Q1 2021 Zumiez Inc Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the Zumiez, Inc. First quarter fiscal 2021 earnings conference call. At this time, all participants are in a listen only mode.

We will conduct a question and answer session towards the end of this company.

Before we begin I'd like to remind everyone of the company Safe Harbor language. Today's conference call includes comments concerning Zumiez, Inc. Business outlook and contains forward looking statements.

These 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 uncertainty 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 isn't there.

Oh boy and Zumiez filings with the SEC at this time I will turn the call over to Rick Brooks, Chief Executive Officer, Mr. Brett.

Hello, everyone and thank you for joining us on the call today with me is Chris work, our Chief Financial Officer.

I'll begin today's call with a few remarks about the first quarter, then I'll share some thoughts on sales for the second quarter to date.

Before handing the call over to Chris who will take you through the numbers after that we'll open up the call to your questions.

As you saw from our earnings release issued earlier today fiscal 2021 has gotten off to a historically strong start with sales of $279 million and EPS of $1 <unk> 3.

Both of which by far exceeded our expectations.

Given the impact of Covid had on our business a year ago. When our stores were closed for approximately 50% of of days available during the quarter. We anticipate that results will be up meaningfully compared with 2020.

Despite a slower start to this year's first quarter, we still expect at that sales would exceed Q1.2019 at some of the headwinds we faced in February of abated and economy benefited from government stimulus.

That being said we were not anticipating net sales would increase more than 30% of the same period 2 years ago, particularly because of a portion of our global store fleet remains closed.

Our performance at Torrance amidst very challenging conditions last year and more recently as the operating environment has improved underscores our market leading position and the strength of our business model.

The work that this organization has been doing to execute the long term consumer centric growth strategy, the zumiez been building and evolving since its inception.

At the company in a position to successfully navigate the pandemic and now capitalize on the uptick in demand, we're seeing from an economic recovery being boosted by record stimulus.

In addition to capturing a meaningful share of the increase in consumer spending our record first quarter profitability reflects a shift back to a more historical mix between our store and digital channels.

As customers, becoming increasingly comfortable returning to in person shop at.

This is a very parts of development given the enriched brand experience that can be achieved human to human.

And the importance of our stores to the 1 channel cost our cost structure, we built as part of our differentiated approach to retail.

Looking ahead, we feel good about our ability to continue to exceed both 2020 end 2019 sales levels over the course of the year.

However at the same magnitude we did in the first quarter as we face tougher comparisons and the benefit from stimulus is likely to fade.

The second quarter has started strongly with may total sales, increasing 42% year over year end up 31 per cent compared with me 2019.

While the near term is difficult to predict as markets recovered from the impact of the pandemic at different paces. The long term outlook for Zumiez continues to brighten.

As I said on our last call, what we expected to happen within the retail industry over several years in terms of of consolidation of winners and losers in retail has significantly accelerated.

Our performance over the last 12 months clearly demonstrates of competitive advantages of our model and underscore the strength of our brand culture and best in class teams that are working to serve the customer in each of the markets, which we do business.

Thanks to these cornerstones of our foundation, we move forward with confidence and our ability to continue to gain share and drive results.

Key to our success has been and will be our work will continue to be our dynamic teams or 1 channel mentality and our advanced in store fulfillment capabilities, including Zumiez delivery, which takes our best in class sales teams directly to our customers store.

While elements of our model have and will continue to evolve in the years ahead.

Our overarching consumer centric strategy rooted in strong brand and culture will remain constant.

We build of business in which we partner with great brands to bring diversity and uniqueness to our customers that allows them to individually.

We've built an infrastructure in which a customer can shop with us to get what they want when they want how they want and as fast as they want we've.

We've morphed our business into a channel this organization with inventory visibility from all touch points and back end capabilities allow us to effectively leverage expenses, regardless of the channel in which sales originate.

The work together has been significant and the path ahead will require further focus to move even faster to serve our customer.

Therefore, we remain steadfast in our commitment to continuing to invest in our future.

We know at times of disease create opportunities with the right people strategies and resources in place, we are well positioned to emerge from this crisis, a stronger brand than ever before.

With that I'll turn the call to Chris to discuss the financials.

Thanks, Rick and good afternoon, everyone. It's been a record start to fiscal 2021 with the results of well exceeded our expectations with our stores closed for approximately half of the quarter last year due to the pandemic I'll provide comparisons to both the prior year end first quarter of fiscal 2019, where appropriate.

Following my review of our first quarter results I'll provide an update on our second quarter to date sales trends before providing an updated perspective on how we are thinking about the full year.

First quarter net sales were $279.1 million up 102, 6% from $137.8 million on the first quarter of 2020 and up 31, 1% from the $212.9 million on the first quarter of 2019 compared with the first quarter of 2019 of the increase in sales was driven by the net addition of 15 stores and comparable store sales.

Growth of 34, 2% of.

Our stores were open for approximately 94% of potential operating days during the first quarter of 2021 compared to 50% in the first quarter of 2020 at 100% in the first quarter of 2019.

From a regional perspective, North America net sales were $248.7 million on increase of 113, 4% over 2020 and up 32, 3% compared at the same period of 2019 other international sales, which consists of Europe, and Australia were $34 million at 43, 2% from last year end of 'twenty.

1.7% from 2 years ago.

Excluding the impact of foreign currency translation, North America net sales increased 112, 6% and other international net sales increased 29, 1% compared with 2020.

Both of our European and Canadian operations had impactful COVID-19 related store closures during the first quarter of this year and they were open for approximately 40% and 77% of the available operating days respectively.

From a category perspective, all categories were up in total sales from the prior year with men's being our most positive followed by accessories hardgoods womens and footwear.

First quarter gross profit was $103.2 million compared to $23.7 million on the first quarter of last year and $66.5 million on the first quarter of 2019.

Gross margin as a percentage of sales was 37% for the quarter compared to 17, 2% in the first quarter of 2020 and 31, 2% in the first quarter of 2019.

The 1980 basis point improvement from the first quarter of 2020 was largely due to 200 basis points of leverage in our occupancy costs, including the impact of the continuation of rent charges in 2020, while stores were closed and.

In addition product margin increased 390 basis points as we gained 340 basis points related to.

And we gained 340 basis points related to the leverage of fixed cost and fulfillment and distribution with a significantly higher level of sales.

Gross margin improved 580 basis points from 2019, driven largely by product margin improvement occupancy leverage and reduced reduction of shrink as a percentage of sales.

SG&A expense was $68.9 million or 24, 7% of net sales in the first quarter compared to $51.6 million of 37, 4% of net sales a year ago and $65.5 million of 37% net sales 2 years ago compared to 2020, the 1270 basis points.

Increase in SG&A expenses as a percent of net sales resulted from meaningful leverage of our fixed costs on higher revenue base in 2021 compared to the prior year when we experienced significant store closures due to COVID-19.

The most significant improvements were 620 basis points of leverage in our store wages 520 basis points of leverage on other store costs during.

340 basis points of leverage in corporate costs.

And these improvements were partially offset by 180 basis points related governmental subsidies in the prior year that did not repeat in the first quarter of 2021.

110 basis point increase in incentive compensation.

Operating income in the first quarter of 2021 was $34.3 million of 12, 3% of net sales compared with an operating loss in the prior year of $27.8 million of 22% of net sales.

In the first quarter 2019, we had an operating profit of $1 million or 5% of net sales.

During the quarter, we recognized flow through on incremental sales of 44% from the first quarter of 2020 and 50% from the first quarter of 2019.

Net income for the first quarter was $26.4 million or a dollar of 3 per share. This compares to a net loss of $21.1 million or <unk> 84 per share for the first quarter of 2020, and net income of zero point $8 million or <unk> <unk> per share for the first quarter of 2019.

Our effective tax rate for the first quarter of 2021 was 25, 7% compared to 29% on a year ago period.

Turning to the balance sheet the business ended the quarter on a very strong financial position cash.

Cash and current marketable securities increased 84, 3% to $404 million as of May 1.2021, compared to $217.2 million as of May <unk> 2020 the.

The increase in cash and current marketable securities was driven by cash generated through operations, partially offset by capital expenditures.

As of May of <unk> 'twenty 'twenty, 1 we had no debt on the balance sheet and continue to maintain our full unused credit line of $35 million.

We ended the quarter with $136.5 million of inventory essentially flat with the end of Q1, 2020, and Q1.2019 on a constant currency basis, our inventory levels were down 3.2% from last year overall of the inventory on hand, as healthy and selling at favorable margins.

Now to our fiscal May sales results net.

Net sales for the 4 week period end of May 29, 2021 increased 42, 4% compared to the 4 week period end of May 32020.

Compared to the 4 week period ended June <unk> 2019, net sales increased 35%.

From a regional perspective net sales for our North America business for the 4 weeks ended May 29, 2021 increased 45, 9% over the comparable period last year and was up 27, 9% compared to the 4 week period ended June <unk> 2019. Meanwhile, our other international business increased 19, 9% versus last year.

<unk> increased 54, 9% compare at the same period of 2019.

From a category perspective, all categories were up in total sales from prior year with the exception of hard goods men's was our most positive tire category, followed by accessories footwear and women's.

In terms of comparable sales for May because we only had a portion of our stores open long enough to be included in the comp base last year combined with the accelerated shift to online spending as a result of COVID-19. We are comparing may 2021 results to May 2019 results for the 4 weeks ended May 29, 2021 comparable sales increased 32.

9% compare at the 4 weeks ended June <unk> 2019.

Due to limited visibility on the business, we will not be providing specific guidance for the second quarter of 2021 or the fiscal year that said based on our first quarter performance EMEA results. We do want I gave you of directional update on our expectations for the year.

Concerning revenue for the full year fiscal 2021, we have previously projected that we would exceed 2019 revenue levels given the significant growth from 2019 in the first quarter and the strong <unk> results to begin in the second quarter. We now believe that fiscal 2021 net sales will grow in the low to mid <unk>.

<unk> from fiscal 2019.

On a quarterly basis year over year comparisons between fiscal 2020 in fiscal 2021 will be challenged due to the seasonality shifts caused by the pandemic as previously discussed throughout the year, we will be comparing our results not only of 2020, but also into 2019 anticipating a return to more normalized seasonality.

Examining the high level impacts by quarter from 2021 to 2020 and 2019 for the remainder of the year. We note debt in the second quarter of 2021, we anticipate that the impact of the stimulus will begin to wane and as a result growth rates will slow from the first quarter of 2021, However, with our May results and current trends on the business.

We anticipate that we will see double digit sales growth from fiscal 2019 in the second quarter of this year, which translates to high single digit growth to low double digit growth from our record setting second quarter and fiscal 2020.

As we looked at the back half of the year, we grew sales year over year on both the third quarter end fourth quarter of fiscal 2020, compared with fiscal 2019, despite the challenges of the pandemic.

Considering the muted back to school season in the prior year due to much of the country employing remote learning and restrictions still in place during the 2020 holiday season. We are encouraged about the potential in 2021. We currently anticipate fiscal 2021 sales growth compared to 2020 to be in the low to mid single digits for.

Our third and fourth quarters.

Moving on to gross margin 2021 gross margin is currently planned to grow year over year, driven by a reduction in shipping costs as web revenue normalizes with stores being open and leverage of oxy costs on increased sales product margin improved by 70 basis points in 2020 versus 2019 to record levels and grew for the fifth.

Year in a row, we are planning project product margin in 2021 to improve over 2020% of the year.

Fiscal 2021, SG&A costs are expected to increase slightly ahead of our sales growth from 2020 for several reasons related to the pandemic. The drivers of this include store wages and benefit reductions in 2020 due to store closures and reduced mall hours that are not anticipated to repeat in 2021 Gov.

Governmental subsidies received in 2020, not anticipated to repeat in fiscal 2021, an increase in costs related to training and recognition events that work foregone in 2020 due to the pandemic and increase in marketing events and other related spending that were not possible at the restrictions of 2020.

And the increase in travel costs on the back half of 2021 with very little travel included in our fiscal 2020 of results.

In summary, we expect to see expansion in gross margin, while SG&A expenses grow much closer with overall sales.

On a net basis, how are we anticipating operating margins will be up year over year in fiscal 2021, reaching double digits as a percent of sales.

We are currently planning our business, assuming an annual effective tax rate of approximately 26% in fiscal 2021, compared with 25, 6% in fiscal 2020.

We are planning earnings per share to increase meaningfully in fiscal 2021, compared with fiscal 2020 with a strong start to the year, we just disclosed throughout.

Throughout the remainder of the year, we anticipate the more expenses will come back into the model of Covid restrictions on reduced such as store payroll related to capacity and hours travel training and other costs discussed above.

With more moderate sales increases expected in future quarters. We are currently planning of the majority of our 2021 EPS growth to be attributed to the first quarter of the year is.

As an example, we are anticipating our second quarter EPS will be down from the prior year. When we had a record setting second quarter and saw a surge in sales of stores reopened at the initial shutdowns, while we experienced minimize expenses due to the controls put in place to conserve cash resources.

In the event our sales estimates exceed those outlined today, we would expect of strong flow through on incremental sales.

We are planning to open 22, new stores in fiscal 2021, including approximately 5 stores in North America 12 stores in Europe, and 5 stores in Australia, we are planning to close approximately 5 to 6 stores during the year cash.

Capital expenditures are planned to be between $20 million and $22 million in fiscal 2021, compared with $9.1 million in fiscal 2020.

The majority of our capital spending will be dedicated to new store openings and planned remodels.

We expect that depreciation and amortization, excluding noncash lease expense will be approximately $23 million in fiscal 2021 compared to $23.5 million of fiscal 2020.

And we are currently projecting our share count for the full year to be approximately $25.8 million shares any share repurchases during the year, we will reduce our share count from this estimate.

We are very proud of the effort of our teams and our financial results to start 2021, our long term strategies have allowed us to outperform the marketplace in a period of time that continued to be heavily impacted by the unusual events of the pandemic and enhanced economic stimulus. We believe our operating model is strong and then we continue to have good opportunities for top and <unk>.

Online growth in the future at.

As we looked at the first quarter of 2022, we anticipate it will be challenging to replicate the results we experienced in the first quarter of 2021. However, we continue to make confidence in our ability to drive long term value for our shareholders into the future.

And with that operator wed like to open the call up for questions.

Thank you, ladies and gentlemen to ask a question you will need to press star 1 on your telephone to withdraw your question cost of Harrington. Please.

Please standby, while we compile the Q&A roster.

Our first question comes from Jeff Van <unk> from B Riley. Please go ahead.

Good afternoon, everyone and let me say congratulations on the strong start to the year.

Can you give us your latest thoughts on supply chain I'm just wondering how.

How the challenges of shaking out there what's improving.

And I guess, how youre managing inventory as you think about.

What would normally be at traditional back to school period.

I'm just wondering in terms of perhaps some pull forward that you saw in Q1 or you might be seeing in Q2 for schools, maybe not so much of Q2, but schools of reopened in Q1.

Just maybe maybe you can help frame that for us.

Sure, Jeff I'm happy to take the question I think from a supply chain perspective, we talked a lot as we moved across 2020 of the challenges related to supply chain and getting product in getting the product we want at especially in some of the longer turn categories within our assortment like footwear and hard goods that just take a little bit longer than the <unk>.

<unk> business.

That challenge is still there today I would say at a much more minimized level. It was pretty strong through Q3, and Q4 and even at the beginning of the first quarter, Although we do feel like our buying teams and our vendors have done a great job really trying to catch up we still are seeing some delays at port and some other challenges within the <unk>.

Ecosystem, but I think there are things, we're kind of learning to work around in and.

And planning through so I think we feel pretty good about where we are from an overall supply chain perspective on the inventory side as you saw our inventory levels were pretty pretty strong and we feel really good about.

Our current day are and where they stand across all of our entities.

As we think about back to school. This is 1 of the challenges of a year like this obviously.

In Q1, we had to chase a lot.

We performed at.

Exceptionally beyond our expectations.

And so the teams continue to work with the brands to to move orders around end, where things are selling we're chasing end and where things are maybe a little slower we're pushing out and I think thats pretty standard within our ecosystem as it relates to back to school in a period like this we make a bet and the teams are pretty good at what they are doing.

And they have they've we've kind of put a plan together for back to school, we got at kind of thought through both.

Regionally and holistically to be able to serve these communities as they go back to school and if we.

We need to chase will chase and if we had to push out we can push out.

Okay Fair enough and then maybe.

If you don't mind, if you could speak more about your international business the metric progression you've seen there lately.

And then I guess the outlook for international for the remainder of the year, how youre thinking about that.

Sure Yeah, I'll take a quick shot and let Rick add add anything that he would like to.

<unk>.

And we talked in our March about the challenges of Q4 with with our European business, specifically as we saw closures across the important holiday season end and maybe just as important we saw a lot of the winter resorts shutdown and restrict travel. So it was a very challenging quarter for them to end 2020.

After at really.

Quite good 9 months to start the year.

We're really encouraged by what the teams have done in Q1 of those challenges that existed in Q4 did not subside. We were closed majority of about 60% of the possible days in Q1 with rolling closures across all of the geographies, we're in and some of the geographies actually just closed pretty much all of <unk>.

1 so it was a really really challenging environment.

The closure rate in Q1 was higher than what it was in Q4 and higher than what it was in all of 2020 just to put it in perspective so.

The good news about our European business is going into the pandemic, we had about 50% of our sales online to begin with so as you would expect that channel ramped up and it was no different in the first quarter.

We're really proud of our European teams and how they've really kind of had to fight through this this is not an easy operating environment by any means but I think that day. They online volumes have picked up for some of the closures that we've had in Q1.

While they are not quite where we were hoping they would be in Q1. They are not far off and so I really give them a lot of credit given the unexpected challenges we have of closures I think longer term.

We're still very bullish on our beliefs around Europe, I think we've talked before to grow Europe to what it is today has taken a pretty meaningful investment at.

And we're starting to really see see that pay off here and we think debt. We can really capitalize on this investment as we move forward I mean, it's at.

As difficult as the operating environment has been over there on us we know, it's probably more difficult on some of our peers of smaller scales are some of our competitors I should say of smaller scale and and I think we have a really good opportunity based on how our customers communicate with us on moved online and when we've been able to open stores.

<unk> been back end stores I think we are of really good opportunity as we get to a more normalized environment there.

And so we're still remain pretty optimistic about the Europe business.

I think what it means also to our global business as we think about really trying to globalize across each of the geographies, there's definitely synergies and opportunities that are coming out of the business platform. We put together and then lastly, I'll just I'll just mentioned fast times as the other of our international business in Australia has done extremely well, while we're very.

Route of what the teams have done there at <unk>.

'twenty was a phenomenal year for them the best since we have seen.

We acquired them and they are off to a great start in Q1 of 2021. Despite the fact that even in Australia. There are closures from time to time at just kind of part of the operations. They are working through but they've done a great job navigating it.

And building the teams and grown unit. So we're happy with how that business is performing.

To add that Chris did a great job, Jeff I'd, just add to that again to execute our strategy. Our model of our integrated channel is omni model you have to build scale and Marc has to do that you have to at the physical presence as well as of digital presence. So that has really been of focus of our of our European business is exactly doing that on a country by country.

And then of course being able to roll of our tools, but thats, where the investment is so important in building of scale. So we can execute and then really drive the profitability side of the business. So.

And as Chris said, I'm, we were effectively closed or at holiday.

All of the physical stores last year, so it's hard to imagine their holiday could be worse and I'm not going to thank abbvie, but its hard to magic of possibly worse than it was a year ago. So I think.

Again I appreciate of our teams are hard at our team's hard work and effort over there and looking forward to.

Much much stronger holiday season this year.

Okay, well it seems like it's just around the corner scraping of.

I appreciate all your comments and wish you guys the.

The best for the remainder of Q2 Q2. Thank you.

Thank you. Our next question will come from Janine Stichter with Jefferies. Please go ahead hi.

Good afternoon, everyone and congrats on the results.

Couple of question wanted to ask first about it sounds like you still think there of some stimulus benefit, especially at the start of Q curious if you could maybe give us a sense of how much you think the consumers at versus how much of it still left on their wallets and then also just wanted to ask about hard goods. I think you said down versus last year in may.

Wondering if that was just anything with the comparisons from last year, if anything theres anything youre seeing at the heart business to suggest at selling thank you.

Sure I'll go ahead and try to tackle easier from a from a stimulus perspective.

I wish I had the crystal ball to answer your question.

As I as we said on our prepared remarks, we definitely had a positive impact on Q1, we think that that went into may as well, it's really interesting actually as we as we looked at the business and we looked at the last 5 years of of our comparable store sales and we've run pretty good results over the last 5 years and are very happy.

With the performance of our business.

Or pretty much all of our highest comping periods of calm.

When theres been economic stimulus in the environment. So may and June of 2020 January of 2021, and now March and April and into May of.

2021, as well so there's definitely a correlation on the business as I said in my remarks, I think the important part is to have a business model that is.

<unk> is mobile end is working for the customer. So that you have the ability to have inventory there in all channels and allow the customer to shop when they want to get those results. So I won't be able to really comment on how much of its last although I'm sure you've seen what we've seen around where savings rates are aware of the.

Where consumers are.

We feel like.

We're in a good spot and we can capitalize on that with our really best in class sales teams in the model, we put together on that.

On the second piece on hard goods.

As you know our business here is really around driving sales gains and our whole focus is on that and we would love to tell you every quarter that all of our departments of our RF.

But that's just not the model, we see our customers sort of move around what's trending and what's hot and.

And with hard goods, it's been an incredible rock.

Starting really in 2019 and 2020.

It was up in Q1.

We did say it was down in May although I would say it was just down ever so slightly in fact, the impact is really felt in the markets, where we had closures. So both in Canada, and Europe, where we had meaningful closures are probably what took it down just slightly so we're not worried about it because if you think about the the increase at hard goods.

Had throughout 2019 at 2020 as a percent of overall sales. These are still phenomenal results for the hard goods category and I think we're anniversarying here of period of time during closure last year, where this became a very popular bi for people that were shelter.

Sheltering at home and looking for things for their kids to do so.

We saw a lot of skateboards during the closure period, we're anniversarying that now end.

We're still optimistic about how the category will play out for the remainder of the year.

Great. Thanks on that perspective.

Okay.

Thank you. Our next question will come from Jonathan Komp with Baird. Please go ahead.

Yes, hi, thank you.

A bit of of a follow up but I want to.

Ask a little bit more broader question of coming off of such a strong quarter.

Do you view the split between what's sort of temporary as a result of the environment, maybe more of what's permanent or lasting and as a result of <unk>.

Execution end and other tailwind.

Fewer competitors and how does that play into your decision to allow the upside to flow through versus reinvesting for the broader strategic outlook.

Okay.

Sure I'll take a crack end.

Great. Great question, obviously, 1 we spent a lot of time to I mean I think.

Our overall perspective is debt and you heard.

I talked about this in my prepared remarks is it's going to be hard to anniversary of Q1 of 2022 at just will we have not had a had a quarter like that in our history for the first quarter of the year.

That being said I believe we're taking share I believe is at.

Our operating model at our product offering and our sales teams that we are winning in a consolidated consolidated market and I think we're seeing at and we believe we're seeing it in every market that we're operating at and so.

So I do think there is a permanent piece here.

But I think every retailer is going to have to look at what they experienced in Q1 and try to do this analysis and for some it will be different than others. So.

So I'm not going to comment on what Q1 of 2022 is going to be right now.

Other than I would tell you we feel really good about these results we feel good about the economics of the model on how it flowed through and I think we've got some opportunity.

To really see strong earnings results like you've seen from US the last few years as it relates to this year end into the future I think the second part of your question around reinvestment in the business and taken. These results is a really good 1 right and I think all of I hope all of our investors would expect us to do that and we are trying to take.

<unk> of opportunities and this type of cycle, you've seen our store count.

Opening count has actually increased a little bit from historical levels.

We're seeing really great deals and we're seeing opportunities in the market and so.

As you would expect we're going to try to capitalize on those we think back to OE at no 9 which were obviously very challenging times from a economic perspective in our real estate market and we opened a lot of stores and those stores were some of the real.

Great stores, we had over the last decade. So we're looking at this is that kind of opportunity as well and we're going to look for opportunities to invest in 2021 that makes sense that we think will drive long term top line value or reduce expenses.

I would just add on that again that part of our investment at that continued investment on our team. So we've still.

For safety reasons of not been able to get back to in person events or in person marketing events. So those those costs are all going to come back into the model because we believe it's what drives long term value creation for our shareholders and of course, it's our commitment to our people too about helping in their development.

As professionals in our business and that's why partly so many people stay so many years here at Zumiez is because of our commitment to invest in their future. So those model of those costs are going to come back in to as as conditions from a safety perspective relative to the virus allow us to bring those back in.

Yes, that's really helpful to hear and then on your cash balance just given that I think it's over a third of your market cap now just looking at it on that basis, what should we think about your plans for the horizon cash balance and potential uses there.

While it seems like maybe our market cap should go up it would be my first start but.

But I think is at as we think about cash obviously, we do at a very healthy balance sheet and.

That was a big benefit to us coming into the pandemic.

Obviously, it helped us weather.

The store of the pandemic and make some really great business decisions.

<unk> not lost on US just over a year ago, we were trying to figure out if we can pay our people throughout the closure period and how important it would be to pay our people and I think that was a huge investment for us debt paid off in a big way and we're going to see that here continued as we roll forward results and we see we got open very.

Quick last year and our teams were hit the ground running and we're super proud of what that meant to 2020, but I also think at Pes into these results that we're seeing in 2021 of just a continuation of our teams together. So obviously, having a strong balance sheet of big focus of ours.

Our thoughts on cash long term are to be really smart about how to use it and we sit down with our board every quarter and work through.

Pretty defined hierarchy that we have which very simply is yes, we're going to first invest in the business and find ways within the business too.

Really drive value for the long term either through sales growth or growth of reducing expenses or building out programs that are unique to what we're doing.

And then secondly, we're going to look for ways to invest outside of the business and to try to see at there is potential opportunities. It would work for us both from a culture of value perspective that.

We'd be accretive for our shareholders over the long term and then lastly, we'll return at our cash to shareholders and as you know we have of $100 million buyback.

Been authorized by our board at this point.

We're pretty smart in how we try to at how do we try to utilize those funds and I think as we look at the cash balance of where it sits today and that the economics of the model on how it generates cash we believe were on a spot where we can do all of those things. We can we can invest in the business. We can look for opportunities outside of the business and we can.

Returning cash to shareholders end.

Our belief is at the winners kind of in each in each retail segment.

We will have that opportunity and we feel like we're in a good spot to be able to do that.

Alright, point's well taken the best of luck of thanks.

Great. Thanks.

Thank you as a reminder, ladies and gentlemen, if you would like to ask a question. Please press. The Star then 1 Paul our next question comes from niche kind of it with pivotal research. Please go ahead.

Hey, guys congrats on the quarter on thanks for taking my questions.

Let me, let me start on hard goods I guess.

I guess, what I'm really trying to understand I know that Chris you mentioned that during walked out of last year.

It was of hot Hot item of the people were buying.

What I'm trying to understand it was your best Comping category throughout the year.

Last year I am just wondering when was it stronger.

It was at the strongest.

In may last year, because of the lockdown or or was it stronger later on the year I'm just trying to understand how difficult the comparisons on hard goods car as we think about this year.

Sure, Yes, just very very simply the answer is yes, it was our largest comp debt.

Hard good Tad last year would of been P..3 4 and even into the 5.

So period, 3.4 and 5 of the year were our strongest comping period, which would correlate at April may and June and so at.

Was super strong a year ago, I think what's probably even more impactful than that is when you look at the 2 year comps. It was strong throughout 2019 as well.

This is a this is a part of our business increased 600 basis points as a percent of total sales so.

So yes, we I think we've seen just phenomenal results here I think obviously <unk> been popular everywhere, but we are 1 of the largest if not the largest distributor of escape boards out there. So.

We're at destination to come get that product and I think our results of showing that so again I think when I look at at and I look at those metrics and I look at the 2 year stack. That's what gives me confidence that there's still runway on this in 2021.

But these levels are phenomenal for us regardless I mentioned I would just add to that debt.

These are toughest calls, but we still ran up 30 over 2019. So it just shows you the strength of the other departments right and how dollars per unit for me. It's always thought we're going to run gains about of what its about wallet share owning that wallet share at tells you. We've got a lot of things working at other departments, where we're continuing to drive sales okay.

Okay, I'm not surprised by that comment Rick.

It's very consistent with what I've heard for almost 20 years now.

At that.

On on SG&A, Chris I think a lot of the color that you gave was really kind of on a year over year.

But what really struck me when I look at my model is that.

Compare your SG&A dollars to 2 years ago. They are only up work a little over $3 million, even though the sales increases.

Over $60 billion I don't know how instructive Q1 is given that you had closed stores, but how should we be thinking about SG&A on a 2 year basis.

Yeah.

We're going to see growth in SG&A on a 2 year basis.

But I think what youre going to see is something that's on.

More aligned with how we have tried to plan SG&A over time, which is below our sales growth and.

On.

I think the teams have done a phenomenal job managing expenses throughout this pandemic and so I do appreciate that you are looking at 2019, because I do feel like Thats more normalized it excludes the impact of.

Store closures and reduced operating hours and governmental stimulus.

Duction of marketing events and training and recognition in all of those things. So I think if youre looking at at over a multiyear period.

You should expect that we would have leverage to 2019.

Albeit.

Growing less than what our sales growth from 2019 would be okay. And then just last question I know that you.

You don't have a crystal ball on the stimulus, but what might be helpful. I don't know if you can provided I'm just kind of curious you mentioned of February was difficult and all of these.

The quarter as a whole was great is there any way.

Could give us like the <unk>.

To your comp for per March April and May I am guessing that April was stronger than me on a 2 year basis, because there was more benefit from stimulus on April is that a fair conclusion.

It's hard to do.

Youre talking about just the comp to 19 is what youre looking at right now.

Right.

Normalized <unk>.

Normalized this most of everything else I would just think that.

April was probably are stronger months end.

But because there was more of a stimulus in April but maybe because you.

I just had the quarter at my fingertips right. Okay, Great now manage I mean, what I would tell you is we gave you the work.

We gave you the comp for Q1.

2019, and actually total sales increase of 2019 at very close to the comp as you would expect given to our store store growth of debt and then I think we gave you at.

At February was.

When we did the March call, which February was down right. I mean, we were down I think 3% when we reported in March and we had expected some of that because of the delayed tax refunds and just where we were within that cycle. Obviously, when we reported in March we knew stimulus was an idea that was out there at actually I know at not been approved so.

So that was something that came right after we reported.

Once that stimulus hit we started to see at really come on at the end of March and into April I think it was hard for us to separate at first was what was tax refunds versus what was stimulus.

But both at a positive impact on the business as we moved through the quarter. Okay, Alright, Thanks, again and good luck.

Thanks Mitch.

And speakers I'm showing no further questions in the queue. At this time I would now like to turn the call back over to Mr. Rick Brooks for any.

Closing remark.

Alright. Thank you everyone as always we greatly appreciate your interest in Zumiez and all of of all the things that we're tackling the challenges of the modern consumer world. So we really appreciate it and we'll look forward to talking to you all on our Q2 call in September. Thank you everybody.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Okay.

Yes.

David.

Some of them.

Yes.

[music].

And on that.

At this point.

Sure.