Elaborating on its recent strong growth outside North America, Zumiez said it intends to open 14 new stores in various European countries in 2022, including two new markets, to take its door count across the continent to 81 locations. They will be branded as Blue Tomato, the European banner of the U.S.-based action sports retailer.
“We’re ready to go. This is going to play out for a couple of years,” commented the company’s CEO, Rick Brooks, adding that lower occupancy costs gave the specialty retail chain more opportunity to expand its reach in Europe, where it entered Norway in 2021 and realized 21 percent topline growth despite ongoing store closures caused by the global pandemic. While the war in Ukraine has dimmed some optimism for the region this year, Brooks contends its European business is “on a path to breakeven, maybe even (make) a small profit” in 2022.
The company is also planning to open 15 new stores in North America and five in Australia, after ending the past year with a total of 738 physical stores, in addition to its websites.
In the fourth quarter ended Jan. 29, Zumiez’s business outside North America, which consisted of 67 stores across Europe and 17 in Australia, had a 28.8 percent sales increase to $59.6 million in terms of reported dollars with a jump of 37 percent in constant currencies. For the whole financial year, total revenues from the two markets rose by 22.5 percent to $153.2 million, or 21 percent in local currencies.
Overall, Zumiez’s net income declined by 10.7 percent to $38.2 million in the final period of 2021. Operating profit slipped by 3.9 percent to $51.7 million as higher costs dragged gross margins down to 38.6 percent from 39.1 percent in the year-ago period, despite a gain of 0.4 percentage points from better pricing. The quarter’s total revenues, paced by men’s, footwear and accessories, increased by 4.6 percent to $346.7 million. North American sales of $287 million were up by just 0.6 percent year-over-year and 2.2 percent from the comparable 2019 period.
For the 2021 financial year, net income ticked 57 percent higher to $119.3 million. Helped by leveraging fixed costs, including store occupancy expenses, the annual operating margin moved to 13.3 percent from 9.8 percent in 2021. Revenues increased by 20 percent to $1.18 billion, with North America contributing $1.03 billion of the total on a 19.1 percent improvement.
Citing the absence of the federal stimulus granted to U.S. consumers last year and current economic uncertainties due to inflation and the Russian invasion of Ukraine, Zumiez is forecasting a meaningful decline in first-quarter revenues to a range of $215-221 million. At the same time, expenses for store wages, training and travel that dissipated during 2021 due to the pandemic will return. While total annual sales are forecast to decline in the low single digits, trends are predicted to improve in the back half from the back-to-school and holiday seasons after a tough first half. The operating profit, meanwhile, should fall in the mid-teens. This year, Zumiez thinks there is a potential upside for its business with better inventory positions in key product areas. The company will continue with its inventory turn and localized assortment strategies this year. It introduced 100 new brands to its customers in the past year.
