Zumiez Inc (ZUMZ) 2006 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Zumiez 2006 fourth quarter earnings conference call. My name is Latiesha, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference. [OPERATOR INSTRUCTIONS] As a reminder this conference is being recorded for replay purposes. At this time, I will now turn the presentation over to Mr. David Griffith of ICR. Please proceed, sir.

Thank you. Good afternoon. Today's conference call includes comments concerning Zumiez Inc.'s business outlook and contains forward-looking statements. These particular forward-looking statements and all other statement 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 than the information that will be disclosed in available in Zumiez filings with the SEC.

Now I would like the turn the call over to Richard Brooks, Zumiez President and CEO.

Thank you very much, David. Good afternoon and thanks for joining us to discuss the Zumiez fourth quarter fiscal 2006 results. Joining me today is Brenda Morris, our Chief Financial Officer, and following my opening remarks Brenda will review our financial and operating highlights, and then I will provide some closing comments before we turn the call over to the operator for the question and answer portion of the call.

Fourth quarter was another record quarter for Zumiez. We posted strong comp store sales results and increased earnings per share by nearly 70% from the year ago quarter. For the full year sales increased 45% while earnings per share were up 55%. As always, I want to recognize a contributions of everyone on our team from the store level to the home office and our vendor partners as well.

We opened three new sores in the fourth quarter and entered the year with 235 total stores including the Fast Forward stores acquired in June. The integration of these stores is complete.

As for the results, net sales increased 49% in the fourth quarter with comparable store sales up 12%. By month, comp store sales were up 12.1% in November, 11.5% in December, and 13% in January.

Net income in the fourth quarter increased nearly 68% to $11.3 million, up from $6.8 million in the prior year. While earnings per share came in at $0.39, up significantly from the $0.23 in the fourth quarter of 2005.

We're very proud of the consistency that we've demonstrated in our results and believe that our accomplishments are a result of our focus on our long-term goals and the strong team we built at Zumiez. During the quarter, we were able to drive improvement in merchandising margin and is obtained leverage on the sales increase. We continue to target 20% square footage growth and mid-single digit comp store sales increases in order to maintain our long-term earnings growth rate of 30%. Keep in mind that due to the acquisition of Fast Forward, we actually increased square footage by 40% this past year.

With that I would like to turn it over to Brenda to discuss the financial results in greater detail. Brenda.

Thanks, Rick. As Rick mentioned, we had a great quarter and year.

For the fourth quarter net sales totaled $112.4 million, an increase of 49% compared to $75.4 million in last year's fourth quarter. The increase in net sales reflected the opening and acquisition of 62 new stores from Q1 2006 through Q4 2006, with a comparable store sales increase of 12% for the quarter as well as one additional week in the quarter in the current year. Our sales growth again benefited from an increase in average unit retail and an increase in the number of sales transactions.

Earnings per share came in at $0.39 in the fourth quarter, up from $0.23 in the prior year's quarter. Gross profit for the fourth quarter increased by $15.6 million to $44.3 million or 39.4% of net sales, compared to gross profit of $28.7 million or 38.1% of net sales in the fourth quarter last year. The increase in gross profit margin was due to stronger merchandising margins and a slight reduction in occupancy costs as a percent of sales, offset somewhat by an increase in stock-based compensation expenses.

Moving to expenses, in total SG&A expenses increased to $26.2 million compared to $18.2 million last year, but decreased as a percentage of net sales to 23.3% from 24.1% of net sales in the fourth quarter last year. The improvement was primarily a result of leverage on the sales increase more than offsetting the increase in stock-based compensation and incremental public company expenses including our Sarbanes-Oxley costs.

Operating income was $18.1 million or 16.1% of net sales compared to $10.5 million or 14% of net sales in last year's fourth quarter. Net income for the fourth quarter was $11.3 million or $0.39 per diluted share compared to $6.8 million or $0.23 per diluted share in last year's fourth quarter. Our effective tax rate for the quarter was 38.8%. Going forward, we continue to anticipate a tax rate of approximately 38 to 39%.

Turning to key balance sheet highlights, at February 3, 2007, cash and marketable securities increased to $52 million from $43 million at the end of January 2006. This is due to the strong cash flow from operations which was offset by the acquisition of Fast Forward.

Inventory was on plan and current at $42.2 million versus $30.6 million at the end of January 2006. For the quarter average inventory on a comp store basis increased 3.2% while driving a 12% comp store sales gain in the quarter. We remain comfortable with our inventory position. Also at February 3, 2007, the Company had no long-term debt including no outstanding balances on our revolving credit line.

Turning to go our fiscal 2006 full year financial results, for the fiscal year ended February 3, 2007, the Company reports net sales of $298.2 million, an increase of 45% over the $205.6 million in sales in the fiscal year 2005. Comp store sales for fiscal 2006 increased 13% on top of a 14.2% increase in fiscal 2005. Gross profit increased $35.8 million to $108.6 million or 36.4% of net sales from $72.8 million or 35.4% of net sales in fiscal 2005. Operating income totaled $32.4 million or 10.9% of sales compared to $20 million in the fiscal 2005 or 9.8% of sales. And net income improved to $20.9 million or $0.73 per diluted share from $12.9 million and $0.47 per diluted share in fiscal year 2005.

Now let me outline our guidance. First, I would like to reiterate our long-term financial targets. On an annual basis we expect comparable store sales growth in the mid-single digit range. Net square footage expansion of about 20%, and diluted earnings per share growth in excess of 30%.

Now turning to initial guidance for 2007, for fiscal 2007 we are introducing guidance for diluted earnings per share of $0.94 to $0.96 which represents an increase of about 30% compared to fiscal 2006. We anticipate that this growth rate can be applied fairly uniformly across the four quarters of 2007. Weighted average fully diluted shares for the year are expected to be approximately 29.5 million shares. We continue to expect to open 50 new stores in 2007, expanding the Zumiez square footage in line with our target of 20% square footage growth.

And now I would like to turn the call back over to Rick.

All right. Thank you very much, Brenda. Again, we're pleased with our results for the fourth quarter, and we're optimistic as you look into 2007 and beyond. Our 100K event in January was a huge success once again, and I returned from the event confident the entire Zumiez teams excited as I am about our business and our prospects. Lastly today, I want to make sure I take a moment to thank Brenda for all of other contributions at Zumiez in the last four years that she's been working with us, and to thank her not only for the hard work and great work she's done but for how much fun Brenda has made the work for us at Zumiez too. And while we're very sad to see Brenda go, certainly all of us at Zumiez want to wish her the absolute best in her future. With that, I would like to open the call to your questions. Operator.

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Jeff Klinefelter representing Piper Jaffray. Please proceed.

Thank you. Congratulations, everyone, on a fantastic year.

Thanks, Jeff.

Thanks, Jeff.

A couple questions. First on the Fast Forward acquisition and impact, maybe a little bit more clarity there. I know recalling it impacted the third quarter in terms of the significant number of new stores that you had opened going into that quarter with Fast Forward and your normal store cycle. Obviously it would appear that margins have improved nicely in the fourth quarter and could you share a little perspective on how those stores and the other new stores you opened in Q3 are ramping up or maturing relative to past cycles and should we read anything into the first two quarters? Brenda, you talked about it being consistent EPS growth. Would that suggest that we're not going to see any sort of deleveraging effect from that big store opening group through the first two quarters?

All right, Jeff, there is a lot of questions there. Let me try to take them, and let's talk about Fast Forward specifically, and I will let Brenda chip in on the first two quarter piece.

The mix, what we said in the third quarter still holds true in that we have a bigger mix of new stores relative to our base set of stores than we've had historically, and in the fourth quarter it was just a very -- it is a very large volume quarter, Jeff, so if anything I would probably argue that we would have seen some greater leverage, you know. We still have that same impact. I probably argue we would see greater leverage if the mix wasn't so heavy on what we consider to be maturing stores. The impact is still there, and I think as we look forward, we still have that impact we worked through these months, and now what I would tell you is that the integration as I said in the comments with the Fast Forward stores is basically complete at this point. Other than we're still getting our full complement of our buy rolled in there particularly as it relates to our private label, that is going to be all forward-looking stuff in fiscal 2007.

Brenda, do you have anything to add?

No, just that I would affirm what you said there, Jeff, that we are expecting consistent quarter performance without any negative impact on the concentration of stores that were opened in the third quarter partly because of some of the things Rick said, the private label, opportunities and margin opportunities.

Okay. And could you just recap again the number of stores? I might have missed that -- that have the signage package that have been converted and what the schedule is for the balance of the year kind of by quarter as they've been converted.

Certainly, Jeff, be glad to do that for you. We have first off in terms of in-store signage, they've all been Zumiez. They're all Zumiez branded stores at this point from the in-store perspective. The other thing that we also did at the end of the fourth quarter was that we basically placed or refurbished almost all the fixturing in the Fast Forward stores to be more consistent with the Zumiez fixturing, which will allow for higher capacity in terms of the merchandise we can hold within each of their stores. So that was part of the plan from the very beginning of the Fast Forward project. So now as far as the name plate on the front of the stores, we've only changed at this point about three locations, but by the end of this year we're probably going to convert all the locations to Zumiez, and we have a couple of those locations currently under remodel who will be changing when the store opens after the remodel.

Okay. Great. Just a couple other last remaining questions. In terms of the average transaction, value and composition, looking back, I guess over the last couple of years, you comped very well. Your productivity continues to increase. Is there any perspective that you could share on the composition of an average transaction, which categories have been growing or adding to the UPT's that you find particularly compelling as you look forward and continue to plan for positive comps against what we would argue is already one of the top productivity levels in the industry?

Well, again, the -- fundamentally the answer to your question is there is a lot of category that is are changing and moving all the time across all of the departments, and brands are part that far issue, too, as you look into that. As you know, Jeff, I don't want to get into that level of detail because again the message, the strategy is that the strength of our brand, the strength of the Zumiez brand is about the diversity of categories, about the diversity of brands, so there is a lot of things changing and moving there, and I guess it is a very high level. I am please that had we're continuing to drive the average transaction, and that we're continue to go drive it are from both the perspective of transaction increases as well as average unit retail increases, so that's -- those are very positive things from my perspective, and again there is many, many things moving underneath that total.

Okay. Thank you.

Thanks, Jeff.

From the line of Robert W. Baird with the next question we have Mitch Kummetz. Please proceed.

Let me add my congratulations. A few questions and just to follow up on Jeff's question about Fast Forward. Rick, you said in terms of your integration there that your buys at Fast Forward is more go-forward related in terms of the private label. Can you elaborate on that in terms of how that hits the business on a go-forward basis?

Basically the story there, Mitch, is when we completed that transaction in the end of June and end of last June, we had already basically, obviously placed and in fact received at that point our back-to-school private label purchase, as well as we placed the units and quantities for our holiday private label purchases. So we weren't in a position that we could significantly impact the Fast Forward stores via our private label until this spring.

Okay. But that should have a positive impact on your first quarter, then, I would think because you had spring merchandise in the stores now?

That's correct.

Also, not just your private label buy but also your vendor buy I would think as well, you were able to incorporate your purchases from your vendors into your spring sort of consolidate that into your spring buy, right?

That's correct, but Brenda and I will temper that by reminding everyone that again part in these lower volume quarters, the additional mix of shift of stores against our total base that are in the maturing state. So in terms of -- that really gets back to all the SG&A costs, auctioning costs related around the mix of the new stores that are a larger part of our base of these maturing stores, Mitch.

Thanks.

Great.

In terms of inventory, it was mentioned only up 3%per square foot. Can you talk specifically about your snow inventory? How is that looking right now?

It is a great question, Mitch. I guess step back and I would say we characterize it as last year from a snow industry perspective as kind of a mixed year, in terms of the snow conditions across the country, and some areas were good, some were average, and some were very poor. But as we said in the past, as we look at the snow business, we never buy snow or snow particularly our snow hardness business relative to what we think our top line is going to grow because it always doesn't snow somewhere. So what the strategy has always been to let the product chase the sales to where there is snow, and I think we did that successfully in -- and congratulations to our buying team for the efforts this year and our sales team in the stores for doing exactly that. So as we come out of this snow year, I think we feel as Brenda said, on an overall perspective, very comfortable with the position in snow and very comfortable with our inventory position overall.

I would think there are a fair amount of pretty nicely priced snow closeouts available to you right now or to retailers in general. Is there any opportunity to take advantage of that and maybe buy, pack it away, bring it out early next season to drive traffic and margins?

That's another good question, Mitch. Those are decisions our buyers make relative to how we're viewing the next season, and we may choose to do that, or we may not choose to do that. It depends at this point in time. We haven't made those calls yet.

One last question. Could you update us where you are in terms of the CFO search and exactly what Brenda's transition is? I thought in the announcement that was made earlier that Brenda is going to be around until early April. Is that still the case? Can you update us on that?

That is the case, and again thanks to Brenda for again the terrific way she's managed and handled this in working and making sure this was going to be a good smooth transition for Zumiez in terms of completing all the year end work. We do appreciate that.

We've engaged a search firm to run the CFO process for us, and there is very encouraging things out there at this point in discussions with our search firm. The first is there is a lot of interest in this position, so that's a very encouraging thing from our perspective. I anticipate that the search is going to take from the point in time we engage the search firm which is approximately mid-February, there is going to be about a three to six-month time line to complete the search and to get the person on board. So we've got a ways to go, Mitch, on that front. We're still in the early phases of it, but we're encouraged by the initial quality of the candidates and the number of candidates we're seeing for the position, and this will be no surprise to you, Mitch, as you know, Brenda has been such a great cultural fit for Zumiez, and that's going to be a key element for us in making our selection is making sure we take the time to find the right fit culturally for us here at Zumiez.

That's all I had. Congratulations and good luck.

Thank you.

Thanks, Mitch.

Representing CIBC World Markets the next question comes from Dorothy Lakner. Please proceed.

Thanks. Can you hear me?

Yes, we can.

Great. Congratulations on a great quarter and a great year. I wanted to ask if you could give us some update on the business. I know you had some difficulties with it kind of mid-year but really recouped pretty quickly, and I just wondered how you felt about it as the year ended. And then one housekeeping question, just the store openings by quarter if you can give us that.

All right. I will take the Juniors and let Brenda handle the store opening schedule, Dorothy.

Great. Thanks.

Juniors you're right as we said each month in the sales releases, it has been -- we had the tougher August in our Juniors business, and otherwise and as we did through the fourth quarter, as we said, we were positive and comped positively in all of our major departments in the Company including the juniors business. So again I don't want to get into brands or specific category issues that we have there, Dorothy, for competitive reasons, but suffice it to say as again as we said in the releases that it is not leading the charge for us. It is doing its part. It is filling its need for us, but the Men's has been the stronger piece of our business. So while we're running comping positively up there, I wouldn't tell you that we don't continue to have challenges in the Juniors business and in fact I am quite proud of the team and think our buying team has done a pretty terrific job to drive the comps we've gotten out of the Junior business at this throughout most of last year, and of course we comped positively for the whole year in our Juniors business. So I think that's a credit to the talented of our buying team in terms of how they've attacked that business, but I am not going to tell that you it is the strongest part of our business. It is not. The Men's continues to lead the way.

Okay. And just if you look at this year going into '07, what do do you think the biggest opportunities are for Zumiez?

You know, I look at this, Dorothy, as I always look at these years we launch into them is we're going to continue to do the same things we've always done. I am a big believer as to long-term strategies that are driving our short-term results, and so we're going to continue to being to to come us on the big things that make a difference here. And we're going to be specific about the big strategies in terms of culture in our business and how we maintain that culture as we grow. And we have specific objectives this year as to what we're going to do in those areas to thinking out not just this year but next year and the year after how we're going to maintain the key business strategies as we grow our business. And they will focus around and continue to focus around a lot of investing in people and investing in the right kind of training for the people in the business. So I don't want to cite out any specific things because again it is all part of the long-term strategy and around the culture and the investment in people, I think, that make our business what it is and deliver the consistent or pretty consistent short-term results based on those long-term strategies.

I want to make sure Brenda gets a chance to answer your question about the stores, too.

Sure. Thanks.

Dorothy, we were planning to be fairly consistent with how we opened stores last year except for we like to front load a little bit more, less Qs 1, 2, and 3 was about 20%, 30% and 50% of the organic stores, the 42 stores. This year we're planning more like 30 to 40% of the stores in Q1 and Q2, and 20 to 30% in Q3. That's our goal this year and we're on track to do that depending on obviously all the things that go along with store construction and possible shift.

Great. Great. That's very helpful. Thank you and good luck.

Thank you, Dorothy.

With William Blair you have a question from the line of Sharon Zackfia. Please proceed.

Hi. All the good questions have been answered, so I will ask the distribution center question. I think you are expanding into the distribution center across the parking lot from your existing building. Can you give us an update on when that's happening, and is it somewhat dilutive but offset by the Fast Forward accretion this year or how should we think about that?

Sure. Hi, Sharon, good question. We actually are in that facility already. We moved into the additional 35,000 square feet in January. Primarily what we've done with that facility, we moved our web fulfillment into there about 5,000 square feet, and so they are up and operating out of that facility, which will help us for some of our e-commerce initiatives we'll be looking at. And the remaining space right now is used more for storage and warehousing, some of the things we stored offsite like new store accumulation, seasonal product, things like that, and that allows us to grow our through-put capacity out of this existing facility. And you are correct, it is slightly dilutive, but we expect that our sales volume will take care of it relatively quickly, and we still expect to leverage the total distribution costs in 2007.

Okay. Thanks. Audios Brenda.

Thanks, Sharon. Take care.

Your next question comes from the line of Jim Duffy representing Thomas Weisel.

I just had a question about the Fast Forward stores and wondering if you can let me know when you expect the productivity of those stores to be at parity?

You know, I would expect that the full parity will be achieved by the back-to-school season this year.

All right. Thanks a lot.

Thank you.

Thanks, Jim.

Your next question comes from the line of John Morris with Wachovia Securities. Please proceed.

Thanks. Congratulations on the quarter. Brenda, congratulations. Sorry to see you go. Thanks, John. A couple of questions here if I can. You know, I may have missed a couple of these because I hopped off, so I apologize, but inventory plan as you look ahead into the spring season, any new markets that you're planning on going into next year that you're not already in? And if you could review for us the systems and IT upgrades that you've got planned for '07 and needed I guess beyond that?

Okay. Big questions. Particularly the last one is a big question. I will take a stab at the first part on the new markets and is let Brenda address the IT question, John.

New markets this year, we're not really looking at entering any new markets this year. What we're looking at is more filling in the markets we opened last year. You will see us add to the five stores we added in Florida last year, continue to expand in the Northeast within our collection of stores there, and we're going to add a few more stores in Texas and then a group of additional stores in southern Cal. So relative to, I would tell you no new markets this year but back filling within what we still consider to be new markets for Zumiez.

Rick, can I just ask the Florida stores, can you comment on how those performed in the quarter?

Yes, and again I will take the question, John, on an aggregate basis. We like to think of it that way because as you know there is always stores that don't meet your goals and always stores that exceed your goals. So on aggregate basis I think we're getting essentially getting to the number that is we planned as we look at sending the targets for the stores, so I would basically say that that is true for Florida, too.

Great. Brenda? Sure. Like always, John, we'll always be looking at opportunities to enhance technology or systems to drive sales specifically. I can tell you, obviously, we've done a lot of infrastructure improvements over the last three to five years we still are very comfortable with. The things that we'll focus on this year primarily are more product-focused, so looking at opportunities to enhance our allocations, replenishment systems, feed to floor opportunities, looking at some of the throughput options in the distribution center. We've done a fabulous job in what you know is a fairly manual environment. We're looking at opportunities there to get it through a little faster and a little more efficiently, and obviously a little cheaper if we can, and then just some of the other basic areas. We don't have any significant on you outflows planned this year, just an accumulation of fine tuning and possibly best of breed opportunities. And could you give us some read on the planning for inventory levels in the spring season?

Again, it is consistent with sales, and in terms of the sales plan, and we believe and certainly our goal, John, internally is to do what we've been doing and we've been doing this for a number of years now, which through better processes internally and again our whole product flow planning process you've heard us talk about repeatedly for the last four or five years. A lot of these technology investments, Brenda just described, again, are around that exact topic, and we're continuing to look at incrementally how can we improve that process. Our goal to answer your question as best I can, our goal is that we certainly are planning to try to drive bigger comp store sales increase than the necessary gains that would seem to take from an inventory perspective, thus increasing turns.

Great. Thanks, guys. Thanks, John.

With McAdams Wright Reagan, have you a question from the line of Sara Haasan.

Guys, nice quarter. I am wondering if you have a plan for the cash since there are no large acquisitions in your space going forward?

Sure. Good question, Sara. You know, again kind of back to the answer that I just gave to John, we're always looking at opportunities to reinvest in our business to drive sales, whether it is technology or infrastructure. And so we will continue to look at those options aggressively where it makes sense, and where we're making sure we're using the cash wisely with a strong return. And beyond that, there is always projects and initiatives and opportunities that as a management team we'll be looking at that we won't be discussing real openly until we decide if there is opportunities for that or not.

And the only other thing I add to that, Sara is not only in terms of projects that we do, but we're constantly looking at ways that we can reinvest in our people, in terms of improving our training programs, improving the where we're doing the training and how we're doing the training and trying to make sure the training and the money we're spending is being spent wisely to drive the top line sales number and improve the Customer Service experience in the stores. So that added element too is very important to us in terms of -- we are constantly making greater investments in putting more resources to work in that end of our business, too.

Thanks, guys.

Thanks, Sara.

Thanks, Sara.

Representing SIG the next question comes from Tom Filandro. Please proceed.

Thank you. Brenda, you definitely will be missed.

Thank you, Tom.

Congratulations as well. A couple of questions. I want to circle back to this AUR, so I better understand what's going on. I want to understand what's driving the AUR, is it private label increasing as a percent of the business, raising prices where you can and branded categories? How should we view the AUR heading into 2007 and also want to get any comments just in general can you give us -- I don't know if you give this or not since we only initiated this recently. Do you give a percentage of private label at the quarter versus a year ago and for the year versus a year ago?

I will take the first part of that, and then let Brenda address the private label question, Tom. We will give you an idea of private label relative on a full year basis when it makes -- it is not meaningful I think to measure it on a quarter to quarter basis because of the seasonality of our business, so full year basis I think it makes sense and Brenda will cover that.

Let me talk about the AUR questions you asked, and the answer to your question is that it is coming from a lot of areas in our business, so it gets back to some of the questions to you -- a couple questions and John's question and the product flow questions that we addressed, which is we're seeing it in our ability where the fashion cycle let's us do it. We're able to take prices up in certain categories of product, and it may be private label and it may be brands. It depends on whether it is the look or a brand driven item, and there are situations in our business where it is both, so it can come from either side on that front. We also have fewer markdowns as a percentage of our business, and that I would tell you is the direct result again of the quality work for our buyers and the execution of our stores, and where we're because of the way that we are flowing product into the system. So it is that side of it also that has improved -- had a positive impact on the margin and the AUR in terms of selling more full-price selling in the business.

So again, I want to make sure I respond to the question more broadly in the sense, too, that it is not just the increase in average unit retail but there is increase in number of transactions against the overall sales level which is, again, I wouldn't be as happy about things if our business was being driven exclusively by AUR. That's a great thing, and I think it again speaks to the talent of our buyers and their efforts and our execution of store level, and it is also important and very important in my mind we see the number of transactions continue to increase, too, and that's I think again a reflection of the quality of the operations, the attractiveness of the product, the way we present it and the quality of people we have in our stores.

Just, Rick, on that comment which I totally agree with you, do you have counters in your store? Is it strictly transactions as opposed to conversion?

It is transactions. That is about the only piece of data we don't collect at this point is we don't have counters in front of the stores. When we talk about this, it is strictly number of transactions.

Thank you.

Tom, this is Brenda I can give you a little color. For the quarters we don't give it because of the seasonality of our private label product but year-over-year we're right about 13% last year, and for this year we'll be just slightly above 14%, and again I think that's representative of the quality of the private label product this year and the team and the development they've done.

Terrific. Can I have one other follow-up question. Just an update, this a general update on the web business, how that's going? Is there any transition that's going to happen any time soon that will make it more better, more powerful, any comments on web?

The only comment very broadly, Tom, and again as you know, it is a small part of our business, still sub1% of our business. I think there is opportunity there, and we'll be looking at how we can exploit that opportunity better here over the next year, and that's part of some of our internal goals for this year is making sure we're building a great platform that will represent I think the great store platform we have out there across the country at this point. It is an opportunity for us. It is one we need to make investments in and getting back to again the question on investments we have to make in our business, we need to look at that, and that is one of the things we're working on.

Thank you and best of luck.

Thanks, Tom.

[Operator Instructions] Representing Tiburon Research, the next question is from Rob Wilson. Please proceed.

Thank you. Did you give how much Fast Forward was accretive in 2006?

Hi, Ron, this is Brenda it was actually relatively neutral in 2006 with our expectation that as we go into 2007 we'll see the accretive input from that acquisition.

Is that different than your original expectation, wasn't that supposed to be accretive in '06?

No. It was actually pretty neutral, I think maybe a penny, but like zero to a penny kind of thing.

Okay. Was there an impact for the 53rd week in the fourth quarter?

Yes.

Sales and earnings maybe?

Yes.

Would you be willing to share that with us?

You know, I don't actually have all the stats on that one specific week, but obviously the 52, 53-week comparison there was an impact. I don't have it -- I don't actually have it quantified at this point.

The comp number we've given you is a comparable 53-week comp kind of number, so we're clear on that, Rob.

Certainly, and capital expenditures plans for 2007, what would they look like?

Yes, it is going to be at this point around 23, $24 million which is the majority of it is stores, and remodel of a handful of stores.

Okay. And one final question. Rick, you've got two Q1s in a row here in 2005 and 2006 you've had tremendous improvement in gross profit margin. Are you going to be able to successfully anniversary that in Q1?

I wish I could answer that. I will answer that in May. How about that, Rob, next time we get to talk in May?

There is no doubt we have some challenging numbers, you're absolutely right, in terms of the comp store sales gains we've run and again the terrific job our buying and store teams have done in executing our product plans, so they're challenging numbers. Let me answer your question from a broader perspective and that would be that by nature here given the diversity of our model relative to brands, relative to categories, gives us some ability to manage the risk around the sales and the top line number and the margin number, too. I wouldn't expect as we go through this year to see the kind of margin gains we've seen over the past year. We've been -- we've driven out a lot, I think there will be much more incremental in approach over the next year than they were this past few years. So again the strength of our business is about how we look at all of those brands and managing that diversity so that portfolio brands and categories of products and so we never look at a quarter and say we're going to plan something down. We look at it and say we think we can figure a way to run gains. When we talk about 29 years we've run comp store sales gains, I think our track record says we're pretty good at doing that. While the numbers are challenging, I feel yet comfortable with where we're at in terms of our -- the guidance that Brenda gave you earlier for this year based upon that mid-single digit comp store sales gain and based upon the 20% square footage growth that all of that is going to come together and that we can deliver that 30% earnings growth.

I guess where I was going with that, is I was wondering if we should model in maybe a larger opportunity in the latter half of the year versus the first half of the year?

Rob, again, what I would say is that our expectation is that we grow each quarter consistently with our guidance of the 30%, and then we feel very confident in that.

Okay. Thanks for taking my question.

Thank you.

Ladies and gentlemen, this now concludes the Question and Answer Session. At this time I will turn the call over to Mr. Brooks for closing remarks.

Thank you, Latiesha. Once again we appreciate your interest in Zumiez, and your great questions today, and we'll look forward to speaking to you again when we report our first quarter results in May. Thank you, everybody.

Bye.

Thank you for your participation in today's conference. Ladies and gentlemen, this concludes the presentation. You may all disconnect, and have a good day.