Zumiez Inc (ZUMZ) 2015 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Zumiez Inc. fourth-quarter 2015 earnings conference call. (Operator Instructions).

Before we begin, I would like to remind everyone of the Company's 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 risk and uncertainties. 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' filing with the SEC.

At this time, I will turn the call over to Rick Brooks, Chief Executive Advisor (sic - see Website - Chief Executive Officer). Please go ahead, sir.

Thank you and welcome, everyone. Joining me on the call today is Chris Work, our Chief Financial Officer.

I will start today's call with a few brief remarks regarding our fourth quarter and our start to the 2016 fiscal year. I will then give an update on our broader strategy and will hand the call over to Chris, who will take you through the numbers. After that, we will open the call to your questions.

Fourth quarter was another challenging quarter for us. While net sales came in ahead of our guidance range, at $242.4 million, it was led by a negative same-store sales comp of 9.5%. In light of these topline headwinds, we continued to tightly manage expenses in the quarter, which benefited margins and resulted in diluted EPS of $0.50, also ahead of our previous guidance.

Evident in our results are some of the ongoing trends affecting our industry, including weak consumer traffic, the lack of a clear and compelling fashion trend within our target customer base, as well as the impact of foreign exchange on our international and more tourism-oriented locations. These pressures have unfortunately followed us into 2016, with February sales comps down 8.6% year over year.

While holiday results were better than we originally expected, our fourth-quarter performance was certainly not how we wanted to finish the year.

We recognize our ability to successfully navigate the current headwinds and return our sales trends to positive territory is predicated on our ability to have merchandise assortments that align with our customers' preferences and needs available anytime and anywhere. This is why we have invested heavily in several components of our omnichannel infrastructure over the last five years that work in concert to better serve the customer, including an enhanced assortment planning software that allows us to micro-sort our stores, localizing the trends that appeal to our diverse customer base; enhancing our in-store telecommunication infrastructure, allowing us to better facilitate the omnichannel experience; the upgrade of our Web platforms in both the US and Europe, providing fast and stable performance, as well as continued enhancement of our omnichannel functionality; the rollout of our Stash loyalty program, where we are rewarding our best customers and continuing to [refine] the way that we interact with them; the 2016 rollout of our new leading-edge customer engagement suite that will better integrate all of our sales channels; and launching full localization, enabling our best-in-class sales teams to serve their local customers with nearly 100% in-store fulfillment of online orders.

Even with all of the technological enhancements that we've introduced, it is important to emphasize the critical role that our dedicated sales teams play in delivering a highly differentiated and hyperlocalized product mix and sales experience. We continue to view our people as the competitive advantage that differentiates us as an authentic lifestyle-focused brand.

The rollout of our new Customer Engagement Suite in 2016 will further capitalize upon this fundamental strength in our business, marrying up our point-of-sale engagement with our back-end systems, creating an integrated experience that both optimizes operational performance and, most importantly, provides our sales teams with the technology to further enhance the Zumiez brand and culture and authentic way for our core customer.

We have already begun Phase 1 of the rollout and expect that -- the phased North American implementation to continue throughout 2016 and into 2017.

In addition to these investments in our omnichannel infrastructure, we also continue to address more immediate concerns arising from the shift in consumer traffic. This includes reducing our 2016 store openings domestically and continuing to be disciplined with our spending, where possible, to protect profitability and overall shareholder return. While addressing near-term issues is required, we remain steadfast in our long-term strategic focus as we reinforce our success through sustainable investments in the business.

Let me take a moment to update you on what we have been doing and our early thoughts on 2016. I touched earlier on some of the exciting steps we have taken to enhance our technological platform. These advancements are done in tandem with our physical-store growth.

During 2015, we opened 51 new stores in North America, including six that opened during the fourth quarter, bringing our total North American store count to 634. In 2016, we plan to open 27 new stores in North America, and our goal remains to strategically leverage our integrated technological platform to optimize our store footprint, while maximizing the impact within each geographic trade area. We do not want one more store than necessary in any given trade area, which is why our new store openings are targeted in areas where we are underpenetrated and have the opportunity to expose our in-store experience to a larger group of customers.

In Europe, we opened six stores during 2015 and are projected to open seven stores in 2016. We continue to invest behind our positive momentum in Europe, as we remain optimistic about the potential for growth in this highly fragmented market. While still a small portion of our business, performance has been strong and we believe our diligence in maintaining our unique culture and perspective on both sides of the Atlantic is paying dividends.

Wrapping up, I want to thank the entire Zumiez team for their hard work and dedication during this challenging past year. Even while headwinds persist in our industry, the strong culture of our employees -- that our employees embody, combined with our unique brand positioning, differentiated product assortments, and advanced omnichannel capabilities, gives us confidence that we are well positioned to continue gaining share and delivering long-term shareholder value.

With that, I will hand the call over to Chris for his review of our financials. Chris.

Thank you, Rick. Good afternoon, everyone.

Let me take a moment to briefly review the results of our fourth quarter and February, and then I will outline our guidance for the first quarter and how we are thinking about fiscal 2016. Then I will hand the call over for your questions.

Fourth-quarter net sales declined $16.1 million or 6.2% year over year to $242.4 million from $258.6 million a year ago. From a regional perspective, North America sales decreased $18.2 million or 7.9% to $212.5 million, while our European sales increased $2 million or 7.2% to $29.9 million.

Included in these numbers is the negative impact of foreign-currency translation in the quarter of approximately $5.5 million. On a constant-currency basis, consolidated sales were down 4.1%. North America sales were down 7% and Europe sales increased 19.9%. Consolidated comparable sales declined 9.5% this quarter, driven primarily by lower transaction volume, partially offset by an increase in dollars per transaction. Dollars per transaction in the period were impacted by an increase in average unit retail, offset slightly by a decline in units per transaction.

In terms of category performance, accessories, men's, juniors, footwear, and hard goods posted negative comps.

During fiscal 2015, we added 44 new stores in the US and seven in Canada, bringing our total stores to 634 in North America as of January 30, 2016. We increased our total locations in Europe by 33%, ending the year with 24 stores in this region. Total store count as of January 30, 2016, was 658.

Fourth-quarter gross profit was $84.3 million, a decrease of $13.5 million or 13.8% compared to the fourth quarter of 2014. Gross margin was 34.8% in the quarter, down 300 basis points compared to 37.8% a year ago. The decline from the prior year was driven largely by the deleveraging of our occupancy costs from lower sales, worth 160 basis points; a decrease in product margins to clear inventory, worth 110 basis points; and the $1.2 million impact during the quarter from the closure of our Kansas fulfillment center.

Fourth-quarter SG&A expenses were $62.8 million or 25.9% of net sales, compared to $66.5 million or 25.7% of net sales in the fourth quarter of 2014. For purposes of comparison, the SG&A expense for the 2014 fourth quarter includes charges associated with the acquisition of Blue Tomato of $6.9 million. Excluding these charges, the increase in SG&A primarily related to the deleverage of our store operating expenses, worth 190 basis points, and store asset impairment charges incurred in the fourth quarter were $2.1 million or 90 basis points.

There were no charges associated with the Blue Tomato acquisition during the fourth quarter of 2015 and we do not expect any further charges with this transaction in 2016.

Operating profit in the fourth quarter of 2015 was $21.5 million, down from $31.3 million in the fourth quarter of 2014. As a percentage of net sales, fourth-quarter 2015 operating profit was 8.9%, compared to 12.1% in the year-ago quarter. As Rick mentioned earlier, we made a concerted effort to manage costs and reduce discretionary spending during the back half of 2015, as consumer buying trends in our industry became increasingly difficult.

Net income for the fourth quarter of 2015 was $13.1 million or $0.50 per diluted share, inclusive of the charges related to the Kansas fulfillment center closure of $0.03 per share. This compares with net income of $17.5 million or $0.60 per diluted share in the fourth quarter of 2014, inclusive of $0.20 per diluted share of charges associated with the acquisition of Blue Tomato.

Turning to full-year results, net sales for the full-year 2015 were $804.2 million, down $7.4 million or 0.9% from $811.6 million in fiscal 2014. By region, North America sales were $728.2 million, down 2.5%, and Europe sales were $76 million, an increase of 18% year over year.

Comparable sales decreased 5.3% year over year.

In 2015, foreign-currency translation variances negatively impacted sales by approximately $19.6 million. On a constant-currency basis, consolidated net sales grew by 1.5%. North America sales were down 1.7% and Europe sales grew by 37.1%.

2015 gross margin was 33.4%, compared to 35.4% in 2014. Gross margin declined in Europe, primary as result of deleveraging of occupancy costs on lower sales comps, worth 140 basis points, and, to a lesser extent, an increase in e-commerce-related costs, including the $1.2 million in exit costs associated with the closure of our Kansas fulfillment center and lower product margins.

Annual SG&A expenses were $222.5 million or 27.7% of net sales, compared to $215.5 million or 26.6% of net sales in 2014. Included in SG&A expenses for 2015 was $1.5 million of charges associated with the acquisition of Blue Tomato, compared to $8.7 million of charges included in 2014. Excluding these charges, the increase in SG&A primarily related to deleverage of our store operating expenses, worth 170 basis points.

Operating margin for fiscal 2015 was 5.7%, compared to 8.8% in 2014. Included in operating margins for 2015 was the $1.2 million charge related to the Kansas fulfillment center closure and a $1.5 million charge related to the Blue Tomato acquisition costs. 2014 operating margins include $8.7 million in charges related to the Blue Tomato acquisition.

Full-year 2015 net income was $28.8 million or $1.04 per diluted share, compared to 2014 net income of $43.2 million or $1.47 per diluted share.

Turning to the balance sheet, we had cash and current marketable securities of $75.6 million as of January 30, 2016, down from $154.6 million as of January 31, 2015. This decline was driven primarily by $92.2 million in stock repurchase activity and $34.8 million in capital expenditures primarily related to new store growth and remodels, partially offset by $48.6 million in cash flow from operations.

During the quarter, we repurchased 1 million shares on the open market for a total of $15.6 million, bringing our full-year buyback total to 4 million shares for a total of $93.3 million. As of January 30, 2016, we had $54.4 million remaining under our share repurchase authorization.

We ended our 2015 fiscal year with $98.3 million in inventory, up 4.7% from fiscal 2014, primarily as a result of our increased store footprint compared to this time last year.

Looking at our February sales results, total net sales for the four-week period ended February 27, 2016, decreased 3.9% to $51.9 million, compared to $54 million for the four-week period ended February 28, 2015. Our comparable sales decreased 8.6% during the four-week period ended February 27, 2016, compared to a comparable sales increase of 6.9% for the four-week period ended February 28, 2015.

Lower transaction volume continues to drive year-over-year declines, partially offset by an increase in dollars per transaction. Dollars per transaction in the period were up, driven by an increase in average unit retail, while units per transaction were flat to last year.

During the four weeks ended February 27, 2016, men's, accessories, juniors, and hard goods posted negative comps, while footwear posted a positive comp.

Turning to guidance, once again I will start off by reminding everyone that formulating our guidance involves some inherent uncertainty and complexity in estimating sales, product margin, and earnings growth, given the variety of the internal and external factors that impact our performance. With that in mind, we are currently planning first-quarter comparable-sales results in the range of negative 5% to negative 7%, with total sales in the range of $172 million to $175 million.

Please keep in mind when reviewing our monthly sales releases for the quarter that the Easter shift is expected to be a slight detriment to the March month and a benefit to April, based on the calendar shift.

We anticipate gross margins will decrease 230 to 300 basis points, compared to the first quarter of 2015, due primarily to deleveraging of our store occupancy costs. Consolidated operating margins are expected to be negative low single digits, with diluted loss per share between $0.07 and $0.11. As a reminder, our go-forward financial results will no longer be impacted by Blue Tomato acquisition charges.

Before I wrap up, I would like to give a few thoughts on how we are thinking about 2016. While the retail environment in general remains uncertain, we continue to believe that the investments we have made in our infrastructure, particularly our omnichannel presence, as well as those investments we continue to make in the Zumiez team, will drive long-term top- and bottom-line growth. However, with the ongoing lack of fashion trend compelling the consumer to buy and other retail headwinds, we remain cautious as we enter into the new fiscal year.

As a result, we are planning comparable sales to be softer in the front half of the year and stronger over the back half of 2016.

As a reminder, our product margins were pressured as we moved through 2015 with the decline in topline performance. As a result, we expect product margins for the year to improve, based on stronger sellthrough. However, we anticipate these increases will be concentrated in the back half of the year, with the largest opportunity in the fourth quarter of 2016.

From a cost perspective, we are currently planning SG&A to grow at a greater rate than in 2015 as we absorb minimum-wage increases across the country and invest in important initiatives for our long-term success, such as the rollout of our new Customer Engagement Suite, continued investments in our people, and other strategic initiatives that we believe will drive long-term value for our shareholders.

We expect foreign-currency translation to impact total sales unfavorably for the year. However, the impact on earnings will be subdued because the contribution margins from other international operations are lower than our mature US business.

We are planning to open approximately 34 new stores, including seven in Europe, with a similar cadence to what we have done historically, with two-thirds of these openings occurring ahead of the back-to-school season. We expect capital expenditures for the full 2016 fiscal year to be between $27 million and $29 million, compared to $34.8 million in 2015, with the majority of the capital spend dedicated to new store openings and planned remodels.

We anticipate depreciation and amortization will be approximately $30 million and in line with the prior year. We are planning our business assuming an annual effective tax rate of approximately 37%.

And lastly, we are currently projecting our diluted outstanding share count for the full year to be approximately 26 million shares. This does not contemplate any share repurchases during the year and any additional share repurchase during the year from the $54.4 million remaining on our authorized repurchase programs will further reduce our share count.

And with that, Operator, we would like to open up the call for questions.

(Operator Instructions). Dorothy Lakner, Topeka Capital Markets.

Just wondered, Rick or Chris, whoever wants to handle it, just if you could talk about where you think you are in the, I guess I would call it, search for the next big fashion trend or even some smaller ones. I know you talk in general terms.

And then, if you could talk a little bit about Europe and how you think that business is going. Obviously, you are opening more stores. Are there new markets included there? Just where are you in the thought process on Europe.

All right, thank you, Dorothy. Let me start and I will ask Chris to join in, too.

So let me -- again, you are right. We talk in generalities relative to the fashion trends and cycles that we're in, but let me start just by reminding everyone what has always driven the Zumiez business. We have been -- our sales have always been driven largely by emerging and growth brands, by really hot items that can drive a lot of volume for us, and then, of course, by fashion cycles and trends that are relevant for our consumer.

So the answer, Dorothy, is yes, we have some things that are working, but not to the degree -- not to a large enough degree they are offsetting the larger benefits we had in 2014. So in 2014, as we said before, just to put some context around this, we had two, but we had a fashion cycle that we were really maximizing and we had a hot item. We had two of the three really working for us in a strong way.

And in 2015, we do have some brands that are growing. We have some really some interesting items that are driving volume, but they haven't been large enough to offset the bigger, more powerful forces from 2014.

So as we look forward into 2016, we do know that we're going to anniversary those bigger drivers from 2014 here over the next few months, and I think you would see that probably that is in some relation to the comp cadence from a year ago in terms of how those comparative strengths of 2014 versus 2015. So we are going to anniversary those just here in the next three months, Dorothy.

And then, we are going to see at that point whether momentum will continue to grow with the momentum of some of the brands that are emerging for us and some of the items that are driving. And then, I do expect that we will see trends from a fashion perspective continue to develop and move also.

Having done this for a long time, like you, I know that this is retail and trends -- pretty much everything cycles in retail. And so, I am confident we are going to see something, Dorothy, emerge, particularly as we get up, as we peak those trends from 2014. Really, they fade out here in the first few months of 2016 on a relative basis.

And so, I am confident that we are going to see something happen. Can I tell you if it is going to be large or how big it is going to be at this point? No, I can't. I can tell you we do have some things that we feel good about, but it is -- we're going to have to see. And we're going to have to prove it through results.

The one thing I really feel strongly about is that, though, this is a trend-related issue. I can tell you that from our perspective our brand has never been stronger. We continue to work on things to improve our brand strength and our brand positioning. We have good indicators, I think, from our customers about how they feel about our brand positioning and likewise our cultural strength within the organization.

We have all evidence for me from my interactions with our team, travels around the country, is that we are in a really good position there, too, in terms of both brand and culture, Dorothy. So I feel very strong about that. I think these are trend-related issues for us. I think that in the modern consumer world where trends move so much more quickly, I think every retailer is going to find more trend holes in their business because of the speed of fashion cycles unique for each retailer's positioning.

But we are going to see here as we anniversary those larger 2014 trends, they really roll out, our comps get easier through the year is whether -- how much momentum we continue to gain with the newer, younger brands, as well as some of the item things we are driving, and then I do think we're going to have to see some fashion cycle shifts. We just haven't seen any for a long time. So, we have things, Dorothy. We are going to have to prove it.

Yes, yes, thanks.

Europe (multiple speakers)

And I would just jump in on Europe. Dorothy, I would tell you we are still really pleased with the progress that Europe is making. I think what you have seen here since the acquisition in 2012 is pretty consistent growth over that period of time, despite the fact that shortly after the acquisition Europe dipped back into a recessionary period.

But as we look at 2015 with 37.1% growth on a constant currency -- on really adding six additional stores, we are still seeing pretty strong comps there, and we have talked about that throughout the years that Blue Tomato has definitely been a comp driver over the last few months, and so -- or last 12 months.

So we're really pleased with what is happening there. As far as opening new markets, what I would tell you is when you only started with three stores in 2012, you are always opening new markets. Now, those new markets to date have been really concentrated in Austria and Germany, but we continue to see good signs from where we are opening, and we are very, very diligent about how we are testing this and opening in different markets and different types of whether it is a mall or a street or a potential flagship location. We are testing all those things, and as we have said over our last few calls, there is really no major red flags at this point.

There is -- we are continuing to invest there, and from an overall profitability perspective, this is still roughly a breakeven business, but this is something we are seeing -- we are going to see the harvest of what we've been doing here in the years to come, and so we're really excited. The team is still intact, for the most part, since the acquisition and they really excited about what they're doing over there and we're excited for them. So, it has been a good partnership.

Great, thanks so much.

Neely Tamminga, Piper Jaffray.

I have two housekeeping questions for Chris, and then a big picture for you, Rick. On the housekeeping, on your inventory levels, could you characterize how you are feeling about the currency of your inventory as you are exiting out of the year and into February and March? And then, also, are you contemplating any store closings and how should we think about the potential magnitude of that?

Big picture, Rick, for you, could you just remind us the strength that is going on in Blue Tomato? What is the opportunity again in the action sports lifestyle, the consumer adoption curve around that over maybe in Europe, as well as maybe the UK? Where are they in that? My travels don't take me over there that often, so maybe reminding us of what the bigger-picture opportunity is for the action sports lifestyle over in UK and Europe. Thanks.

Sure, so I will go ahead and start with the inventory and the store question, and then I will kick it over to Rick here.

I'd tell you from an inventory perspective we feel really good about where we ended the year, and I think what you have seen from us as we have moved through 2015 is that we are not one that is going to fall in love with our inventory and hold onto it forever. We are focused on moving inventory, and as our sales results have dipped, our buying teams have done a really good job of continuing to move through and really strategic markdowns here. This is not marking down the whole store. They are marking down those things that aren't selling.

And so, they have done a good job at 4.7% inventory growth on the store growth that we have had. From a per square footage basis, we feel fine with where we have landed, and from an aging perspective, we actually feel pretty good about where the aging stands. So, the teams have done a really nice job managing through that.

From a store-closing perspective, what you have seen from us over the last two years is we have closed a handful of stores each year. This last year was actually a smaller amount. We only closed two stores, but it is something we continue to watch, and as you have heard us talk about, we don't want one more store than we need to have in any given trade area.

So, we are still managing -- actively managing the portfolio and looking at trade areas where we have the potential to either decrease our store count and still capture the same volume in that area or relocate within those trade areas. So, you are probably going to continue to see a similar cadence to what you have seen from us. There is no substantial store-close plans at this time.

Great, thanks, Chris. So let me try to address your second part of your question there about the longer-term view and the size of our opportunity in Europe, Neely.

And again, as Chris said, relative to a moment ago about Blue Tomato, we feel great about where the team is at there. We have a really strong team in place. It essentially is the core of the group that was part of the acquisition when we acquired Blue Tomato. They are an awesome group of people, culturally aligned with us, and so we think we're in a really good spot to continue to push our growth in Europe in a really good quality way from a people perspective.

So we haven't officially sized the opportunity in Europe and we will here at some point. We haven't done that because what we really want to do when we come out here to talk to the market about how big we think the opportunity is in Europe because we want to -- we want to be able to tell you about what the impact of our -- of building the omnichannel business has been; what the types of stores we have tested have been; how those metrics have worked, as, again, Chris said, across malls, across street stores, across flagship stores.

We actually want to bring evidence to the market and say this is what we can tell you. These are the maturation curves as we see them today and this is how it will play out and here is the scale and the time frame that we think we can deliver the maximum size of the business in Europe.

Now, we do know that from a lifestyle adoption point of view, Blue Tomato resonates all over Europe, and we know that because of the strength of Blue Tomato's e-commerce business. That was the biggest piece; as Chris said, there were really only three stores at the time of the acquisition.

They are one of the most internationalized websites in Europe. They do business in 14 languages, multiple shipping methods all localized to each local country. So we know that what Blue Tomato is doing is resonating across western Europe and even into the eastern European countries. So, we feel very strongly that the lifestyle adoption is there. We have evidence for that, based on the strength of their e-commerce business. Their e-commerce business is helping determine which countries we enter and what orders we lay out that longer-term plan, Neely.

So, I don't think there is any question about the strength of the lifestyle in this category in Europe, and you combine that with the fact that Blue Tomato is one of the few pan-European businesses in Europe and particularly not just on the e-commerce world, but now is we're building out the physical world, we are one of the few that is crossing borders with physical stores and, we believe, doing that successfully at this point.

So, I think the opportunity, that all being said, we feel great about where we are at. I think the opportunity is going to be very large, but I want to have more evidence, Neely, to bring to the -- and share with the analysts and the investor community, and that evidence needs to be based upon actual results so we can really tell you with real data what the stores look like, how they mature, what it means, and from an omnichannel perspective to the web business when we open stores in markets and build markets.

So, more to come on that front. The headline is we feel great about where we are. We think the opportunity is big and we just need to continue fleshing it out so we can give really a meaningful response over the longer term to this question.

Thanks, Rick; thanks, team, and best wishes out there.

Richard Jaffe, Stifel.

Just a question, a bigger-picture question, on e-commerce and the payoff of all your investments, your ability to use online and to sell from online and in stores and then to use the stores for fulfillment. It is clearly a break from the norm in our space and wondering how that is playing out. And how you see the growth of e-commerce versus the growth of comp-store sales, how that has been trending. Thank you.

Okay, great, Richard. Thanks for the question. A lot to that question, so let me try to parse it here in terms of laying that out for you.

Now I will start by saying that, again, we are almost not even considering -- we are not even seeing a distinction today between physical stores and e-commerce business. Think about what we are doing here from the perspective of maximizing business in a trade area, and not just maximizing our sales in a trade area, but what we are trying to do now, particularly as we layer in the idea of microassortments and localization of fulfillment, we are going to in the long run try to maximize the efficiency of the business model on a trade area basis.

So, that is the headline in all of this, but let me break it down a little bit more for you and I will talk maybe a little bit within that specifically about the idea of localization. So, I think when we talk about all the things, you have to think of localization as one of a series of steps being taken over the last few years to really build this integrated channel and selling platform.

And we are really, in essence, trying to empower our teams in the local market, just like the old days. They used to own the customer relationships with the local customers. That is what we are trying to do today, give back to our local teams the power for owning in its entirety the customer relationship.

So we have been working on that in a number of ways over the last, really, six years, and we can highlight some of that relative to the investments we've made. And I would start with assortment planning. I think, like any great retailer, you have to really focus on the basics of right product in the right place at the right time, and we have developed what I believe over the last six years some of the most powerful microassortment tools, localization assortment tools, literally thinking about the things on a store-by-store basis, and now thinking about that on a store-by-store and trade-area basis, how we're operating the business.

So, that is a huge part of what we have been doing on that side.

We also have the investment in the next-generation commerce engine, our new Customer Engagement Suite. This is another one of those connecting pieces for us, Richard, that is so important again about unleashing the power of our teams in new and innovative ways in serving customers. The Zumiez Stash is another one of those. That's another connecting piece.

You're going to see us localize even more of that over time in terms of how we work with customers and empowering our people to really have those personal impactful relationships with our local customers, our local teams and our local customers.

So, then you think about what we are trying to do with in-store fulfillment. Again, it is really about localized fulfillment and, again, giving power back to the team, and we have some very simple goals with this. It is to be really fast. And I can tell you that we have achieved that goal. We are significantly faster today in delivering product to our consumers than we have ever been in our history of doing e-commerce.

And again, it's about trade-area commerce is really how I want everyone to start thinking about this from our perspective. We are much faster today than we were just a few months ago in meeting customer expectations. And I think speed is a huge part of meeting customer expectations in today's world.

But that's not the only thing we're doing with the idea of localization fulfillment. As we said in the comments and I said a moment ago, it is about empowering our teams, our local teams, that serve our local customers. I am not going to share with you exactly how we are all doing it, but let's just say there is a much improved brand experience in how we are doing fulfillment locally for customers. And you're going to continue to see us evolve that here over the next few months and the next few years.

As Chris said, we continue to fine-tune what we are doing here and I'm going to ask Chris to talk a little bit more of the economics in a moment on this topic, Richard, so we get a sense of that aspect of it.

So, we have both those goals in that both are about better brand experience. Much, much faster in terms of delivering product to our customers, as well as a better brand experience in that process itself.

So in the long run, what we're really trying to do here is, from a relationship with the customer perspective relative to product, is we want to have same-day, next-day availability in every localized market for that relevant product for them, localized assortments, same-day/next-day capabilities across a wide variety of paths to purchase with digital integrating with physical seamlessly, whether that be marketing digital, the e-commerce, the website digital aspect of that. These are all about how we make this seamless experience with multiple path approaches, same-day/next-day availability on virtually everything we need, and with this feedback loop coming all the way back to localized assortments in trade areas that are going to allow us to really meet the needs of our customers.

So, the last thing I will add before I ask Chris is obviously we're going to have to change some measures, and this will get back to us about the distinction between e-commerce and stores. There is no distinction anymore. It is about how we're all one integrated world. We are going to have to think about different measures. We're going to have to think about different incentives.

I think the next few years we're going to really be rolling out -- it is going to revolve around this idea of trade areas and trade area profitability, trade area penetration within markets. So, a lot more to come on that front, I think, Richard, is that as we evolve this process. So, let me stop there and let Chris talk a little bit about some of the economics of the localization effort.

Yes, absolutely, I think it is good to talk about this cost side because since we announced this in late December here that we were moving in this direction, from a cost perspective as we're planning this for 2016, we are really looking at this as a breakeven proposition from 2015 to 2016 when you compare cost as a percent of sales.

And what that means is that the cost of the Kansas fulfillment center going away is really swapped for higher cost associated with store labor to fulfill the product in store, and also shipping, because you do end up with more split shipments when you move to this type of model.

And from an overall financial statement modeling perspective, I should note here that the shipping cost is still within the cost of goods sold line item. However, the store labor is actually flipped from the cost of goods sold into SG&A. So, you will see a little bit of movement there.

But the model does not come without challenges, and the impact of inventory planning and labor utilization is impactful, but we do believe this is going to drive the best customer experience, as Rick mentioned.

So over the coming years, we're going to be working hard to harvest the efficiency of the model through better assortment planning, better order algorithm, aligning shipments, better in-store labor planning, and really what we believe will be an increased margin, with the benefit of harvesting slow-moving product more efficiently before markdown.

So, we're really excited about the way that we're going to be able to serve the customer doing that -- or doing this, and we are going to learn a lot from it and we're going to keep getting better at it.

It is going to be very interesting to watch. I look forward to it, and just one more question. The Stash membership, would you comment on its growth?

Yes, so we're up to about 3.8 million members today, so we have continued to see really strong growth here, and we are continuing to service those members in lots of different ways, which our marketing team, as you know, is very creative and they're really finding ways to bring excitement to the program and to generate interest from our best customers.

So we are continuing to learn a lot, and as you can see, the numbers are getting a lot bigger, right, as far as members in the program, and that is just a benefit for us in marketing to our customers.

And I would just add to that, Richard, you'll see us continue to evolve what we are doing there in terms of the Zumiez Stash. Particularly as we get toward the end of year, there will be some new elements of it rolling out. I think it will be exciting for our customers in that we continue to offer, I think, really unique, hard-to-find, exclusive rewards, some pretty amazing stuff through the catalog rewards for our customers, too. So really cool stuff, as you know, stuff we don't sell, right. They're all about experience, unique experiences, and unique product that you can't buy, so it is a pretty cool program and you'll see us continue to evolve that here over the next few months and year or two.

Great, thanks very much.

Jessica Schmidt, KeyBanc Capital Markets.

Thanks for taking my question. Can you just talk about the impact, if any, as you anniversary last year's port delays? How big of an impact was this to your business in terms of, I don't know, later floor sets in first quarter?

And then, on footwear, can you just talk about what drove the improvement in February and, I guess, how sustainable you think this could be?

Okay, great, I will take those questions, and fortunately, they are going to come in one answer.

I think our buying team, and we talked about this a lot as we moved through the end of 2014 and into the beginning of 2015, the impact that the port strike had on us. And I think our buying teams in connection with working with our brands did a great job of working through that, and we were really able to not have a very big impact on the 2014 holiday season, albeit we did see some impact as we moved into the early parts of 2015, and we talked about that.

And one of the areas that we had the biggest impact was actually footwear, and so what you're seeing today in the February results on a negative 8.6% comp is you're also seeing that footwear was a positive category. And I would chalk most of that up to the port delays we had last year. So, we are getting a little bit of benefit there with footwear coming back.

I will tell you footwear has been down since Q4 of 2012, so we are lapping some numbers that are a multi-years decline, so we are still working on footwear. It has been a challenging category, especially with the athletic cycle. But we continue to test new things and try new things, and we're going to keep working on it for the foreseeable future because it is an important part of our business.

It didn't lose ground overall, when you look at all of our categories as a percent of total sales over the year, but it has been a slow performer for a period of a few years, after being a huge driver of the comp for the few years before that. So we will continue to work on it, but the increases you are seeing today are mostly port related.

Great, thank you.

Betty Chen, Mizuho Securities.

I was wondering if you can talk a little bit about the product pipeline, if you can, Rick. I know you mentioned February maybe impacted by some fashion. Just looking farther down the road, are there some things that the team is getting a little bit encouraged with?

And then, also, separately, just curious on when we think about these trade areas, I know there were only two closures in 2015, but when that does occur, do you see a certain amount of sales transfer either moving to the online business or to a nearby store that could perhaps lead you to reconsider these trade-area strategies going forward? Thanks.

All right, I will take the -- let's start with the last part, Betty, of your question. And I think we're going to figure all -- this is the exciting part, I guess, about this modern world we're in.

Now that we're at this point, we have made so much progress in developing our capabilities and infrastructure at this point, we're going to actually start to really now experiment with these ideas and see what the impact is and measure the impact, because once you can really start to think in a trade-area way, you break out of channels, whether that be physical channels or marketing channels, whatever that may be that we used to think in, you break out of those channels and you can really start to look at what happens in a trade area.

And when we talk about optimizing our store portfolio in a trade area, that is really what we are talking about. What would it mean to unplug a store? How much of the volume do we maintain within the digital realm and how much moves to other physical locations? How much of that can we control via marketing messages, right, in terms of moving customers and telling them where our product is that they really care about the most?

So these are all things I think that now that we have all these tools in place, we have spent all the time getting it here, that we could now actually start to measure. And we have done some experimenting with this over the last few years, but I would tell you that we're in a new capability level to do this at this point.

So, the idea of a trade area will be that we over time will be able to look at the market and try to maximize profitability. And so, we're going to need a new way. Yes, we would still probably look at four-wall contributions on a physical store. We will probably still have those disciplines in place, but we're also going to be looking at, what is our penetration in markets? How do we think about trade-area profitability across all channels against the marketing spend in our market? What does more marketing spend mean in a trade area versus not? What does pulling a unit out or adding a unit in mean to the profitability in a trade area?

So, we only have anecdotal stuff because we have just been experimenting with it over the past few years. Now that we are getting to this point, we can be much more scientific about what we're going to do in the markets, really measure and be more purposeful in terms of how we're going to think about the marketplaces and this idea of trade-area profitability.

And I would tell you that our thinking is that over time trade area itself, the idea of it, will progress. They're probably going to get bigger as we -- for where we are thinking about them today, and over time we will probably be able to find that maybe we can narrow that down even more and we can get more -- within smaller units. Because we know most of our customers have a primary store and maybe only shop one other store, based on our market research, so we may be able to narrow them down over time.

Today as we are looking at bigger markets from a trade-area definition point of view, different parts of our organization will have different definitions, based upon their objectives and what they are trying to achieve. But it's just a really cool part about where we're going. Still a lot of work to do in it, but I think this is one of the really exciting parts about retail in general, about how we do that domestically, how we do that across the world in terms of our international capabilities, because all these consumer needs and desires are the same across geographies. So, that's why store growth in Europe is so important to complement the e-commerce growth there.

So, long answer, but that's generally how we are thinking about it and I think we're in an all new world. I love where we are at in terms of capabilities to really think and experiment in this way now.

From a product pipeline perspective, I will echo back to some of my comments a moment ago, Betty. We do have things that we are encouraged about, but at this point they haven't been big enough to offset the bigger, more powerful trends from a fashion-cycle perspective and an item perspective from the 2014. Now as those anniversary here over the next few months, we're going to get a chance to see where those are at and will they continue to gain momentum, right? Will they continue to grow? Will new things come up that we can drive again?

Our buyers -- let's put it this way. We are trying about every possible thing you think we can -- that we think can work for our customer, that's interesting for our customer. We're out there experimenting and pushing things on a market-by-market basis, localized again to see what we can do. We are not being cautious in this area. We are really going out and seeing what we can make happen in every marketplace.

So, we're going to see, I think, and then I still think the big question mark for us will be the fashion cycle there. There just hasn't been a fashion cycle that we can run with, and I think you hear this from all the retailers that sell higher price points that aren't value-driven retailers and that have higher price points and have a bit more of a fashion quotient in terms of what their customers demand from us. Those businesses, not just ours, but those retailers are having tougher times today.

So, I do think we're going to see something move around fashion cycles, too, and that's what our customer wants. They like newness. They like to be different and to be individual, so I would expect we're going to see some movement on a fashion-cycle basis, too, hopefully over the next six to 12 months also.

Betty, the only thing I would add to that is one of the things we have shared with you guys over the years is just our concentration of vendors in our top 10 and our top 20.

As you know, we track that as an indicator of where our brands are going, based on how highly concentrated they are when we find things that really drive comps versus when they disaggregate, we also often see more new vendors come along.

And as we look at our top 10 and our top 20, there really has been no change in what we have seen over the last few years from a standpoint of 20% to 30% turnover in the top 10 and top 20. What has changed is the overall penetration when you look at those top 20 vendors as a percent of our total sales. Over the last two years, we have seen pretty meaningful declines, which to us leads us to that new wave of product, right? You are seeing some brands cycle out of the top 20 and you're going to see a lot more brands cycle back in. So, we're optimistic about what that means for the future and we will continue to track the brand movement.

And this is, again, one of those things that are always cyclical in retail in our end, and retail in our business is that we are seeing that disaggregation of sales out of those top 20 and into -- and being spread out more among the smaller brands and -- that we are carrying out there.

So again, from our perspective, it is a good sign for our cycle we're in today, and we just need to see those brands continue to build momentum, Betty, for where we are at today.

Great. Thank you so much. Best of luck.

Paul Alexander, [BBT Capital].

Apologize if I missed it, but could you just talk a little bit about the comp guidance? February comps were a little bit worse than what you were expecting for the overall first quarter, so what gives you the confidence in the acceleration coming? Thank you.

Yes, thanks, Paul, I will take that question, and what I will tell you is as we have looked at the quarter, you are right. The February comps came in at negative 8.2%.

We are looking at comp guidance of down 5% to down 7%, and really what is -- predicated behind our guidance is looking at what we are seeing on a week-to-week basis, and we did see much tougher results over the first couple weeks of February than what we saw over the last couple weeks of February and into March.

And so, as we started to look at the trend line going forward, we felt comfortable that we were seeing enough in the business today to move ahead of what our February results were. And there is not a lot more to it than that. We're trying to forecast based on the trends we are seeing in the business today.

Howard Tubin, Guggenheim Securities.

I was just curious to get your view on the overall promotional environment here as we move into the spring season, and whether or not that's having an impact on how you view promotions within your own business?

Sure. It's been a promotional environment forever, I think, over the last few years. Doesn't seem like it has relented that much and our basic position hasn't really changed in that what we want to do is offer a uniqueness to our customer.

So, where we do that, we are able to sell product at full price and maintain a strong margin profile in our business.

And as Chris said earlier, yes, we had to take markdowns on those things that did not move as sales toughened through the back half of 2015, but we are very targeted with what we do. We don't do full store promotions. That just doesn't make sense in our world because of the nature of supporting our brand partners and doing what's right for our brand partners in helping them build equity within their brands through price discipline.

So, I guess from my perspective, I don't think it's going to get any less promotional. I think that's going to continue. I think, again, that's part of the modern world. I still feel as if there is too much capacity in the retail world, and when I say retail world, I mean in both the digital and physical spaces, and I think those -- that part of our issue in terms of the promotional environment is working through that capacity relative to the modern consumer world where you have complete price transparency, complete inventory transparency domestically as well as globally in terms of buying product.

And there is -- even to the point where you see people, based on currency movements, shopping cross-border in today's world.

So, I don't think we're going to see the promotional environment slow down. It is really about, again, in our case, our unique position relative to trend cycles and relative to brand emergence, hot items, those things for us that we have to drive out in providing uniqueness for our customers. So, I don't see it being -- getting less promotional. In fact, I think we have got a ways to go to work through the excess capacity that is in the retail world today.

Great. Thanks very much.

Jonathan Komp, Robert W. Baird.

Maybe if I could start, just a couple of clarifications, Chris, with some of the details you shared for the outlook for 2016. The first, if I could just ask on the gross margin side, it sounded like you might expect to see some favorability later in the year. I know you're going to be cycling the product margin decline in the fourth quarter, but can you help share any perspective on what type of comps you think you'll need later in the year to get improvement on the gross margin line year over year?

Yes, what I will share is the way that we are thinking about our annual guidance here, and what we said is that we thought it was going to be softer in the front half of the year and we would see stronger comps in the back half of the year.

Obviously, when you are lapping a negative 7.3% comp in Q3 and a negative 9.5% comp in Q4, we would expect to be able to comp positively in the back half of the year.

And from a leverage perspective on gross margins, we are expecting to see product margin improvements as well, because you've seen us, based on our tough sales results, we have had to really strategically discount some product to get out of it and it has impacted gross margin here through our product margin declines over Q2, 3, and 4.

And so, we are expecting to drive product margin here on the back half of the year. Absent that, when I just think about things like occupancy that I have talked about and store operating costs that I have talked about, we have -- we would still expect to leverage that on a 3 to 5 comp. So, the business has got to get to those levels to leverage those overall expenses.

But I think we're going to manage. Really strong inventory discipline is what you should expect to see from us, right? The team is going to manage to what the sales results are, and we've had to do that through 2015, and to the extent we are able to get sales results going in the right direction in 2016, our expectation is we're going to see margin grow with sales.

Okay, great. And then, just another clarification on the SG&A guidance. I know there is adjustments in a couple of the numbers in 2014 and 2015, so just wanted to clarify the percentage growth you are looking at in SG&A dollars for 2016. I think it would be at least 7% or higher, but I wanted to confirm that's the same number you're looking at.

Yes, yes. We are -- obviously there is our GAAP numbers, which is mostly what I speak to, but we have laid out all the adjustments in the script, and as you know, the SG&A growth, excluding those adjustments, is going to be quite a bit higher, and we are -- as we laid out in our prepared remarks, we're expecting SG&A growth to be higher in 2016.

And I think what this comes down to is we have done a pretty good job of managing SG&A growth throughout 2015, and we have been -- we have a long-term path, and Rick talked a lot about this in his remarks earlier today that we are long-term planners on what we think the right investments for the business are. And the commerce engine is something that has been years in the making.

And so as we look at 2016, we are expecting 2016 to be a little bit more of an investment year from a standpoint of things like our new Customer Engagement Suite. We're going to have to deal with the statutory minimum wage increases across the country, both on a state-by-state basis, as well as municipalities that are raising minimum wage. And it is not just the impact of minimum wage, it is those that are near minimum wage as well.

There is continued investments in our people, plant, and SG&A. As you know, we are a performance-based culture, and in a year like we just had, the incentives get -- reflect the results that we have performed to. And so, we are expecting some growth there.

And there is other strategic initiatives that, again, are all in line with our long-term plan. So these investments are all relative to the plan, I should say, so to the extent that we see continued challenges in 2016, we're going to make some tough decisions around those investments, both those that we think are a part of our long-term growth, as well as those that are related to performance.

So we will be monitoring it closely, but our plans today do have SG&A growing in excess of what the adjusted growth was in 2015.

Okay, got it. Then maybe the last one for me, then, Rick, I know you did a good job really explaining the localized fulfillment in the new commerce platform in terms of the potential benefits to the business. I want to just maybe ask, I know you characterized some of the rollouts as a phased rollout over the next couple of years. Could you maybe just address any potential complexities or potential pitfalls as you roll out the platform and how you expect to mitigate any execution risk on that side?

No, I am pretty comfortable, Jon, to where we are at in this. We are very disciplined in how we do this in our execution of these projects. I think you can see that in what we have done and how well we have implemented it.

For example, localization, it went incredibly smoothly. And again, as Chris said, these aren't things that we have come up -- these are part of our long-term planning cycle, so we have been experimenting with localization of fulfillment, I think, since back to 2012 and then have been increasing proportion of the localization effort each year as we built algorithms, we implemented additional software tools to help us do this, rolled out new OMS, and I think we have done that all in a pretty seamless way and executed at a pretty high level in that regard.

I would tell you the same thing about rolling out our new commerce engine, the engagement suite, our Customer Engagement Suite. We have it well planned. We were -- because we were the launch partner for the software, it gave us some ability to really work with our software partner, our software development partner, on which hardware it worked with, how we thought about that, how they built the integrations. It allowed us to really, I think, get a good jump on it.

We will have to replace some equipment. That is just -- that we have to -- that is just outdated in our system, so that is a significant part of the plan of our rollout is to replace some hardware. But our teams are -- I think we are well prepared. As Chris said, we will do this in a phased approach throughout 2016, as well as into 2017.

So, I'm very confident. I think it's -- we're already using it in a number of locations today. So I am pretty confident in our ability to do it, and again I think we had an advantage from being early and being the launch partner with our software partner in doing this.

So, I am confident where we are at, and again, our experience internally is we execute at a very high level on these things. I am not anticipating any significant execution issues.

Okay, great. That's helpful to hear. Thanks, guys.

Pam Quintiliano, SunTrust.

This is David Kwon for Pam. Thanks for taking our question. In terms of the health of your consumer, you mentioned recent challenges are more trend related or lack thereof. How is he feeling, though, and has there been any recent differences in sentiment that he's picked up on related to lower gas prices, higher wages, and warmer weather? Are these factors impacting allocation of spend? Thank you.

Yes, I think, again, we are seeing that from our perspective. I will address the weather issues. We always see weather issues every year.

I would tell you that we had an amazingly good snow good -- one of our best snow hard goods business in the West Coast we have had in a long time. It's because it snowed in California maybe for the first time in four years.

The flip side of that was the East Coast and the Midwest were terrible in our snow hard goods business. So, now we always think about that. We always plan about that. We will move product around to fulfill customer need where it does, where we do get the appropriate weather. So weather is always a factor for us, particularly during these seasonal types of periods when you are transitioning from winter to spring.

So, we see great variability day to day in our business that is to a significant extent driven by weather.

Now the broader issues around gas prices and things like that, I think again these -- trend unfortunately overrides that in our case, and if you looked at a lot of the macro data, gas prices, it is not being spent on clothing. It is being spent in other areas, on technology and homes and cars.

But a large part for us is that we just haven't had that must-have item, that really must-have brand at a significant enough momentum level that they will offset those trends from previous years. So I think we have some very -- we have some things that are unique to us that we need to overcome in this. That is about our position relative to this time in this marketplace that we need to deliver on for our customer, both on the trend set, as well as on the emerging brands that and finding that hot item, things like we did in 2014 that were more difficult in 2015. So, we need to earn those dollars through how we execute in our business.

Great, thank you.

Jeff Van Sinderen, B. Riley.

I know it is a small concentration, but any color you can add on what you're seeing on the growth side of the business and what your outlook is there? Is there anything to get excited about?

And then, if you don't mind, given traffic generally running negative, lots of store closures in the industry, just wondering what your latest thinking is about rents as you negotiate renewals and new leases. Thanks.

Okay, great, thanks, Jeff. Just making some notes here to make sure I get all your points. I don't have a lot to say on girls. As you have heard from our prepared comments, girls was negative, like generally most our business, unfortunately, has been in the last few months.

So, I would say -- I would tell you the same thing about girls as I said broadly. We have things that are working. We have some things we are excited about, but they haven't been of a scale at this point to offset that. So, I think just more to come there in that business, and again, I don't think we are unique in this way. I think anyone that is trying to sell higher price point has as a higher fashion quotient to the consumer, whether that be in our world fashion isn't just about fashion trends, it is about brand and uniqueness of those special items that -- we view those as trend fashion driven items, too.

So, I don't -- I can't call out anything for you. Girls has been a growing, significantly growing part of our business over the last two or three years, Chris, in terms of gaining penetration within our mix of our business, but generally I don't have anything that would be much different than our overall business in terms of we're just really tactically trying to experiment and test all sorts of things in that women's business, just like we are in the other aspects of our business.

Just to add some color to that, this is the third quarter in a row the women's business has been down, but it was up over 36 months before that. So, the women's business as a percent of our total sales has actually been consistent with the prior year, but this is a business that has gained 3% of the total sales over the last three years. So, we have seen a lot of growth there, but consistent with our overall business, it has experienced a slowdown here.

So then on your second part of your question, Jeff, regarding to our topics and discussion with landlords around rents and renewals, the answer here is always variable, depending on the centers that you're talking about.

So, it is all about how important we are in particular centers relative to the demand for that center. So, no really new news here, either. I think just like when we -- we have great partnerships with our major landlords. They get what we do. They, I think, see the value we bring to their centers in terms of our customer, but it is always about balancing and the trade-offs between the really powerful centers where there is tremendous demand and we will expect the rent negotiations are much more challenging there versus centers in the B and C categories where we might have a bit more leverage on our side in talking and discussing with those landlords what the right rent levels are.

And again, I would harken back here to this idea of what we're trying to do in the broader market about trade area. So you can think about our -- how we might manage this, how we might work for -- towards trade-area profitability over the long run in our thinking about which centers are needed to fulfill and to capture the market within a particular trade area.

So, I think this kind of thinking and our ability to experiment and test with that, our ability to localize fulfillment to what makes sense for the consumer, and as well as our cost structures, I think will add additional dimensions to this conversation. So we have, again, great -- I think great relationships with our landlords, but it is always a balancing act.

Got it. Thanks and best of luck for the rest of the quarter.

Adrienne Yih, Wolfe Research.

It is actually Doug Drummond on for Adrienne. Thanks for taking our questions. Most of mine have been answered, but circling back to inventory, you have been exercising great discipline with respect to inventory management. When do you perceive that inventory growth will be in line with sales growth? And should we expect total inventory to be flat to down and in 1Q 2016? Thanks very much.

Yes, I think when you experience the sales declines that we have had here in the last quarter, it is tough to match your inventory to sales, specifically when you're growing units at the level we have, which we have added 57 units here in the last year.

So, we actually feel like on a per square footage base the inventory is very well situated, and I think when I would expect to -- our long-term goals are always to grow sales at a faster rate than inventory, and I would expect we would be able to continue to do that as we get sales in the positive territory and moving the right direction.

So, I think our challenges here have been more on the sales declines over the last six months, and so as we look forward to 2016, our goals are to grow sales quicker than we grow inventory.

The only thing I would add to that, Doug, is the fact that we are unique in -- compared to a lot of pure apparel fashion trend retailers, who you would -- if you would report the inventory [movements] you may be more concerned about. We have categories of our business, like blank skateboard decks. There are blank skateboard decks. We can manage that relatively closely, so if we have a downturn in any cycle there, they don't lose -- there is not an obsolescence factor in a number of our areas of our business that other people do.

So we're able to manage the quality of our inventory still to a high level and give ourselves a bit more time to work through challenges like that. And I can tell you that in our seasonal category, I think we feel good about particularly the snow category for where we are at currently relative to how we have been able to manage through that. I think we feel good about that category that is more -- where you have more trend or seasonal risk related to inventory positions.

So again, our current (inaudible) quality of inventory, I think Chris and I feel good about where we are at. Our buyers, again, I think have been very disciplined about where we are at, so, and the uniqueness of our business allows us -- I think it gives us some more time to work through issues, again, because if we don't have a markdown product, we are not marking it down if we believe we can have a sufficient sellthrough rate and we can manage the order -- the open to buy to get inventory in the right position over time.

Okay, great. That's helpful. Best of luck, guys.

There are no further questions in queue at this time.

All right, then let me just wrap this up then. And again, although it was a very challenging year in 2015, I just, again, I want to thank all of our teams and our vendor partners because I actually think while very challenging on the sales front, we achieved a tremendous amount that is going to position us well for the longer term. And we [keep] the (inaudible) in 2015 that is going to position us well over the longer term.

So thanks to all of our Zumiez teams everywhere, across the country and around the world, and thanks to our partners and on the supply side, our technology partners. We greatly appreciate the efforts everyone has made to help move our business forward, and we are looking forward to hopefully a much better year in 2016 and for many more better years beyond that. So thank you, everybody, I really appreciate it, and we look forward to talking at next quarterly call.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.