van Sinderen - B. Riley & Co. - Analyst : Good afternoon. Rick, maybe you can talk a little bit more about the period of market consolidation that you mentioned in your prepared comments, how you feel that's evolving and what you think are the remaining key elements that will unfold going forward.

Question: Jeff Van Sinderen - B. Riley & Co. - Analyst : Okay. That's helpful. And then maybe if we can switch to Blue Tomato for a minute. Can you update us on what you're seeing in Blue Tomato and their business early this year? And then any key initiatives that you're focusing on for Blue Tomato that maybe aren't ones that of you've really talked about yet? The one thing that is sort of in the back of my mind, if you could give us any thoughts on when you think that division will begin to be accretive.

Question: Jeff Van Sinderen - B. Riley & Co. - Analyst : Okay, great. Thanks very much. Thanks for taking my questions, and best of luck for the rest of the quarter.

Question: Mitch Kummetz - Robert W. Baird & Company, Inc. - Analyst : Yes. Actually, Chris, just a couple quick housekeeping items. You mentioned -- well, let me -- on the 53rd week, you mentioned the sales impact on the quarter. Could you tell us what the earnings impact was?

Question: Mitch Kummetz - Robert W. Baird & Company, Inc. - Analyst : Okay. So, $0.05 on the earnings impact. And then on the guidance, well, kind of the loose 2013 outlook, you mentioned that you expect your operating profit to be up. Is that versus a 2012 that includes that $0.05 impact from the 53rd week? Are you adjusting that out in terms of saying operating profit up?

Question: Mitch Kummetz - Robert W. Baird & Company, Inc. - Analyst : Okay. And then as far as thinking about Blue Tomato year-over-year in terms of that operating profit up, you mentioned, sounds like about $6.4 million in terms of negative impact this year, $4 million on the earn-out, $2.4 million on the amortization of intangibles. When we compare that to 2012, what was -- what's the impact on Blue Tomato for 2012 that goes into that loose guidance of operating profit that's up?

Question: Mitch Kummetz - Robert W. Baird & Company, Inc. - Analyst : So, you're looking at about $7.3 million combined. And again, it's the $7.3 million that you're using last year versus the $6.4 million this year that's baked into that outlook of operating profit up. Is that correct?

Question: Mitch Kummetz - Robert W. Baird & Company, Inc. - Analyst : Got it. All right. I just wanted to be clear on that. Thanks, and good luck.

Question: Edward Yruma - KeyBanc Capital Markets - Analyst : Hi, thanks for taking my question. Rick, you mentioned, I think once in your script, that you viewed the pressures on your comp as kind of being more transitory. And obviously, given your guidance for the year, at least the rough guidance, you would imply that comps should get better in the back half. Are you taking this as a view that the pressure on the consumer is temporary, or is this due to things like e-com and other levers you might be pulling throughout the course of the year that should allow you to achieve a positive comp for the year?

Question: Edward Yruma - KeyBanc Capital Markets - Analyst : Great. Thanks so much.

Question: Brian Senzack - Janney Capital Markets - Analyst : Hi, guys, good afternoon. This is Brian on for Adrian today. I was wondering if you guys could comment a little bit or talk on what categories you guys see that are working well right now and perhaps more importantly, where you see the greatest opportunity and greatest potential for growth in 2013 throughout the year here.

Question: Brian Senzack - Janney Capital Markets - Analyst : Definitely. I was thinking specifically on, I think across the sector now we're seeing a little bit of an up-trend in juniors. I know you guys have been positive comping for a while now in your juniors business. Particularly, I was wondering if there's -- if you have any kind of idea, if you're seeing that as well, or if you think that's kind of a potential to optimize on that trend and maybe build a little bit more penetration into that side of the business.

Question: Brian Senzack - Janney Capital Markets - Analyst : Definitely. I appreciate it. And then Chris, if I could ask you just one more housekeeping question, if you could provide the ending square footage here at the end of fourth quarter, that would be great.

Question: Brian Senzack - Janney Capital Markets - Analyst : Okay, great. Thank you very much, guys, and best of luck in 2013 year.

Question: Richard Jaffe - Stifel Nicolaus - Analyst : Thanks very much, guys. Just two thoughts. One is about the sneaker business, it's been a challenge, and wondering if you have any visibility on that business becoming more robust in 2013.

Question: Richard Jaffe - Stifel Nicolaus - Analyst : Fair enough. Any thoughts on bricks and mortar in Europe in terms of building stores over there, or is it pretty mature?

Question: Richard Jaffe - Stifel Nicolaus - Analyst : I totally agree with the opportunity. I just didn't know the sense of timing and how big. Thank you.

Question: Dorothy Lakner - Caris & Company - Analyst : Thanks, and good afternoon, everyone. Just to follow up on the last question, wondering Rick, if you could give a little bit more color on where those stores are going to be opening. Obviously, you've had some of the Blue Tomato stores open, and just how are you proceeding with these new ones? And then secondly, if you could talk a little bit about what you've learned with the loyalty program launched last year at Zumiez and how that's going. Thanks.

Question: Dorothy Lakner - Caris & Company - Analyst : Great. Thanks so much, and good luck.

Question: Simeon Siegel - JPMorgan - Analyst : Thanks. Good afternoon, guys. So, just given the calendar shifts this quarter, can you help us with any assumptions for March and April to get to that negative mid single Q1 guide? And then Rick, your brand turnover and product offerings have clearly been impressive. Are you seeing anything new out there in terms of new brands?

Question: Simeon Siegel - JPMorgan - Analyst : And then just quickly, I think I missed. How much did you say the North American e-com sales were this past quarter?

Question: Simeon Siegel - JPMorgan - Analyst : I think you gave a penetration rate. I just missed it. Did you say what the -- what it was as a percent of sales?

Question: Simeon Siegel - JPMorgan - Analyst : Got it. Okay, thanks. Good luck, guys.

Question: Christian Buss - Credit Suisse - Analyst : Yes, hello. With respect to the balance sheet, can you talk about what your desired minimum levels of cash are? And have you considered taking on some leverage in order to be able to repurchase shares?

Question: Christian Buss - Credit Suisse - Analyst : That's very helpful. Thank you, and best of luck.

Question: Linda Tsai - ITG Investment Research, Inc. - Analyst : Yes. Hi, what's the historical percentage of sales during new stores have opened at relative to mature ones? And how do the stores that opened in 2012 compare to this?

Question: Linda Tsai - ITG Investment Research, Inc. - Analyst : Thanks. And then could you give us an update on footwear? I think in the last call you spoke about how the athletic trend is overshadowing the skate trend. What are your strategies to still capture the audience that's interested in skate and how can you, if possible, limit your down side risk to the trend?

Question: Linda Tsai - ITG Investment Research, Inc. - Analyst : Thanks. And then what's your outlook for AUR in Q1 and in 2013?

Question: Linda Tsai - ITG Investment Research, Inc. - Analyst : Great. Thanks, and good luck.

Question: Stephanie Wissink - Piper Jaffray & Co. - Analyst : Hi, thanks for taking my question. Just a really quick housekeeping item, Chris, circling back on Mitch's earlier question on the costs included related to Blue Tomato. The earn-out provision that you gave us, $4 million this year versus the $2 million last year, that is actually included in the series of guidance figures that you gave us for the year, or would you like us to exclude that? Help us understand which costs include versus exclude.

Question: Stephanie Wissink - Piper Jaffray & Co. - Analyst : So, maybe just ask it a different way, the earn-out provision and the amortization, those are ongoing items that will continue even after the anniversarying of the closure of the deal?

Question: Stephanie Wissink - Piper Jaffray & Co. - Analyst : Okay, that's helpful. Thank you. Then my question for both of you is, as you're thinking about the comp rate net of the e-com growth, if you're looking at just the stores business, if you could just help us reconcile what that figure is, where it's trending, how you're thinking about that over the course of the year and then rationalizing that with your store growth plans, is the stores business still contributing on an accelerated basis? Or is this more of a normalized basis now and the e-commerce is really adding to the overall lift in comp? Thank you.

Question: Paul Alexander - BofA Merrill Lynch - Analyst : Thank you. Rick, could you talk a little [about the long-term store goal] in North America? I know you've framed it as 600 to 700, and in the past you talked about wanting to open up the domestic stores at a pace of 8% to 10%. Just thinking about how fast you're opening the North American stores or just American stores X- taking out Canada this year, you're going to get -- at that pace, you're going to get to the 600 to 700 range in only two years or so, two or three years maybe. So, how should we be thinking about that pace? Will it slow down, or -- will it slow down as you approach that range, or should we be thinking that maybe you might re-evaluate and blow through that range? Thank you.

Question: Paul Alexander - BofA Merrill Lynch - Analyst : Great.