Operator: Good afternoon, ladies and gentlemen, and welcome to the Zumiez Incorporated Fourth Quarter and Full Year Fiscal 2012 Earnings Call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference.
Before we begin, I would like to remind everyone of the Company's Safe Harbor language. Today's conference call includes comments concerning Zumiez Incorporated business outlook and contains forward-looking statements. These particular forward-looking statements and all other statements that may be made on this call that are not based on historical facts are subject to risks and uncertainties, and actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available in Zumiez's filings with the SEC.
I would now like to turn the call over to Mr. Rick Brooks, Zumiez Chief Executive Officer. Please go ahead sir.
Richard M. Brooks - CEO: All right, thank you and welcome everyone. I'm joined today by Chris Work, our Chief Financial Officer. After my remarks Chris will take you through our financial and operating highlights for the fourth quarter and the full-year and then we will open the call up to your questions.
We delivered a solid fourth quarter with earnings of $0.74 per share. This is above our original projection and brought our full-year to a record $1.35 per share, including significant cost associated with our acquisition of Blue Tomato and cost for the relocation of our web fulfillment facility and corporate offices. These bottom line results were achieved through the successful execution of the growth strategies outlined at the start of fiscal 2012 combined with a partial year of contributions from Blue Tomato operations.
Net sales for the fourth quarter increased 22%, and for the full-year rose 20%. While our comps in fourth quarter were down 1%, we are proud of our overall execution and to achieve a 5% comp gain for entire year. The past 12 months were highlighted by managed strategic approach to extending our reach both domestically and abroad.
In the U.S. we opened 43 new stores in both new and existing markets and continued to build on the (positive) momentum of Zumiez.com. Through the relocation of our web fulfillment center to Kansas we provided this business the adequate room to grow and ability to extend our best-in-class customer experience.
Internationally, we doubled our store base in Canada with the opening of 10 new stores. We also took a major step to increase our global presence with the acquisition of Blue Tomato, which we believe is a premier operator in the large but highly fragmented European action sports market. Importantly, this is an organization that shares the same values as Zumiez, and we believe this cultural match is critical to the long-term growth and success of this venture.
As Chris will explain in more detail in a moment, we have decreased our assumptions around the estimated earn-out associated with the Blue Tomato transaction due primarily to short-term challenges in the face of a difficult European economy. To be clear, though, our confidence of the long-term value this endeavor will create has not changed.
In addition to the global expansion that I've already mentioned, we made progress on initiatives focused on our ability to engage with our customer in our omnichannel retail world and we moved our home office (into building) we own, which we believe will be long-term cost effective.
As a quick recap of the past year, which was significant for us, I think the key takeaways would be that we increased sales and earnings to record levels, while taking important steps in further building a sustainable, long-term foundation for growth.
Shifting focus to 2013 and how we build on these accompaniments, not a lot is going to change this coming year in terms of our primary growth drivers. We believe the best opportunities for this business continue to be; initiatives focused on comparable store sales gains; domestic unit growth; increased ecommerce penetration; and international expansion.
Looking at each of these in more detail, there is still plenty of opportunity for us to grow and further reinforce our leading position in the U.S. market. Our focus on providing highly differentiated product assortments between unique apparel, footwear, accessories and hardgoods brands has and continues to place apart from our competition.
By continuing to offer this unique assortments and providing best in class customer service across all channels, we believe we can weather the ups and downs in the economy and gain market share even as new competitors, large and small enter the space. Further, we will continue to make improvements across all consumer touch points. So the same great experience our customer expects from us is realized regardless of the channel.
One of the keys to our track record at delivering sustainable growth has been consistent improvement in store productivity. During Zumiez's 34-year history, the Company has posted positive annual comparable sales in all but three years, two of which include the recession years of 2008 and 2009. We believe that much of the success we have enjoyed in growing same-store sales is from the direct return on the investments we have made in our people, who are the core of our daily operations. This is a huge point of differentiation for Zumiez. And our ability to drive future comp gains where large part is based by the continued training, empowerment and opportunities we provide our employees.
We currently operate 472 domestic stores and continue to believe in a long-term model of 600 to 700 stores in the U.S. A range we evaluate on a regular basis as we aim for optimum number of units in this market. Internationally, we intent to build out the footprints we have recently established in Europe and Canada. In 2013, we expect to open approximately 60 stores globally.
In addition to our store count, the development of our websites, Zumiez.com and BlueTomato.com are an important element of the multichannel strategies we are developing, and we continue to make investments here in 2013.
We made great strides the past few years developing these channels that still have a tremendous amount of room to enhance our integrated selling platform to drive future gains.
In Europe, we believe there is tremendous opportunity to gain market share by leveraging combined strengths of Zumiez and Blue Tomato. Our European business has performed well in light of the economic headwinds, and while challenges remain, we're confident there's a great deal of potential to build upon our position as the region recovers. As the second largest action sports market in the world, the opportunity in Europe is integral to our long-term plans.
2013 will mark our third year operating in Canada, and initial results of the 20 stores we have opened thus far have been in line with our expectations. With this opportunity to more than triple our existing store base, Canada represents another growth prospect for our overall business.
Chris will take you through the first quarter guidance in a bit, and we'll again refrain from giving full year earnings guidance. However, I would like to comment briefly on our thinking for the year.
We got off to a slow start in February with comps down 9% and believe some of the factors weighing on the recent monthly comps are temporary. But with that backdrop, we'll also be cautious as we project earnings. That said, we continue to believe we're in a period of market consolidation where the best operators will win share. With this in mind, we plan to continue making investments in 2013 to support the strategic growth that we believe will serve us optimally for the long-term.
All-in-all, we remain dedicated to the principles that allow us to build and maintain our leading position in action sports. We believe our unique approach to the marketplace, offering highly differentiated shopping experience through a deep and diverse product offering and exceptional buying experience will continue to separate us from our competition and serve our customers and shareholders well for many years to come.
With that, I'll hand the call over to Chris.
Christopher C. Work - CFO: Thanks, Rick. Good afternoon, everybody. I will begin by reviewing our fourth quarter and full year results, then I'll move on to guidance before opening up the call for your questions. Fourth quarter net sales were $224.4 million, up 22.1% over the comparable period last year. Europe added $19.4 million to our top line in the quarter. North America net sales for the quarter were up $21.2 million, or 11.5% over the prior year fourth quarter.
Our fourth quarter benefited from the addition of 56 net new stores since the end of last year, offset by 1% comparable store decrease in the quarter compared to a 9.7% comparable store increase in the fourth quarter of last year. As a reminder, the fourth quarter of 2012 was 14 weeks compared to 13 weeks in the fourth quarter of 2011. The extra week was worth $7.6 million in sales.
Breaking down the category performance, our men's and juniors apparel both comped positive, while our all other departments comped negative. Comparable store transaction declined for the quarter, partially offset by an increase in dollars per transaction. Dollars per transaction benefited from higher average unit retail prices and increase in units per transaction year-over-year.
Comparable ecommerce sales increased 22% in the fourth quarter, which is included in our reported comparable store sales result. Gross profit for the fourth quarter was $85.7 million or 38.2% of net sales in the fourth quarter, compared to $71.5 million, or 38.9% of net sales in the fourth quarter of last year. The 70 basis point decline in gross margin was primarily driven by web fulfillment and shipping costs as a percent of total sales, including Blue Tomato ecommerce operation, partially offset by occupancy cost leverage. Excluding the impact of Blue Tomato, product margins improved slightly in the quarter.
SG&A expenses for the quarter were $49.6 million, or 22.1% of net sales, compared to $40.2 million, or 21.9% of net sales in the prior year quarter. The increase in SG&A as a percent of sales was due to an increase in web operations as a percent of total sales, including Blue Tomato web operations, partially offset by leveraging fixed costs.
Fourth quarter operating profit was $36.1 million, or 16.1% of net sales, compared to $31.3 million, or 17% of net sales during the fourth quarter of last year. Net income in the quarter was $22.9 million, or $0.74 per diluted share, compared to $18.7 million, or $0.60 per diluted share during the fourth quarter of 2011.
During the fourth quarter, we updated our long-term forecast for Blue Tomato. Based on current results and the outlook for the European marketplace, we've revised the future expectations for this business and as a result adjusted the estimate for the potential earn-out. Therefore, the total impact on fourth quarter 2012 earnings from costs associated with the acquisition were detriment to earnings of $0.5 million, or $0.01 per diluted share, compared to our original projection of $3.0 million, or $0.08 per diluted share. These costs consisted of $0.3 million in inventory step up and $0.6 million of intangibles amortization, partially offset by the benefit of the net earn-out adjustment of $0.4 million.
Turning to the full-year, fiscal 2012 net sales were $669.4 million, up 20.4% over 2011, driven by positive comparable store sales of 5%, $29.0 million in revenue from our European operations and the additional stores opened in North America. North American net sales were up $84.5 million over last year or 15.2%.
During the year we added or acquired 56 net new stores including 10 in Canada and 8 in Europe. There were 53 weeks in fiscal 2012 compared to 52 week in fiscal 2011. Comparable ecommerce sales increased 32% in 2012 compared to 2011, which is included in our reported comparable store sales results. For the year our men's, juniors footwear and hardgoods department all comp positive while accessories in boys comp negative.
Operating income increased 13.8% to $68.5 million or 10.2% of net sales compared to $60.2 million or 10.8% of net sales in the prior year. The 60 basis point decline was driven by 30 basis point decline in gross margin and 30 basis points from deleverage on our SG&A cost during the year.
Gross margin includes the 30 basis point impact from the step up in inventory related to the Blue Tomato acquisition. And SG&A as a percent of sales includes the 80 basis point impact from costs associated with the Blue Tomato acquisition. Net income for fiscal 2012 increased 12.9% to $42.2 million or $1.35 per share – per diluted share compared to $37.4 million or $1.20 per diluted share during 2011.
Let me lay out the impact on the year of certain expenses that should be taken into consideration when looking at our results. One-time costs associated with the acquisition of Blue Tomato were $3.6 million, impacting diluted earnings per share by approximately $0.10, and include $2.2 million in inventory step-up and $1.9 million in acquisition costs that were offset by a $0.5 million foreign currency gain on the transaction. Costs associated with the acquisition that are considered ongoing charges were $3.7 million in 2012, impacting diluted earnings per share by approximately $0.09, and included $2.3 million of estimated earn-out and $1.4 million in intangible amortization.
During 2012 we recognized $2.1 million of exit costs associated with the relocation of our web fulfillment center to Edwardsville, Kansas and our corporate offices to Lynnwood, Washington, impacting diluted earnings per share by approximately $0.04.
Moving on to key balance sheet highlights, we ended the quarter with cash and current marketable securities of $103.2 million, down from $172.8 million at the end of our fiscal 2011. This decline was driven by cash paid for the acquisition of Blue Tomato, capital expenditures related to our new store growth, and cash paid to repurchase our common shares, partially offset by cash generated by operation.
As of the end of the quarter, we had $2.3 million in outstanding debt assumed from Blue Tomato and no outstanding balances on our revolving credit facility.
Capital expenditures for the year were $41.1 million, driven by the addition of 53 new stores in North America and the build-out of our corporate offices.
Inventory was $77.6 million at February 2, 2013, up 19.3% from $65.0 million. In North America, on a per square foot basis, inventory was down slightly at the end of 2012 compared to the end of 2011.
During the fourth quarter, we repurchased approximately 1.3 million shares of our common stock at an average cost per share of $20.43 for a total $25.8 million.
During December, we completed the November 2012 $22 million repurchase program and announced a new program which authorized an additional $20 million in repurchase fund. As a February 2, 2013, we had $16 million remaining from the announced December 2012 stock repurchase program.
Now let me outline our guidance. As always; in putting forward this guidance, we want to remind everyone of the complexity of estimated sales, product margin, and earnings growth; given the variety of factors that impact performance, including challenging macroeconomic condition.
For the first quarter, inclusive of our February sales result released on March 6, 2013, we are planning same-store sales to decrease in the mid-single-digit range and total sales to be in the range of $141 million to $144 million.
We expect consolidated operating margins to be in the 1.5% to 2.5% range, with diluted earnings per share between $0.04 and $0.07. Included in our first quarter guidance is an estimated $1.6 million or approximately $0.04 per diluted share in costs associated with the Blue Tomato acquisition consisting of $1.0 million in estimated earn-out cost and $0.6 million in intangible amortization.
As many of you know, our business is seasonal, with the majority of our sales and earnings occurring in the back half of the year. While our quarterly guidance suggests sales results will improve relative to the February result, consumer sentiment is tough to gauge and there's still uncertainty about the sustainability of an economic recovery. Because of this it is difficult to project the full year with a reasonable amount of certainty. However, here are a few comments on how we're thinking about the year.
We are planning our comparable store sales to increase in fiscal 2013, although we're cautious in our outlook and believe this could be lower than comparable store sales in 2012. We achieved record product margins in North America during fiscal 2012. Our product margins can be impacted by a variety of factors, most notably shifts in product mix, both domestically and internationally. Looking forward to 2013, we expect our consolidated product margins, excluding the impact of inventory step-up, to be down slightly.
We plan to continue making strategic investments that we believe will reap long-term benefits focused on enhancing the customer experience across multiple channels, growing our international footprint and investing in our people and infrastructure to support our domestic and international growth in 2013 and beyond. We expect these investments to slightly deleverage our overall gross margin as well as SG&A for 2013. However, we expect operating profit to increase.
As a reminder, fiscal 2012 included an extra week resulting in a 53rd week fiscal year. While this was a benefit to sales and earnings growth in fiscal 2012, it will be a detriment to sales and earnings growth rates in fiscal 2013. Additionally, the calendar shift will impact sales results by period and quarter throughout the year. Notably, we expect the second quarter to be benefited by the shift of a back-to-school week into the quarter out of the third quarter, while the third quarter will be negatively impacted. The impact to each quarter's sales is projected to be approximately $5 million to $6 million.
Estimated earn-out expense related to the Blue Tomato acquisition is projected to be approximately $4.0 million in fiscal 2013 and the amortization of intangible assets associated with the transaction is expected to be approximately $2.4 million in fiscal 2013.
We are planning to open approximately 60 new stores in 2013, including up to 10 in Canada and 6 in Europe with the cadence similar to our historical opening of two-thirds back-to-school and one-third after. We expect capital expenditures for the year to be between $42 million and $44 million compared to $41 million in 2012. The major capital projects are the new store openings and plan to remodel. We also expect depreciation and amortization to be approximately $28 million and estimated 22% increase over fiscal 2012. We anticipate our annual effective tax rate to be consistent with our fiscal 2012 results.
Finally, our estimated weighted average shares used in the calculation of diluted earnings per share for the full-year is projected to be approximately 30.3 million shares, which includes the impact of $3 million of share repurchases subsequent to February 2, 2013. Any additional share repurchases during the year from the $13 million remaining in our authorized repurchase program will further reduce our shares used in this calculation.
And with that we will now open up the call for some questions.
Operator: Dave King, Roth Capital.
David King - Roth Capital Partners: Rick, I think you've talked in the past about the ecommerce business kind of owning a low volume week generally in how you may have lost 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, I guess particularly in the context of the 22% increase we saw this quarter, but I guess to what extent do you think that's weighed on your recent comp results and could 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 then, how we should think about how you'll benefit going forward?
Richard M. Brooks - CEO: Sure, Dave, I'm happy to give you a little bit more color around how we're thinking about ecommerce. And clearly, for both the quarter and the year, the ecommerce results were a positive to our comp because rates have gained clearly above our mature stores or comp store results. And I always like to make sure that when we talk about ecommerce and stores that I back this all up for a moment and make sure that we're thinking about the idea of omnichannel, and because what we're really doing, and as you've said, we've talked about ecommerce in the past, but what I really want to get there when focused on this idea of what we're really trying to do, which is build an omnichannel model which is integrated multichannel selling platform where you can lease the power of what we're doing with inventory and the brand experience for consumers as well as our sales people in every touch point of the business. So, Dave, that's really been as I'd hog about that is really what we are trying to build, yes, we're also putting I think strength to the pure ecommerce operation. But we still have long ways to go in that front. We don't do a lot of advertising here in the U.S. with our ecommerce business. I think those are opportunities for us going forward. But the primary opportunity is going to continuing to look and build – continuing to look how we build this integrated multichannel selling platform across the organization, and that's really were our growth has been coming from, will continue to come from as I see it over the next year or so, and then – and we are going to continue on some of the pure ecommerce strategies, but the real focus going to be on this omnichannel platform. So, as you think about what we are doing that's number one on the list.
David King - Roth Capital Partners: I mean 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. And I know when we talked about – you talked about leaving some money on the table there, just because it did take you guys arguably little bit longer to start building some of that kind of stuff because you are methodical in your approach to doing it and so.
Richard M. Brooks - CEO: There is no doubt. If you look back again, if you just go back to five years ago our ecommerce business is 1% of our revenue mix and this year Chris, you finish that?
Christopher C. Work - CFO: 8.3 in North America.
Richard M. Brooks - CEO: 8.3; North America, the revenue mix. So, clearly we made some significant progress, and most of that progress, Dave, has been the last three years. So, I'll talk little bit about how we are thinking about investments going forward and I'm not going to talk about specifically the omnichannel efforts we are driving out, because that’s where it gets to be a bit of a competitive issue, exact things we're doing. But in both – to talk about some of the investments Chris talked about in his comments we're making and in my comments also. We're looking to launch a new web platform in both the U.S. and Europe this spring. We will be making continued investments in not just the infrastructure, the technology infrastructure and the business, but also in human capital in both of our web operations and our IT operations to make sure that we can facilitate the successful launch of more omnichannel efforts. So when we talk about the investment we're making, those are really the biggest areas we're looking at and then there are number of projects that are currently underway and will be getting underway relative to – that are scheduled for this year to kind of drive forward those omnichannel initiatives.
Operator: Jeff Van Sinderen, B. Riley.
Jeff Van Sinderen - B. Riley & Company: 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?
Richard M. Brooks - CEO: Sure, I'll give a shot to it, Jeff. And again, as you know this is nothing new in terms of the way we're going to talk. We've been saying this for a number of years now that we think that the game is a share consolidation game and we have been making the argument for a while that we think that in many cases there based upon the change in consumer behavior, the adoption of smart devices, both smartphones and tablets, the always-on connections of high-speed Internet connections and social networks, the ability to communicate easily with your friends that these macro forces have been what is really the driving forces behind this idea – our idea of share consolidation. And I guess at the heart of it which is that consumers simply have new way to shop, new ways to access the information, new ways to comparative shop, to comparative shop for prices, to know where the location is closer to them to buy the product as well as the websites to choose from. It's definitely a world where the consumer has the power and we have been for the last four or five years. This is the world that, that’s the great world for us to work in, and world that we can embrace and I think we can do great things with. And I say probably again because as we talked about the power of our sales culture across organization, I mean we I think are going to live in this new world well. But given that world, when you talk about the power to consumer, the integration of their ability to shop any time of the day, any place, anytime to these new smart devices. I think it simply means that more volume boost towards direct channel in whatever form that may take. And think I that s been the case over the last few years, not just for us but for all of retail, and including specialty retailers or pure play ecommerce players. And I think what it highlights is that there is simply too much physical retail space. When we talk about share consolidation, Jeff, I mean that’s the underlying reasons as we see it for the consolidation that’s taking place and we see again that our perception is that we are in the stages of this idea of omnichannel retail of integrated multi-channel selling. And we are in the early stages, not in the late stages, so this has ways to go. There was going to take a number of years yet for this fully to play out. And that’s why in our comments you heard us talk about. Again, it's driving to make the right investments, continuing to invest in our people throughout the organization as key things that are going to drive our ability to perform well in this kind of environment. So, again to finish that up, the thoughts of with that again it's an evolving world. I think we are adjusting well to it. And I think we have long ways to go.
Jeff Van Sinderen - B. Riley & Company: And then maybe if we can switch to Blue Tomato for a minute, can you update us on what you are seeing in Blue Tomato and their early this year? And then, any key initiatives that you're focusing on for Blue Tomato that maybe aren't ones that you've really talked about yet? And I guess 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?
Richard M. Brooks - CEO: Alright. And I'm not sure, I'll let Chris deal with a lot of part there. I'm not sure we're going to be prepared there. We're still – we got a number of things we're working on building out the long-term models for Blue Tomato and integrating with our five-year planning process, Jeff. But let me start at the high level. We're not going to comment first on how they're doing any time in the current year; so I'm clear about that. But let me just say that since the time we acquired Blue Tomato in what's been a very tough European economic environment, that we have continued to run gains in our Blue Tomato operations, both on a comped level as well as larger gain relative to new stores and gains in their web operations. So, I just like to make that clear to everybody that this is a business that's still growing, and again, I think that makes sense relative to the quality of the operation and quality of the people in the Blue Tomato business as I said in my comments. These guys are a great cultural match with the way we think and the way we operate and they're working incredibly hard. So, we feel good again about the situation there in terms of the quality of our partner, the fact they continue to grow in a tough environment over there; both comp and in total volume, and again, in a very large action sports market that is clearly in a consolidating mode because of difficult economic environment. I think we're positioned well. Now, I also want to say that the key thing about Blue Tomato is not what happened in the last seven months or what's going to happen between now and the earn-out provision. The key thing is about the next 5 and 10 years, because Europe is a huge action sports market. So, when we think about our business, I know you appreciate this and I know our investors do, I mean we're thinking about planning for the long-term, and so as we think about building a big business in Europe, it's going to take us about 5 to 10-year window to do that. So, now, we'll have clear plans for what we need to do to get there, Jeff, and key things for 2013 in terms of investments we're going to make at Blue Tomato, as I mentioned one already, which is we're launching a new web platform this spring to help scale the business there and that's been underway for a while in terms of development just like ours has been here in the U.S. The other things that we're really trying to help our Blue Tomato team with is the roll out of stores, because they believe in an omnichannel model as strongly as we do. And while they are great at what they do, we do bring some expertise around what it takes to roll out new stores. So, we're working them and helping them in their economic models and skills sets it takes to build out the stores and we're going to do both of those this year in Europe, both launch the new website – we expect to see growth in revenue both from new stores as well as the launch of the new website.
Operator: Mitch Kummetz, R. W. Baird.
Mitch Kummetz - R. W. Baird: Chris, just a couple of quick housekeeping items. So, you mentioned – on the 53-rd week you mentioned the sales impact on the quarter. Could you tell us what the earnings impact was?
Christopher C. Work - CFO: We had estimated about $0.05.
Mitch Kummetz - R. W. Baird: 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 the 2012 that includes that $0.05 impact from the 53rd week or are you adjusting that out in terms of saying operating profit up?
Christopher C. Work - CFO: That includes the 53rd week; that's on a GAAP basis.
Mitch Kummetz - R. W. Baird: Okay. And then as far as thinking about Blue Tomato year-over-year in terms of that operating profit up, you mentioned it sounded 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's the impact on Blue Tomato for 2012 that goes into that the (loose) guidance of operating profit that's up?
Christopher C. Work - CFO: Yeah, the full year of 2012 is impacted by we had one-time cost of Blue Tomato of $3.6 million and then the ongoing charges were $3.7 million.
Mitch Kummetz - R. W. Baird: So, you're looking at about $7.3 million combined and again it's a $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?
Christopher C. Work - CFO: That's correct. Those are the numbers that will be included in that concept.
Operator: Edward Yruma, KeyBanc Capital Markets.
Edward Yruma - KeyBanc Capital Markets: Rick, you mentioned I think once in your script that you viewed the pressures on your comp is 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 pressure on the consumer is temporary or is this due to things like ecomm 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?
Richard M. Brooks - CEO: You are right, Ed, we did comment what we said really was that we felt that, there were temporary impacts on February to be clear, and I think most of those are well – have been new covenant and other covenant on the tax refund transition timing and weather and predictably for us relative to year ago. So, those are the kinds of things that we are trying to say there because obviously our first quarter comp guidance implies that we are going to do better than a negative for this quarter. On a full-year basis I think the answer to your question regarding how we are thinking about this, is all of the above. And I think Chris was right in his comments, we need to see continued sustained improvement in our macroeconomic environment generally to make sure we are continuing to feel good about the positive comp. We think we can drive and we have to do the things that we have to execute, which I've commented on earlier here which is, we have a lot of cash to drive our comp results to better planning, more detailed assortment planning, we have our new website launch, we have many omnichannel projects underway that we hope can impact 2013. And we are going to do all the important long-term things in our business by continuing to develop and our commitment to training of our staff and employees. These are things that are long-term instructor that we have yet to do. So, the list is big, there are things we want to accomplish in 2013, but we need both aspects I think to make sure we can drive again relative to the direction we provided which is continuing macroeconomic improvement and that we need to execute on a high level and I'm confident that we have done that historically, I'm confident we can do it here in 2013.
Operator: (Brian Czenszak, Janney Capital Markets).
Brian Czenszak - Janney Capital Markets: This is (Brian) on for Adrienne 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?
Richard M. Brooks - CEO: (Brian), thanks for the question, and we're not going to do that. So, we just typically don't want to comment on categories. We'll talk about general direction for the years, but in terms of the high level what we expect and in terms of our thinking as Chris has done. But we're not getting into category thinking at this point. And again, the primary reason for us for that is that we have a very, very broad, diverse set of categories as we do with brands and our strength is diversity of all those, and that our history for many years as you look again in our comments about how we've said we've been able to drive comps, it's not only the great – our long-term investment in our people, but it's the product strategy too; diversity of brands, diversity of categories, that allow us to react quickly to the marketplace as the market changes. So, your question presumed, I know what those changes will be; I don't, but I'd tell you, I have great confidence again that our teams will stay on top of it; that we have good plans in place to drive volume and we'll react in markets as necessary.
Brian Czenszak - Janney Capital Markets: I was thinking specifically on, I think, across the spectrum, now we're seeing a little bit of an uptrend in juniors and I know you guys have been positive comping for a while now hundred juniors business, and particularly I was wondering if there's – if you have any kind of idea of – if you're seeing that as well of 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.
Richard M. Brooks - CEO: Well, again, as you saw from our February results and the fourth quarter results, our junior category – the junior department has comps positive and I think you know that we generally deliver those in the order of magnitude of how they're performing. So, you can certainly derive that our juniors business has been doing well. I think it's been on an uptrend, as we've talked over the years about the changes we made in juniors. I feel that we have built a more sustainable juniors business in terms of the strategies we're executing in our juniors operation now. We built a bigger stronger team there in our juniors business, and at the peak, I think mix of juniors apparel historically has been as high as 15% of our revenue – and last year, Chris it ended at, do you have that?
Christopher C. Work - CFO: I do have. Our juniors was about 11%.
Richard M. Brooks - CEO: So, now it was up, right, over previous year.
Christopher C. Work - CFO: That's correct.
Richard M. Brooks - CEO: So, now, your last part of your question, (Brian) is, are we going to try to maximize? Well, that's our job and you will certainly see us run at those opportunities.
Brian Czenszak - Janney Capital Markets: Definitely. No, 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 the fourth quarter, that would be great?
Christopher C. Work - CFO: Yeah, sure. So, ending square footage was 1,480,000 square feet.
Operator: Richard Jaffe, Stifel Nicolaus.
Richard Jaffe - Stifel Nicolaus: Just two thoughts. One is about the sneaker business. It's been a challenge. I'm wondering if you have any visibility on that business becoming more robust in 2013.
Richard M. Brooks - CEO: Okay. Richard, again, I typically don't comment on the individual carriers, but because we have in this case, because it's been a bit tougher business for us, we always like to be as transparent as we can about our thinking in those areas. As you know, our men's, really, as we've identified it as being men's that has really been the tougher one here through really October forward I believe and through February. And so we're just not standing pat, right. We're trying to take the efforts, drive some initiatives that we believe can improve the business. We have some things that we think we can do that relative to making sure we have the optimum brand presentation at each location, right mix of products in terms of styles, those are all things that we have worked and our footwear team has worked hard on, Richard, here over the last – particularly last two months as we head into spring. So we see some signs of encouragement there, but we are, I think, after a four-year positive footwear cycle that we're going to have some headwinds here in footwear. So I think we can minimize the impact of those headwinds, but I'd expect that we're going to, again, have to let our results speak.
Richard Jaffe - Stifel Nicolaus: Any thoughts on bricks-and-mortar in Europe in terms of building stores over there, or is it premature?
Richard M. Brooks - CEO: No, we think there's an opportunity there to build some stores and our intent Chris in terms of store growth in Europe this year?
Christopher C. Work - CFO: We plan to open up to six stores in 2013.
Richard M. Brooks - CEO: And again stores (will be) something different there, Richard, but we think the opportunity there in Europe is the same one here in the U.S., which is in more mature markets there is the opportunity to really leverage cross-channel selling platforms. And again, it will be a bit different in Europe in terms of the store formats and they are just different markets country by country, but it's a good opportunity, and I think that's again where our strength with Blue Tomato we're going to both lever each other's strengths in terms of how we put that all together.
Operator: Dorothy Lakner, Topeka Capital Markets.
Dorothy Lakner - Topeka Capital Markets: Just as a 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 have learned with the loyalty program launch last year, Zumiez and how that’s going?
Richard M. Brooks - CEO: And again this won't be surprising for how we are thinking about the stores we're adding in Europe, we are going to be adding those stores in Austria and Germany, will be where the new stores will be focused and those are the two strongest markets for Blue Tomato in terms of their web performance. And so actually we are leveraging our expertise and knowledge about where those stores should go based upon the web performance in markets in both countries. So, you will see us, I think we have a great opportunity just between those two countries initially and then again as time goes by we will be able to have longer term plans what I'm thinking. But again I want to make sure, it reminds me when that Blue Tomato is a great opportunity but it's going to take a while before it really moves the needle here because it's a small business at this point and that is the great opportunity that exist for us. Loyalty is the Stash program. We are now just about seven, eight months into it, Dorothy, and our primary focus is over these last few months and it will continue through the next five to eight months, nine months, is going to focus on really acquisition of members for the program. That's the key point right now because we need to have a significant enough database of members that we can really draw conclusions from the data that we're getting from the program. So, I would characterize it is too early yet to really use – to be in their data mining, the data that we are learning; not that we're not, we are at very high levels, but the real focus is on working to gain across all our platforms, stores and the web to drive people to sign up for the program, and you'll see that being the primary focus because it's about getting critical mass and involving kids in it. I can tell you that kids are involved in it, they're having a great time with it, and we have lots of redemptions here over the last few months, and that shows that kids are using the program.
Operator: Simeon Siegel, JPMorgan.
Simeon Siegel - JPMorgan: 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, I mean your brand turnover and product offerings have clearly been impressive. Are you seeing anything new out there in terms of new brands?
Richard M. Brooks - CEO: I'll start Simeon on the brand side and then let Chris follow up on whatever further he'd like to say on the – talking about the quarter. No, we are, as you would guess, we are always working closely with our young brands, and we have a lot of brands just in a handful of stores, because that's where it's relevant for them and again our mission is always to be a great partner for our brands, no matter what their size. So, we want to do what’s right for them, we want to grow them smartly in our world and we're not the Company that's going to say, let's go into $100 when they should in 25. We're going to make sure they work in 25 first or 10 first and because that's what's in the best interest of the brand and making sure that the product never gets markdown, right. But we have enough products in the right market to meet demand that they have for the product. As you know, we want to sell products at full price, so doing it right and being a great partner for these young brands is really an important part of what we do. And that's why you have to have a long-term view on these brands too. As you know, we have brands that are top brands today that we sold for, they have been in our – in part the Zumiez brand family for 10, 12 years, but it really the first probably eight years of that we're just working together in a quality way. So, what we are trying to do with young brands, it just faster and help and assist and listen to what their interest and needs are, and I feel pretty good about the young brand pool at this point Simeon, but as you know, it will be up to everyone doing the job right and the young brands to execute highly in their part in term of their great product to make sure that they have great marketing, to go with the great product and that they manage distribution well, because as you know where a brand is as much where you see and what other brands you see it with as it is the great product and a great marketing. So, these young brands can take a long time to work with and develop, and we want to do what’s right for them. So, I feel good about the pipeline that being said, it all has to work over a period years and so I feel good about where we are at today. I think we have some really interesting things going on, and we're doing a number of tests in how we even (group brand as) collections across the country and we'll see how those brands play out and not just this year but beyond.
Christopher C. Work - CFO: And to get back to your other question on a calendar shift, I think the most important thing to think about is to really look at March and April together, right, and maybe the shift of Easter is not unusual to any given year. However, this year is even a little more challenging because of the calendar shift as well because of the 53rd week in 2012 and 52 weeks in 2013. So from a comp perspective we expect the shift to be a detriment to March and a benefit to April. The important week before Easter falls in March during each year. However, Easter day falls into April, and that is typically a lower volume day. From a GAAP perspective we expect the Easter shift to be a benefit to margin, a detriment to April as the week before Easter is in April in 2012 and it's in March in 2013. So just a few items there, but again I can go back to the longer-term view of really looking at the two months together when considering the comp.
Simeon Siegel - JPMorgan: And then just quickly, I think I missed, how much did you say the North American ecomm sales were this past quarter?
Christopher C. Work - CFO: Past quarter we said it was up 22%.
Simeon Siegel - JPMorgan: Well I think you've given a penetration rate. I just missed it. Did you say what it was as a percent of sales?
Christopher C. Work - CFO: For the year it was 8.3% in North America.
Operator: Christian Buss, Credit Suisse.
Christian Buss - Credit Suisse: Yes, 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?
Richard M. Brooks - CEO: Again, our Board on a regular basis takes a look at our look at future cash flows and considers what we need to do relative to managing our cash positions. So, a lot of that's left with the Board there. We give them direction and guidance. I mean we have been a good cash generator for many, many years. So, you know what the plan is at this point as our Board hasn't made any other plans in what we put forth in terms of the buyback program that's in place today. As far as where we take leverage on, again, I think our perspective today is that as a retailer we actually have a lot of leverage – it's just off balance sheet relative to our commitment and our future cash commitments on leases. So, at this stage of the game, I don't believe it's something the Board has considered an option in our world that we would lever to for the purpose of buybacks. That's not something I think the Board has considered, because in our world we really think we have a levered business relative to the amount of future cash commitments we have with our long-term leases.
Operator: Linda Tsai, ITG.
Linda Tsai - ITG: What’s the historical percentage of sales your new stores have opened up relative to mature ones and have do these stores that opened in 2012 compared to this?
Christopher C. Work - CFO: Historically our new store shave opened around 70% to 75% of mature store base and our 2012 stores have been consistent with our historical pattern.
Linda Tsai - ITG: And then can 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 sets interested in skate and how can you have possible limit that you're downside risk to the trend?
Richard M. Brooks - CEO: Sure, Linda. And first I'll just remind, we have a really big footwear business as relative to the size of our business. And last year we were at roughly, Chris, about 23%, is that right?
Christopher C. Work - CFO: Yeah, 23%.
Richard M. Brooks - CEO: 23% of our business is the footwear business, and the significant portion of that is our men's footwear business, Linda. So, I don't want you to think that this – this is an important part of what we do and we are very focused on it. Now, as you said, it's clear that there is a performance athletic trend; basketball footwear trend just from a fashion point of view cycle going on. That, as we have said, is a bit of headwind for us. But there are things we can do in terms of trying to minimize the impact of that, and it's clearly about getting the right presentation, the right location, the right brand mix for each location now. And we are certainly doing that. So, again, our proof of that will be how we do here over the next few months and the first six months this year and then into back to school. So, that will prove whether our opportunities to minimize those trends work out. So, at this point that's kind of where we stand.
Linda Tsai - ITG: And then what's your outlook for AUR in Q1 and in 2013?
Richard M. Brooks - CEO: I don't think we give specific direction on that, Linda, but let me just say that I have been pleased over the last few quarters and particularly in February about the fact that our dollars per trans have been driven by both AUR and units per transaction, and again, I think that reflects the quality of our sales team out there in the stores to finally see that UPT number would be part of the driver of what's going on with driving dollars per trans higher. So, I would expect generally that the trends you've seen in the last few months would be similar to the trends we'll see here over this next quarter.
Operator: Stephanie Wissink, Piper Jaffray.
Stephanie Wissink - Piper Jaffray: Just a really quick housekeeping item, Chris. Circling back on Mitch's earlier question on the cost included related to Blue Tomato. So, 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?
Christopher C. Work - CFO: What we've done and we'll continue to do is we'll provide GAAP figures that are inclusive of the costs of Blue Tomato or any other unique activity and then we've just called out what the dollar value of those items are for you guys to make your own conclusions around what's included or excluded.
Stephanie Wissink - Piper Jaffray: So, maybe just ask a different way, the earn-out provision in the amortization, those are ongoing items that will continue even after the anniversarying of the closure of the deal?
Christopher C. Work - CFO: That's correct. Yes, so the earn-out is evaluated over a 34-month period ending April 30, 2015, and the amortization of the intangibles is over a 36-month life or three-year life of those intangible assets.
Stephanie Wissink - Piper Jaffray: Then my question for both of you is as you are thinking about the comp rate net of the ecomm growth, if you are looking at just the stores business, if you could just help us reconcile kind of what that figure is, where it's trending, how you are 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 it more of a normalized basis and the ecommerce is really adding to the overall lift in comp?
Richard M. Brooks - CEO: We do disclose some of that and I'll let Chris talk about the numbers, but I just want to discourage you even to think about like that, because this – as we've been talking about throughout, we are building an integrated multichannel selling platform. What happens in stores, what happens online are completely integrated. I can't tell you whether a customer starts on online anymore and buys in store, or vice versa. The interconnectivity what goes on, it is completely driven by the consumer and you need to think about it in integrated way. So while we do call out what it is, that's not the way we're thinking about running the business, and I would encourage you analysts to think about it differently, and I think as we go forward over the next 3 to 5 years we're going to have to reinvent the way we think about these metrics, because I can tell you that we are successfully building an omnichannel business platform, an integrated multichannel selling platform, and we're having great success with our efforts doing this, and because of that what you're asking us to do I think is we can certainly do it, and I'll let Chris address it at some level here, but I would discourage you from thinking about the business like that because that is simply not the way it's working.
Christopher C. Work - CFO: And just to answer your question Steph, as we break out our sales the way that we define them, store sales were up 2.9%, and our ecommerce sales were up 32% as we mentioned on the call. So the combination of those two is the 5% comp that we disclosed.
Operator: Paul Alexander, Bank of America Merrill Lynch.
Paul Alexander - Bank of America Merrill Lynch: Rick, could you talk about the long-term store goal in North America. I know you framed it at 600 to 700 and in the past you talked about wanted to open up the domestic stores at a pace about 8% to 10%. So, just thinking about how fast you are opening the North American stores or just American stores exiting or taking out Canada this year. You are going to get – at that pace you are 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 slowdown or slowdown as you approach that range or should we be thinking that maybe you might reevaluate and blow through that range?
Richard M. Brooks - CEO: Great question, Paul, and as you were – that we are thinking about those questions ourselves a lot, I mean having those conversations with our Board. And so let me just say again that, we are saying it's a range of 600 to 700 stores and as we said in our comments that we are regularly we evaluate what that range is and if we said that because of the idea of that omnichannel business model. And we also said in our comments right that we want is the optimal number of stores to meet the needs, meet the demands that our consumers have for products. So, I don't know what the exact number is, Paul, and that's why we are saying we are going to obviously be looking at it closely on a regularly basis as to what we are learning, and that's why we are making all these efforts in omnichannel, that's why we are executing on this Stash program and many other things we are doing internally. If so we can make the right decision. Now, we are also be working out portfolio stores aggressively, so low-end stores, if you go back five years ago, we would tell you we have closed five stores in the history of the Company. I think, Chris, we closed last year?
Christopher C. Work - CFO: Five stores.
Richard M. Brooks - CEO: Five stores, so we are going to expect us to work much more aggressively on the low end of our store portfolio and make sure that again we're calling the low end to make sure where we believe we don't need those stores to meet market demand. So, I don't know exactly where the number is. So, you should think about that 600 to 700 as – it's somewhere in that range. I don't know where it is, but we're going to figure out over the next few years. And in no case though, I want to make this really clear, do we think that there is any less revenue to be had, right, that doesn't really matter where we end up in that 600 to 700 range, we're modeling the same amount of revenue as how we're capturing the revenue, Paul. That is the key thing and in which channel we're capturing it, whether it be purely ecommerce, will it be in-stores or whether it be in integrated omnichannel world. So, that kind of addresses just at the high level how we're thinking about 600 to 700 and what that means. And I don't know what the right – I don't know what the exact number is, but we'll figure that out here over the next few years into working and managing the store portfolio. The rate of growth, I hear what you say. I think we are looking at those numbers the same way. So, let's talk about international – or we'll talk about domestic and then come back and maybe talk a little bit about international too. As we said throughout our comments and the questions today, we believe that we're playing to a large extent a share consolidation game in this world where fundamentally consumer behavior has changed. So, at this point, I don't think that you're going to see us probably slow the rate of store growth, because again, in an omnichannel world, stores and our ecommerce platform are integrated in how they're working together. And we want to go out there and meet consumer demand wherever that demand maybe and stores are a big part of that. So, in consolidating share world, it's important that we're out there growing stores at the rate I think we have been historically. So, at least for now you are going to hear me say that we are continue to grow our domestic stores about the same rate we have over the last couple of years. Now we also have international growth opportunity and as we said in the comments, lot of growth to go yet in Canada, we can more basically double – I think probably more than double the number of stores in Canada here over the next few years and likewise in Europe. I think we have tremendous growth opportunities there, both again on omnichannel stores and growth on the ecommerce side. And then as you know we are always looking at what’s next. We are good long-term planners. I think we have demonstrated that over the years and we view ourselves as the growth business and so we think there are lots of opportunities for us to grow our business over the long-term.
Operator: Ladies and gentlemen, that concludes the time allotted for questions-and-answers. I'd now like to turn the call back over to management for closing remarks.
Richard M. Brooks - CEO: All right. Thanks. Just in closing, I just want to take a quick moment, it is the closing of the year for us and I want to take this as opportunity to say thank you fellow employees for their hard work and dedication in what’s another solid year for us here at Zumiez. Likewise I want to say thanks to our brand partners for their support, we value it greatly. And then lastly just thanks to you, our analysts and investors for sharing in our long-term vision for where we think Zumiez can go. So, with that I'll say thanks again, and then we look forward to talking to all of you in May for our first quarter results. Thanks.
Operator: Thank you for your participation in today's conference. This concludes the presentation, you may now disconnect. Good day.