Operating profit slipped 98.6 percent to $497,000 against $34.3 million for the period ended April 30, as turnover fell 20.9 percent to $220.7 million versus $279.1 million. The retail operator of 741 doors worldwide, including 69 in Europe under the Blue Tomato banner, reported a net loss of $397,000 against a profit of $26.4 million. Product margins were strong across all geographies, but shipping, labor, and logistics expenses came in higher than forecast.
Despite the period results, Zumiez remains bullish on its prospects in Europe, where it’s close to becoming profitable and plans to open 14 stores this year. In the first quarter, the retailer’s international segment sales, consisting of Europe and Australia, rose 13 percent (C$ 21.8%) year-over-year and were up 37.5 percent from Q1/19 to $34.4 million. North American sales slid 25 percent to $186.1 million year-over-year and were down 0.9% from Q1/19.
“This is a good time to invest (in Europe) given where the market’s at,” Zumiez CFO Chris Work told analysts. “You’re going to see us…open 14 stores in Europe this year. We’ll open some new markets. We did open our first store in Norway, and we expect to continue to grow across Europe…We’re one of the largest lifestyle retailers operating across Europe at this point. And I think we have a lot of room for growth.”
Zumiez believes that scaling its retail operations outside the U.S. will give the segment more opportunities to grow product margins that currently trail those generated in the domestic market, where it operates 601 stores.
The company believes it’s “feeling good” about its expanding European business, despite an operation that is currently losing millions of dollars, which will soon result in a bottom-line contribution from the segment.
