https://www.jeffharbaugh.com/wp-content/uploads/2014/08/logo_color_640.gif 0 0 jeff https://www.jeffharbaugh.com/wp-content/uploads/2014/08/logo_color_640.gif jeff2011-12-07 00:59:292014-09-26 08:02:11Zumiez’s October 29 Quarter; Consistently Pursuing a Solid Strategy
I know I’ve written about it before, but let’s review the pillars of Zumiez’s strategy as I see them before we get to the numbers. Here’s the link to the 10Q if you’re interested.
- Find and retain employees who are actively committed to the action sports lifestyle and make sure they are customer service focused. I suspect this might restrain their growth sometimes, but that’s okay.
- Have a wide selection of established and new brands, including ones that are hard to find in other places. Manage these brands, and the associated inventory, so you can be generally less promotional than competitors. Their largest vendor represented less than 7% of total sales during the quarter.
- Grow only as fast as you can find the right mall locations and staff.
- Be the only mall retailer that offers hard and soft goods in a specialty shop-like environment.
- Continuously work to have systems and procedures in place that let each store carry what its customers want to buy.
In broad brush, this hasn’t really changed since the company was founded.
Zumiez’s 442 stores in 38 states now include 10 in Canada. Sales for the quarter ended October 29th were up 10.3% to $154 million compared to $135.9 million in the same quarter last year. Comparable store sales were up 6% and a net of 42 new stores have been opened since the end of the quarter last year. Ecommerce sales were 6.4% of the total, or $9.9 million. In the same quarter last year they were 4.4% of the total, or $6 million.
It’s interesting to hear how they talked about the comparable store sales increase during the conference call. CFO Marc Stolzman said, “The comparable store sales gain was primarily driven by an increase in dollars per transaction, partially offset by a decline in comp store transactions. The increase in dollars per transaction in the quarter was primarily a result of an increase in average unit retail, partially offset by a decrease in units per transaction.”
To me, that speaks at least partly to the success of their brand strategy. They were able to increase comparative store sales because they got more dollars per sale even though the number of transactions fell.
Gross profit margin rose from 38.7% to 39.1%. The improvement was largely the result of distribution center efficiencies (remember they opened their new distribution center in California).
Selling, general and administrative expenses rose 11% to $37.3 million. As a percentage of sales, they were down from 24.7% to 24.3%.
Net income was up 14.8% from $12.3 million to 14.1 million.
The balance sheet is strong, and they have no debt except for the normal kinds of current liabilities every business incurs in the normal course of business. The increase in inventory was in line with the sales growth.
Though they didn’t talk about it in any detail, they noted that 15% to 20% of their business was private label. Private label business is particularly compelling when you’re already a retailer because of the higher margin with no additional costs. But we’ve learned in our industry that too much private label can be a bad thing. If only it was easy to know how much was too much before you got to too much. It is, I suppose, possible that Zumiez’s strategy of having a lot of brands and turning them frequently lends itself to more private label business. I’ll watch with interest to see how much they grow it.
Well, that’s pretty much it. When things are going well and the strategy hasn’t changed much there’s not a whole lot to write about. Here’s hoping I get to do lots of short articles like this one because of good results from a host of industry companies.