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Zumiez Inc (NASDAQ:ZUMZ)
Q4 2019 Earnings Call
Mar 12, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to the Zumiez, Inc. Fourth Quarter Fiscal 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of this conference.

Before we begin, I'd 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 the call that are not based on historical facts are subject to risks 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's filings with the SEC.

At this time, I'll turn the call over to Rick Brooks, Chief Executive Officer. Please go ahead, sir.

Richard M. Brooks -- Chief Executive Officer

Hello and thank you, everyone, for joining us on the call. With me today is Chris Work, our Chief Financial Officer. I'll begin today's call with a few brief remarks regarding our fourth quarter performance, then I'll share some thoughts on how we're thinking about the current operating environment before handing the call to Chris who will take you through the numbers. After that, we will open up the call to your questions.

We delivered our fourth consecutive successful holiday quarter to conclude a year in which we drove sales over $1 billion, delivered the highest earnings per share in the history of our company. Fourth quarter comparable sales increased 6.4% compared to our original guidance of 2% to 4%, marking our 14th consecutive quarter of positive gains. This comes on top of a 3.9% increase a year ago, a 7.5% gain the year before that and a 5.1% gain the year before that.

Solid full price and full margin selling in each of our geographic regions, combined with the benefit from numerous expense savings initiatives we have implemented throughout our organization, drove a 25% increase in earnings per share to $1.48, $0.16 above the high-end of our original guidance range. For the full year comparable sales increased 4.9% on top of 5.6% last year and 5.9% the year before that.

While diluted earnings per share improved 46% or $0.86 to $2.62. Our success and progressively increasing sales with double-digit growth and profitability in recent years underscores the power of our business model, our relentless attention to serving our customers, the strength of our people and our strategic initiatives put in place over the last decade.

During the last few years' earnings calls, I've discussed Zumiez' short-term results are directly attributable to the execution of the long-term consumer centric growth strategy that the company has been building and evolving over its 40-plus years history. This strategy requires significant agility in navigating the trend cycles and speed desired by the customer. As we plan for the next decade, it all starts with the continued investments in our brand and culture. Throughout our history we have used these critical elements as a foundation to drive our decision making in support of our customer.

We built a business which we partnered with great brands to bring diversity and uniqueness to our customer that allows them to individuate we have built a infrastructure in which the customer can shop with us to get what they want when they want and anyway they want and as fast as they want. We have worked our business in to a channel organization with the inventory visibility from all the touch points. And back and capabilities allow us to effectively leverage expenses. The work water get that has been significant on the path ahead will require even further focus to best serve the

Customer.

The next decade will utilize our global platform to continue to service our customer. We will prioritize speed, getting faster in every aspect of serving and meeting customers' needs than we are today. This speed will allow us to further navigate the complicated wave of trend cycles that are moving faster than ever in our history.

Our speed will be improved through continued supply chain management, enhancing localized assortments, and ability to connect with the customer at more intimate level to improve digital interactions and enhanced in-store experiences. We'll be nimble with our buying behavior, continuously evolving with our customer's trends and preferences and working with our brands to build an infrastructure that supports us both in serving our engaged customers base.

We will also further efforts around social responsibility as customers and employees care about social causes more than ever, and we expect this trend to accelerate with subsequent generations because of the power of social media and the condition of the modern world. Today I'll briefly elaborate on this topic and future calls I plan to provide more details on key drivers over the next 10 years.

Zumiez has always focused on being a good corporate citizen, and we carried out a number of initiatives on our own and with our brand partners. Our own initiatives have focused on the Zumiez foundation, which has provided free clothing to homeless shelters across United States recognizing an encouraging philosophy among our lungs our base of passionate employees investing our people to make them stronger members of society and finding ways. To minimize our impact on the environment through recycling responsible manufacturing and investing in infrastructure that promotes responsible usage over the last 12 that they did mention of taking a our social responsibility means to surveillance and created guiding principles and organize various data sources that will further our social mission. We believe our long-term -- we believe of the long-term that is the thing to do for our customers, our employees and our shareholders.

Key projects include seek ways to minimize our impact on the environment, finding ways to inspire employees and customers to be more locally involved and engaged around their passions and causes, aiming to be an inclusive reflection of our customers, and finding ways for employees to outwardly share the company's teaching and learning practices in the communities that we operate.

Looking ahead to the next decade, I remain extremely confident in our ability to adapt to industry change and that the company is well positioned and not only win with today's empowered customer but also with the consumer of the future as their buying behaviors continue to evolve. We remain steadfast on the long-term and believe that our key strategic priorities have as well positioned to meet customer needs by growing sales, product margin and profit. These are complicated times with the impact of tariffs, pandemics and market fear recession, but we are laser-focused on growth for the long-term and finding ways to continue to strengthen our position. I remain extremely confident in the teams we have in place and the strength of our brand and culture as we move forward.

Lastly, before I wrap up, I would like to comment briefly on the coronavirus. We're monitoring the fluid situation closely with the well-being of our customers and employees as the top priority. We have teams focused on monitoring, planning for and responding to any potential impacts that virus may cause for our business. We're actively following guidance from health officials and local authorities. We're assessing potential implications for both traffic and supply chain.

We remain in close contact with our vendors and brand partners as it relates to merchandised deliveries. And while we have not seen a material impact on the year-to-date results, we remain cautious about the potential implications.

With that, I'll hand the call over to Chris who will review our financials. Chris?

Operator

Thanks, Rick, and good afternoon, everyone. I'm going to start with a review of our fourth quarter and full-year 2019 results. I'll then provide an update on our February sales trends before discussing our first quarter guidance and some perspective on how we're thinking about the full year.

Fourth quarter net sales increased $24.2 million or 7.9% to $328.8 million from $304.6 million in the fourth quarter of 2018. Contributing to this increase were positive comparable sales growth of 6.4%, the net addition of 11 stores since the end of last year's fourth quarter and an adjustment to deferred revenue related to our Stash Loyalty program worth $2 million, partially offset by a decrease of $1.1 million due to changes in foreign currency rates.

During the 2019 fourth quarter, our comparable sales were driven by an increase in transaction volume as well as an increase in dollars per transaction. The increase in dollars per transaction resulted from higher units per transaction, partially offset by a decrease in average unit retail. During the quarter, the hardgoods category was our largest positive comping category, followed by men's, accessories and footwear. Women's was our only negative comping category.

From a regional perspective, North America net sales increased $20.4 million or 7.8% to $280.9 million. Other international net sales, which consisted Europe and Australia, increased $3.8 million or 8.5% to $47.9 million. Excluding the impact of foreign currency translation, North America net sales grew 7.7% and other international net sales grew 11.6% for the quarter.

Fourth quarter gross profit was $128.3 million, an increase of $14.4 million or 12.6% compared to the fourth quarter of 2018. Gross margin was 39% in the quarter, an increase of 160 basis points compared to 37.4% a year ago. The margin improvement was driven by numerous factors, including a 40 basis point improvement due to better inventory management and lower inventory shrinkage, 40 basis points of leverage in our store occupancy cost, 30 basis points related to the Stash Loyalty program deferred revenue adjustment, a 30 basis point decrease in distribution and shipping costs and a 20 basis point improvement in product margins.

SG&A expense was $79.5 million in the fourth quarter compared to $76.2 million a year ago. SG&A as a percentage of net sales improved 90 basis points to 24.1% compared to 25% in the prior year. The increase was primarily driven by 70 basis points of leverage on our store operating costs and 60 basis points improvement from a decrease in impairments of fixed assets. These improvements were partially offset by 30 basis points of increase in incentive compensation due to business performance.

Operating income in the fourth quarter of 2019 increased 29.6% to $48.9 million or 14.9% of net sales compared with the prior year fourth quarter operating income of $37.7 million or 12.4% of net sales.

Net income for the fourth quarter was up 27.9% to $37.9 million or $1.48 per share compared to net income of $29.6 million or $1.18 per share for the fourth quarter of 2018. Included in this amount was a previously mentioned STASH loyalty program deferred revenue adjustment that had a positive impact of earnings per share of approximately $0.06.

Our effective tax rate for the fourth quarter of 2019 was 24.8% compared to 22.6% in the year ago period. The increase in our tax rate was due to changes in the valuation allowance on deferred tax assets related to our international businesses.

Turning to the full-year results, net sales for our fiscal year 2019 were $1.034 billion, an increase of $55.5 million or 5.7% from $978.6 million for fiscal 2018.

Contributing to this increase was a positive comparable sales growth of 4.9% and the net addition of 11 stores in fiscal 2019, partially offset by a decrease of $6.4 million due to changes in foreign currency rates.

By region, North America net sales increased $44.9 million or 5.2% to $914.3 million. Other international sales, which consist of Europe and Australia, increased $10.6 million or 9.7% to $119.9 million. Excluding the impact of foreign currency translation, North America net sales grew 5.2% and other international net sales grew 14.9% for the year.

2019 gross margin was 35.4%, an increase of 110 basis points from the prior year gross margin of 34.3%. The increase was driven by leveraging of occupancy cost worth 40 basis points, 30 basis points due to improved inventory management and lower inventory shrinkage and 30 basis point decrease in distribution and shipping costs, and a 10 basis point improvement in product margin.

Annual SG&A expense was $280.8 million or 27.1% of net sales compared to $274.9 million or 28.1% of net sales in 2018. The increase as a percentage of net sales was driven by 80 basis points of leverage in our store cost and a 20 basis point decrease in charges related to impairment of fixed assets. Operating margin in fiscal 2019 was 8.3% compared to 6.2% in 2018. Our 2019 operating profit was $85.8 million, an increase of 40.5% from operating profit of $61.1 million in 2018.

Full-year net income was $66.9 million or $2.62 per share compared to 2018 net income of $45.2 million or $1.79 per share. Our effective income tax rate for fiscal 2019 was 26.5% compared to 27.5% for fiscal 2018. The decrease in the effective tax rate for fiscal 2019 compared to fiscal 2018 was primarily related to the reduction in net losses in certain jurisdictions where there is uncertainty as to the realization of deferred tax assets and the proportion of earnings or loss before income taxes across jurisdictions.

Turning to the balance sheet, cash and current marketable securities increased 51.9% to $251.2 million as of February 1st, 2020, up from $165.3 million as of February 2nd, 2019. This increase was primarily driven by $105.6 million in cash flow from operations, partially offset by $18.8 million of capital expenditures primarily related to new store growth and remodels. We ended fiscal 2019 with $135.1 million in inventory, up 4.5% from last year. Excluding the year-over-year impact of foreign currency translation, inventory increased 5.4% from the prior year.

Now to our February sales results. Our comparable sales increased 5.8% for the four-week period ended February 29th, 2020 compared with the comparable sales decrease of 3.8% for the four-week period ended March 2nd, 2019. The comparable sales increase was driven by an increase in transactions and in dollars per transaction. February dollars per transaction increased due to an increase in units per transaction, partially offset by a decrease in average unit retail.

For February, men's was our highest positive comping category followed by hardgoods, footwear was our largest negative comping category followed by accessories and women's.

Looking at the guidance for the first quarter of 2020, once again I'll 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 internal and external factors that impact our performance.

Furthermore, we're pleased with the start of the first quarter and current sales trends but are cautious in light of some of the macro factors going on globally.

Given the speed with which the circumstances are changing our guidance does not include the impact of the coronavirus. With that in mind, we currently expect that comparable sales will increase between 2% and 4% for the first quarter of 2020 with total sales in the range of $219 million and $223 million. Consolidated operating margins are expected to be between 0.4% and 1.3%, and we anticipate earnings per share will be between $0.01 and $0.07 compared with last year's earnings of $0.03.

Now, I want to give you a few updated thoughts on how we're looking at 2020. These thoughts are inclusive of our current operating plans for this fiscal year but do not factor in a discount for unknown items such as the impact of coronavirus. As we continue to monitor this dynamic and rapidly evolving situation, we intend to remain flexible and agile in adjusting inventory, expenses and capital allocation plans accordingly. We're now building our 14 consecutive quarters of positive comparable sales.

As we look to the first quarter of 2020 and beyond, we continue to believe that the investments we've made in our infrastructure creating a seamless sales experience for our customers, our unique approach to merchandising as well as those investments we continue to make in Zumiez team will drive long-term top and bottom line growth. With that in mind, we anticipate we'll grow consolidated comparable sales in fiscal 2020 in the low single digit range

In fiscal 2020, we achieved peak product margins -- in fiscal 2019, we achieved peak product margins once again, improving from the previous high point in 2018 despite a continued heavily branded cycle, resulting in reduction of a private label share of approximately 200 basis points. We're currently working on initiatives to continue driving product margins domestically and internationally.

We are currently projecting that our 2020 product margins will be up in various degrees across all entities, but our planning consolidated product margin to be roughly flat as international sales are growing faster than domestic sales and we have lower product margins internationally. We continue to manage costs across the business with the more mature concepts in North America focused on leveraging at a low single-digit comparable sales growth.

Internationally, we're focused on managing costs well within our current sales and unit growth rates and driving our concepts closer to breakeven, reducing the impact of the losses on the overall business. We currently anticipate year-over-year operating growth of approximately 4% to 8% for fiscal 2020.

Diluted earnings per share for the full year is currently planned between $2.70 and $2.80 or 3% to 7% growth year-over-year. We're currently planning our business assuming an annual effective tax rate of approximately 26.5%, which is equal to the effective tax rate in fiscal 2019. We're planning to open approximately 20 new stores during the year, including approximately eight stores in North America, eight stores in Europe and four stores in Australia. We're planning to close approximately five to six stores during the year.

We expect capital expenditures for the full 2020 fiscal year to be between $18 million and $20 million compared to $19 million in 2019. The majority of our capital spend will be dedicated to new store openings and planned remodels, and we expect that depreciation and amortization, excluding non-cash lease expense, will be approximately $25 million, which is basically flat to the prior year.

We're currently projecting our share count for the full year to be approximately 25.9 million shares, any share repurchases during the year will reduce our share count from this estimate.

Now with that, operator, we would like to open up the call up to questions.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] I show our first question comes from Janine Stichter from Jefferies. Please go ahead

Janine Stichter -- Jefferies -- Analyst

Hi. Good evening. Thanks for taking the question. So, first, on coronavirus, I know there is probably not too much you can say, but you can give us any sense of visibility you might have into the product pipeline and supply chain disruption that would be really helpful and then I have a follow-up from the dollar business.

Richard M. Brooks -- Chief Executive Officer

All right. Let me start, and I'll maybe give you a little bit of sense, Janine, about how we're responding in the market today. Then I'll ask Chris to give you a little bit more detail about the potential impacts to the business. So, as you said in the comments, this has continued to be a real fluid situation. And of course, what we're seeing every day is that there's more change, and the change is happening of a much more quickly. And the health and wealth of our customers and employees is what we're really laser focused and is the most important thing for us as we think about the impact.

Like others, we are actively following the guidance the CDC in local health authorities we have set up internal teams both here and in Europe to address all the scenarios across our entities and to-date we're not aware of any confirmed cases within our company. But we have taken a number of steps so let me just give you a few examples of which what those steps examples of what those steps include.

First, we have eliminated all non-essential travel, we've canceled or postponed our large internal meetings. We have changed cleaning protocols across the entire company and we're allowing people to work from home where that is applicable to the role in their function. So with that as kind of the top headlines, let me turn it over to Chris who will give you little bit more sense about how we think of what we think the potential impacts may be. Chris?

Christopher C. Work -- Chief Financial Officer

Yeah. Thanks, Rick, in regards to results and how it's impacting the business, we really kind of break this down into two sections. I think you have to look at the supply chain perspective and then obviously the customer demand perspective so let me start with supply chain we're working really closely with our brand partners as well as our vendors that we use for our own private-label merchandise to moderate of the supply chain.

We're being really cognizant of what changes need to be made as we communicated to you over the last few quarters we have worked pretty hard to reduce our reliance on China obviously due to tariff issues and other aspects, and we currently saw Q4 receipts right around 40%, which was down from about 42% or 43% at the end of Q3 and down from almost 60% a couple of years ago.

That said, it's truly a global economy and we're aware of instances in our supply chain, the strain from the lack of raw materials coming out of some of these impacted areas.Overall, we do expect some level of slowdown but we're working through it as you saw from the results we just released in our prepared remarks. Our inventory growth at the end of the year did factor some of that in as we started to see the hitting China in January we made a strategic decision to try to pull forward some inventory into the year and probably had a favorable impact in February as well, and we are working closely with our brand partners and supplementing where needed.

We're also aware of cost pressures and things get back up and running, and we expect to see some potential cost challenges due to demand in both air freight and traditional long-haul shipping. That will work with our brand vendors to try and manage through.

From a customer demand perspective we mentioned on the call that we have had a very strong start to Q1 and it's hard to see a major impact. February comp was a 5.8 comp and we saw even stronger results in week one of March bringing our quarter to-date comp over 6%.

On a micro level though we continue to look at some of the market experience some of the larger outbreaks, and let me give you a couple of examples. Here in Seattle, we continue to see very strong sales in Washington and the outlying areas but stores directly in the AP Center are comping down mid-single digits over the last week and low single digits, considering the entire trade area, meaning that our web is picking some of that lost demand lost physical demand in the stores. Second example would be in southern Austria where we have quite a few stores that are on the Italian border, and we've seen an impact in those stores as well as the Italian travel ban has picked up over the last couple of days.

There is still a lot to learn here obviously these are very short time periods that we're providing these measurements but we find some comfort in the diversity of our store base and the resiliency of our model, and we expect some areas to be challenged and other areas to perform OK. And that might change over time as this virus moves across the country. We have an extremely strong balance sheet and as we mentioned in our prepared remarks and we intend to be pretty flexible and agile and adjust the inventory expenses and capital allocations, and we're trying to plan accordingly.

Janine Stichter -- Jefferies -- Analyst

That's very helpful color. And I just wanted to ask about the hardgoods business. It's been really strong for a few quarters now. Just give us some thoughts around what's behind that. And then, any mix shift we should be aware of. I believe that's a little bit of a lower margin category. Thank you.

Richard M. Brooks -- Chief Executive Officer

All right. Again, I would be happy to address the hardgoods business for you, Janine, and particularly I wish I could tell you what it was that triggered we have wrecked our brains over the last few you'll remember it's about time last year we started really seeing our hardgoods our skate hardgoods business really take off.

And across and two to be clear, we saw a take off across all of our global businesses, so Australia, Canada, US, the Europe, all of those down to the same week. So skate hardgoods is really -- start growing pretty dramatically. So, we've looked at what the trend lies and there was some trigger point which is sometimes we will see that. But the answer that we really, we really can identify one across all the businesses. So, for me, this -- just remember that we had four years of negative skate hardgoods business. To me, it was a switch in the cycle and the junction of the consumer and that's Aggie and why we saw this take off across all of our business platforms and just really accelerate.

Now, again, as opposed to just focusing on the hardgoods category itself, I guess I would like to backup and look at the question a bit bigger too because we're thrilled about hardgoods. We also have other areas of the business that got softer in the process so for me this is actually what is usually how our business works and why you never really talk about specific brands within departments or categories related to the results, it's because the business model itself this is not supposed to happen in the business model are part of the actual anticipate and expect over to see shifts like this across the business model.

And then, as you think about -- we're always at some point in the different in some cases where beginning like in the skate hardgoods cycle, I would tell the beginning of the second. Other things were in the middle, some things at the end in terms of trend cycles but we are really fortunate I think that our business model has such a diverse portfolio of brands and a diverse portfolio of categories covering the lifestyle for the consumer for the and so this diversity really allows us a few things I think most people to get.

And of course, our goal is to maximize sales across all these different trend cycles that are overlaying each other typically at different times. So, we benefit from young brands that go from local to global and becoming growth drivers for us across our business.

We benefit from fashion cycles, like Restaurant 90's that take off and where we see global demand. We also benefit from category shifts like we're seeing here with skate hardgoods where we were negative for 44 years but now we're seeing that will become a real driver four this across the last year.

And I can see, all three of those examples, we have brands that are -- we have young brands that have become growth brands that have been driving the business. We've been riding the Restaurant 90's type at the same time while we're benefiting from the emergence your been providing the rate of 2nd at the same time. While we're benefiting from the emergence of the skate hardgoods kind of category shift business. So, no matter where we're at, all the different cycles as they overlap, our goal is again to make sure all the brand trends right unique products for our customers who want to express individuality, and then to grow -- hopefully grow our share of 40 customer spending across those various trend cycles.

So this is, again, kind of giving a big perspective as we actually expect to see these shift in our business. We actually tried to anticipate the shifts in this business and our goal is that we can gain across these trend cycles and in fact when we insisted cycle changes, it tends to be really good thing for our business because of the custom leaders on trend cycles relative to their peers.

So this is why we will talk about brand concentration with private label mix. And I would like to ask Chris to kind of give you a little bit of cover on that too. Chris, you want to?

Christopher C. Work -- Chief Financial Officer

Yeah, absolutely. I will try to put some quantification to what Rick saying and I think it is really important I know Rick laid out some of the prior year comps in our prepared remarks but I think when we think about this over a multi-year period. I mean this is really since the back half of '16 we've been running really strong results. In '16, the real turning point for us started for us in men's and then women's apparel and apparel those columns.

And while we were roughly flat flattish in 2016, 2017 was a 59 comp 2018 was a 5.6 comp and now 2019 is a 4.9 comp. So that gives you a 16.3 three-year stack. And if I think about that stack, really the first couple of years were really apparel drive to almost -- or actually over 50% of the business when I took, and we star are we have a very productive when we start up a little time to. Almost or actually over 50% of the business when I took men's and women's apparel together what you will see here when we report our can 10-K and our category performances, you'll see this year was heavily driven by hardgoods and footwear as well.So I think what's interesting and just speaks to what Rick saying was hardgoods grabbing on the 300 basis points of share -- total sales and footwear another 100, and the donors really be in the apparel side, and it speaks to the magnitude of what Rick is talking about at the end of the day, what's most important for us is driving comp and we've seen this over time, we've seen these categories move up and down as the consumer preferences change, and we see that within our top 10 and top 20 brands. And we talked about this really as part of this call every year that we expect to see 20% to 30% turnover in our brands. 2019 was no different than years prior.

One other thing about the last couple of years is, this has been heavily branded cycle and we've seen the concentration of our top 20 brands continue to concentrate, meaning they are higher percentage of our overall sales. That being said, history will tell us at some point we'll be concentrate and that moves in waves. And so, neither thing is really a bad thing to our business. It's really just what the customer wants. We're happy to move with them and, overall, we really measure ourselves on those overall comp numbers.

So, private label also has declined as a percentage of the business. And I think that's something that we called out as far as what we were really excited about as we see margin actually increase here. 2019 was again our peak performance. This is like the third year in a row that we've seen margin grow to our peak performance despite the fact that private label decreased another 200% as a share of the business. Now we don't see that as a negative on our private label business.

Actually what we see more is the focus on the branded side of our business. So, we'll go on these way, I'm sure we'll be in a way that at some point in the future where the brand style may not be as important as maybe a look, and private label could play at a higher penetration point. So, we'll continue to push that and go where the customer takes us.

Janine Stichter -- Jefferies -- Analyst

Helpful color. Thanks a lot.

Operator

Thank you. I show our next question comes from Jeff Van Sinderen from B. Riley. Please go ahead.

Jeff Van Sinderen -- B. Riley -- Analyst

Hi, everyone I know you mentioned Austria but what are you seeing more broadly in Europe in the last couple of weeks if you can comment on that?

Richard M. Brooks -- Chief Executive Officer

Yeah. Jeff, I'll go ahead and take that. I think when we think about Europe overall, let me take a step back and just talk about Europe for 2019 and kind of where we stand today and then I'll briefly touch on what we see here most recently out of Europe. So, we have talked about this over prior calls. I mean, really to grow Europe to where it is today, it'd take a meaningful investment and you guys know this is something we've been talking about for many calls now and we believe that investment has really put us in a place to capitalize on the European marketplace. We're including a real strong network of stores and webs in five distinct countries now as well as our web platform that reaches all across Europe.

We at this point think we're probably the largest lifestyle retailer in Europe. 2019 represent a really solid year in Europe, full price selling, and we continue to be really pleased with the trajectory of what we're doing, including our stores in Germany and Switzerland which we would classify as kind of maturing markets still have some room for growth but we've been in the markets for few years performed at high single-digit comps.

Our stores in the Netherlands, which is really a new market to us in 2018, saw a mid-teen comps. Austria, which was our most mature market performed very strongly. We're really happy with the results there and we opened our first stores in Finland and have been really happy with our store in Finland. So, I think all of that, plus the fact that we're seeing really a strong category growth across all departments, and I think it kind of leads to us that we're really taking a meaningful step in the right direction here in 2019.

Overall sales for Europe were up 13.2% to over '98 million and on the loss side, we saw the loss decline from EUR6 million to EUR3.4 million loss. So, we saw a meaningful decline in overall losses. We saw significant flow-through on the incremental sales, and we believe that we've opened a lot of new stores here both in 2019 and '18 that are going to provide additional flow-through into the future. So, our fundamental belief, as you know Jeff, is that this is a global customer and our brands are global and we see that many other comments even Rick mentioned on the prior question around on the hardgoods trends and things that are working here are typically working in Europe.

We know that operating at scale and efficiency internationally allows us to serve our customers better and ultimately provide more shareholder value. We have seen that in Canada as we grew scale, we really leveraged the investment in that business and we expect the same in Europe and Australia. So, we have lots of opportunity ahead of us and we believe profitability to be in the near-term really barring a recession, and that's obviously challenge that we're working on that marketplace. So, as it comes to how we're performing here in the short-term, which I will say is the short-term.

It has been a little bit more challenged and I think that part of that, a big part of that is related to the snow season. As you know, that business is highly dependent on the snow season. Now as we have grown and moved out of the Alps regions, we are seeing a move away from that, which is part of our strategy there because we're very core, we're very known for our stores for our snow, so large part of what we do but when it doesn't snow, that puts you at risk.

So, we have seen great strides in our apparel categories, our footwear categories, our accessory categories. But we have seen a tough winter and that impacted us in Q4, it also impacted us to the start of the year. So, while I can put my finger on a few areas of the business like previously mentioned Southern Austria as it relates to the coronavirus, the bigger impact here in February and even in the first couple of weeks of March is a decline in the snow business. So, the results are not as strong as our consolidated comps but it's something that we think barring again global pandemic challenges that will rebound as we move past this stage.

Jeff Van Sinderen -- B. Riley -- Analyst

Okay, that's helpful and then I'm going to give you a little bit of a what if question, if traffic were to fall off substantially in your brick-and-mortar stores due to COVID-19, how are you thinking about managing promotional levels in that sort of a scenario and then would you expect e-com to give substantial offsetting factor if brick-and-mortar gets it?

Richard M. Brooks -- Chief Executive Officer

All right, I am reluctant Jeff as you might imagine to address a hypothetical scenario like this but because of the situation, let's just give you a few headline thought I think about how we're thinking about it. So, as we said in the comments related to the coronavirus, we are trying to model and anticipate different scenarios of impact on the business.

And as Chris said, supply chain is probably the area we are least worried about. We think we can manage through in some cases where we may see product pushed out. It could actually turn out to be advantage for us frankly in terms of giving us some flexibility around received dates with product or cancellation dates with products.

So, we've actually gain flexibility around [Indecipherable] because of delays, so now we are not anticipating that at this point but these are the things we're game in as we look at the process that give us flexibility and we have such diversity in our brands, overall brand diversity who ships us when they ship us, we are of course talking as Chris said with vendors about this that I think on the supply side that diversity gives us a lot of ability to manage decide their process. But much more difficult side is the traffic side of the business which is really the heart I think of your question should traffic follow up significantly in the business and that of course is much more difficult thing to manage our way through.

I'm concerned about two things there, of course as we said we're getting not only the safety for customers and our staff but also what it means to our staffs who are we have a lot of our employees out there. So, I think these are areas we have to really think our way through and again that we're planning and trying to do some contingency modeling around what that would mean for the business.

So, now that all being said, we have not experienced that in fact as Chris said, we're seeing pretty solid results through five weeks with a comp of 6% and actually accelerated we went to March but we're monitoring what's happening I don't know whether if there were a lot of schools that are out whether that will play to our advantage over a period of weeks or not those are all things we have to, we just have to see how that plays out. And -- but that's a wildcard but if that is the card that's play, Jeff and I think we have a lot more to worry about overall relative to what it means for global recession than just traffic and Zumiez stores.

Jeff Van Sinderen -- B. Riley -- Analyst

All right, fair enough. Thanks for taking my questions and best of luck for the rest of the quarter.

Richard M. Brooks -- Chief Executive Officer

Thanks.

Operator

Thank you. Our next question comes from Jonathan Komp from Baird. Please go ahead.

Jonathan Komp -- Robert W. Baird -- Analyst

Yeah, hi. Thank you. If I could maybe ask another broader more historical question tied to more of the economic sensitivity and just given the nervousness that's out there, I know back in 2007, you had very strong comp trends and pretty quickly you reversed to very negative comp trends.

And I'm just curious if you're looking back to that period if there is anything that stands out in terms of factors you're watching or monitoring as sort of tells if you will or even just how you're planning the business today for a range of potential outcomes that you are uncertain as they are?

Richard M. Brooks -- Chief Executive Officer

Yeah, I'm glad to just talk a little bit about John, we have thought about this relative to 2007, 2008. It is different, so I would tell you is the headline on that aspect of your question in 2007 again based upon that we know, we have a highly that we're in the consumer discretionary marketplace that our products are discretionary relative to consumer cycles and in 2007 we were in the fall of 2007. We saw I think a drop off in our business earlier than most than a lot of retailers did at that point in time and we realize at the time but as we move back later looked at it what we saw was that we were really killed in areas like Nevada and Phoenix and Southern California and it became clear to us of course that hindsight that those were the earliest hardest hit housing markets.

So, we tended to lead I think into recession, I had in my experience over the years here at Zumiez and now even my 27th year here that we tend to be an early indicator going into recession as opposed to laggard. We're seeing that this time, this is a flip and I think it's because of the nature of the coronavirus and that is impacting everyone in your time at the same time. And so, I think we're more going to be, more in the line but in fact at this point we seemed to be a bit more resilient than what we're hearing about what maybe some other retailers were at in the marketplace. So, now what holds up and that's a whole different question but we're looking as we've talked about here better what other potential range of outcomes.

You know our business model is highly levered model both on the upside and the downside but this is also why we have consistently focused on having a very strong balance sheet. We know that about our business, we know it forever and so we've always put a premium on having a strong balance sheet be able to respond to consumer cycles and investments in our business. And our goal through these kinds of cycles of that we have adequate resources to continue to invest in the key things that drive long-term strategy, protect shareholders security and interest and to make sure that where we never put the business in jeopardy and as appropriate return value to shareholders where it makes sense through these environments and that's why having $250 plus million in cash the balance sheet today and no debt -- no long-term debt on our balance sheet is such an incredibly strong position to be in. And we view that as the risk mitigator while we can gain all the strategies. We are small player, we are discretionary retailer, we're in the subject to the cycles and the most important thing is that we cannot only manage our way through these cycles but we can actually try and invest and make the right decisions for the long-term as we worked through the cycles.

Jonathan Komp -- Robert W. Baird -- Analyst

That's really a helpful perspective, thank you. And then maybe one follow up for Chris, the G&A dollars you held very, very tight in 2019 and drove a lot of leverage, just how should we think about your ability to control the cost as tightly in 2020 whether looking at your dollar growth at the leverage points, just how you're thinking about the year?

Christopher C. Work -- Chief Financial Officer

Yeah, I mean let me kind of start with what I put out there for the year to date thoughts in our prepared remarks. We are planning 2020 SG&A to grow at a slightly higher rate than 2019 as we mentioned 2019 was aided by some pretty meaningful expense savings and planning throughout the year as we kind of go forward our models right now are built with the US and Canada, North America really focused on localization of our sales efforts and optimization of our cost structure and so growing and really planning SG&A on that low single digit comp point where our maturing markets like Europe and Australia have a higher comp point, higher sales growth point, but we're really focused on the investment in SG&A and cost being below that point, which drives to kind of where we are today and we do expect to have SG&A and our model grow slower than sales. And that's what we put out there for the year.

If we are to slip into more recessionary challenges or really fall off on the business, as Rick said, I mean it is challenging, one thing you've seen about this model over the last few years is that as we grow sales ahead of sort of our leverage point we see significant flow through to the bottom line.

That being said when we drop below that low single digit point we will see challenges based on the fixed cost nature of our business. Now I think our model is set up much better than others and the fact that how we have set our fixed cost business to work across both channels, I mean this is without having a fulfillment center with allowing our web fulfillment to be fulfilled by our employees in store. These are the type of things that I think really do help leverage that fixed cost because you're just taking those fixed dollars over more sales. So, clearly the variable cost in our model, weather it's units received and shipping, credit card, we will obviously have -- we still have set our incentive levels at a target to meet certain hurdles. So those types of things could be adjusted in a downturn but we have heavy fixed cost, as you know too, related to our rent and labor and many of our corporate costs.

So, we're managing against those two factors and we still think on the low single digit that we put out there we should be able to provide some leverage for the business and grow earnings and grow operating profit, but if we are to slip below that we would expect to see some challenges in the model.

Jonathan Komp -- Robert W. Baird -- Analyst

Okay, great. Thank you. Best of luck.

Richard M. Brooks -- Chief Executive Officer

Thanks.

Operator

Thank you. [Operator Instructions] Our next question comes from Mitch Kummetz from Pivotal Research. Please go ahead.

Mitch Kummetz -- Pivotal Research -- Analyst

Yeah, thanks for taking my questions. Let me start with footwear, it's a most negative comp for the month of February. I know that when you guys reported last quarter, it was negative in November and you kind of said don't read too much into that or it will turn positive which it did, so tell me even I'm not supposed to read too much in the February being negative. So why now it's small month? So what do you see on the footwear side?

Richard M. Brooks -- Chief Executive Officer

Let me start and I'll let Chris address it in a little bit more, Mitch, but I'm going to go right back to the comments I had earlier relative to Janine is, we actually don't care. Frankly, our goal is to drive results, why footwear is negative in the month of February we drove a 5.8% comp and it got stronger in the week of, in the first week of March. So from my perspective the business is the business, our job is to execute the model, our business model and to go with where our customers want to go and own our proportion of wallet share with our customers.

So, I just want to emphasize that point because we've been through these cycles many times, we've had negative footwear cycles many times, we've had positive footwear cycles many times and through most of those we've been successful in running gain. So I just want to make sure that that's the headline here.

Chris, do you want to talk about it more?

Christopher C. Work -- Chief Financial Officer

Yeah, the only thing I would just add to that, and Mitch you took a little bit of my thunder there because I was going to tell you the same thing I told you after November because as we think about footwear, we really look at footwear in the peak selling periods right. And December was one of those and we saw it actually revamp pretty nicely across December and into January. As we think about footwear as you'd imagine, the summer and the back-to-school period are some of our larger portions. So, we, as Rick said, are really focusing on the overall model and we're not getting too tied up in where footwear is here in February, I think it's something we'll continue to monitor and we'll see how it ends up as we close out Q1 and move into the more important time period here in Q2 as a percentage of the overall business.

Mitch Kummetz -- Pivotal Research -- Analyst

Okay. Couple other questions. First, on -- just kind of hypothetical too but if traffic did fall off a lot do you guys have any recourse in terms of your lease structures I mean I don't even know to what you said you had a percentage rent, do leases split the percentage rent? I mean, how can you -- is there anything that you can kind of help out on that side?

Christopher C. Work -- Chief Financial Officer

Sure. I think what I would say is, yes, we do have storage around percentage not the largest portion by any means of our occupancy portfolio. We have looked at our real estate portfolio over the year as a real -- real with a real risk-based approach and we have been doing this for good portion of this last decade trying to look at the portfolio and as we said in the past not have one more store than we need to. And so, what that means is, we manage a lot of the portfolio with pretty short deals.

So we have really thought through this and said, OK, we know every trade area has like a key center in the market that's when what we want invest in that's when we want to be in for a long-term. Those trade areas with multiple stores in the market we're going to be pretty cautious with the B and C and D centers.

Now, I would tell you, those centers have actually performed pretty well for us over this last cycle of 14 quarters that we've been up. I think that's for a variety of reasons, including our teams that are there, our buyers' ability to put product in them and also fulfilling from store. I think it had an impact as we've been able to make those stores look better in the amount of inventory we have been able to put in there because it's dual use inventory. So I think we feel good about where we're at. But with the real estate portfolio we are really looking at that bottom 10%, 20% of our stores really on short deals and maybe reaching beyond that as I think about kind of where we're at right now, I mean we really -- the vast majority of our stores are all four-wall contribution. Definitely more of them are our four-wall cash flow, we have of our lowest 20%.

We can get out of about 80% of those in the next three years and almost 90% of them in the next five years. So, like I said we're managing pretty short term deals and as it relates to kind of our ability to work with landlords, we will continue to work with them in a fair and honest way as the deals come up. And in many of these cases we have been able to get some rent concessions and in the more favorable locations. Sometimes it goes the other way. So we'll keep working with them and kind of see where this goes.

Richard M. Brooks -- Chief Executive Officer

I just add, Mitch, that I think our relations with them, we have very strong relations with all the major landlords. And if traffic declines, the landlords have probably a bigger problem than any individual retailer does. So I think we would all have the same interest to work toward what's best for our mutual customers. And again, I think, the landlords understand that we have been a high performer for them. Of course, high performers can afford to pay a bit more rent, because of that and landlords are also as you know closely watching the financial health of their retailers, so they also understand about Zumiez is that we're one of the healthiest retailers out there.

We're good at long-term planning and long-term thinking and that they understand we factor into their long-term positioning across their entire portfolio too. So I think it gives-I respect our landlords, we always have a good conversation discussions always there and tough as you might guess but yeah we both see the strength in each other and so I am always cautiously optimistic about when you have that kind of relation, you find good answers.

Mitch Kummetz -- Pivotal Research -- Analyst

And then one lastly, Rick, just kind of a big picture question for you. Any thoughts on what social distancing might mean in terms of wallet share? Are kids going to stop going to movies, concerts, restaurants before they stop going to the mall? And even if they stop going to the mall, will they spend -- continue to spend on footwear and apparel versus other things because they can do it online and maybe they can do some of the other things online, any thoughts on that?

Christopher C. Work -- Chief Financial Officer

Yeah. I do have thoughts on that, Mitch. And the answer to the question, I don't -- there is no -- there isn't one answer to your question would be what I would tell you there is going to be different answers to the questions for each, for each retailer, each type of business, each type of consumer business in terms of what the retailer means to the consumer grouping. So, we think we have a very strong community aspect of what we do as a retailer. And so, where our stores have actually become hubs for these like-minded young people who individuate and think about expressing their identity, they have relationships with our sales before and I am sure you have seen in our stores that these are -- many customers come in for the -- into our stores because they have fun being there and fun working with our teams.

So, I think this answer will be something different for each retailer. And I guess back to kind of power how the position and power that each retail brand has and what they're doing for their customer. So how that plays out I'm not sure across retail but I will tell you this that I'm much more confident in our positioning relative to what we're doing for our customers evidenced by the fact that they have been willing to spend more dollars with this and spend more dollars at full price.

In my mind, that is the measure that shows -- that demonstrates the retailers winning their marketplace because customers bow with their dollars on things they find valuable in their life where value has been added. Now if I was just selling generic low-price clothing, I would be -- I wouldn't feel very confident about where I'm at right now.

And so, for us, I think our brand needs something little deeper, the tighter connectivity to it, I think as we-Chris shared with here in Seattle we would see some volume move to the digital side but I think we probably will also see at the same time less drop-off and we will then work with our teams about what the social business mean how far do we stand from customers in the stores but yes still have a fun time. Those are the kinds of things our teams are working on.

Mitch Kummetz -- Pivotal Research -- Analyst

All right. Great. Thanks, guys.

Operator

Thank you. I show no further questions in the queue at this time. I would like to turn the call back over to Rick Brooks, CEO, for closing remarks. Please go ahead.

Richard M. Brooks -- Chief Executive Officer

All right. Thank you very much. As always, I just want to make sure I say to everyone thanks for your interest in Zumiez and the time here talking about what's going on in our business today. And lastly, I just want to make sure that I said everyone to stay safe and stay healthy and that we look forward to talk with you again when we release Q1 results in June. Thanks, everybody.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Richard M. Brooks -- Chief Executive Officer

Christopher C. Work -- Chief Financial Officer

Janine Stichter -- Jefferies -- Analyst

Jeff Van Sinderen -- B. Riley -- Analyst

Jonathan Komp -- Robert W. Baird -- Analyst

Mitch Kummetz -- Pivotal Research -- Analyst

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