), in a drive to be the world's leading action sports retailer, has
agreed to join hands with one of Europe's leading action sports
retail company Blue Tomato. The acquisition will provide Zumiez
broader avenues to strengthen its international base while also
selectively expanding Blue Tomato's European footprint.
The leading mall-based U.S. retailer of action sports allied
apparel, footwear, equipment and accessories, will buy the
Austria-based company for about €59.5 million, plus future payments
of €22.1 million conditioned upon achieving a certain level of
operating performance over the next three years. Zumiez will pay a
portion of the contingent future payments in the form of its common
Blue Tomato, the operator one of Europe's largest action sports
in 14 languages, deals in extensive and diverse collection of
branded snow and skate hard goods, apparel, footwear, and
accessories across Europe. In addition to the ecommerce site, the
company also operates 5 stores in Austria.
Blue Tomato posted solid results for the fiscal year ended April
30, 2012. The company's net sales for the year jumped 27% year over
year to €29.4 million. The company's ecommerce business made for
nearly 75% of its total sales for the year. Net income for the year
reached €3.5 million.
Zumiez plans to complete the acquisition before the close of the
second quarter of fiscal 2012. The company will fund the
acquisition from its current cash balances. Upon closing, the
company believes the acquisition will be accretive to its fiscal
2012 earnings per share, exclusive of the acquisition and
Zumiez indicated that Blue Tomato will retain its present
headquarters, which is at Schladming, Austria, following the
completion of the acquisition. The company also plans to retain all
the current Blue Tomato staff, under the leadership of the former
European Snowboard champion and founder of Blue Tomato, Gerfried
Additionally, Zumiez revised its sales and earnings outlook for
the second quarter of fiscal 2012, assuming to fully acquire Blue
Tomato by July 1. Zumiez raised its second-quarter sales guidance
in the range of $134 - $136 million, inclusive of nearly $2 million
sales from Blue Tomato. The company kept its earnings per share
guidance unchanged at 4 cents to 6 cents, inclusive of the
acquisition related costs and expenses, compared to its earlier
forecast, which excluded these charges. Comparable store sales for
the second quarter are guided in the range of 8% - 10%.
Further, Zumiez's revised outlook for the second quarter
includes expenses of about $1.6 million or 3 cents per share
related to the shifting of the company's ecommerce fulfillment
center to Edwardsville, Kansas as well as its corporate offices to
Lynnwood, Washington from Everett, Washington. It also incorporates
costs and operating impact of about $2.3 million or 5 cents per
share related to the Blue Tomato acquisition.
Everett, Washington-based Zumiez targets young men and women in
the age group of 12 to 24 years, who seek popular brands that
represent lifestyle centered on extreme sports activities. We
expect Zumiez's focus on teenage action-sports based merchandise
and expanding store network to deliver solid performance in the
upcoming quarters. The company competes head-to-head with
Hot Topic Inc.
Pacific Sunwear of California Inc.
We maintain our long-term "Outperform" recommendation on Zumiez.
The quantitative Zacks #1 Rank (short-term Strong Buy rating) for
the company indicates continued success from its growth initiatives
and store expansion efforts.
HOT TOPIC INC (HOTT): Free Stock Analysis
PAC SUNWEAR CAL (PSUN): Free Stock Analysis
ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
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