Zumiez (ZUMZ) Q3 2021 Earnings Call Transcript

Zumiez (ZUMZ 4.67%)
Q3 2021 Earnings Call
Dec 02, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. Welcome to the Zumiez Inc.'s third quarter fiscal 2021 earnings conference call. [Operator instructions] Before we begin, I'd like to remind everyone of the company's safe harbor language. Today's company -- today's conference call includes comments concerning Zumiez Inc.'s business outlook contains forward-looking statements.

These forward-looking statements and/or 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 additional -- excuse me, 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 would like to turn the call over to Rick Brooks, chief executive officer.

Mr. Brooks, you may begin.

Rick Brooks -- Chief Executive Officer

Thank you, and hello, everyone. Thanks 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 remarks about the third quarter then I'll share some thoughts on sales for the fourth quarter date before handling the call to Chris who will take you through our financial results in more detail.

After that, we'll open up the call to your questions. As you saw from our earnings release issued earlier today, our third quarter was a historic one. We've adeptly navigated multiple external headwinds over the past 18 months starting with the pandemic in early 2020; continued global supply chain disruptions; labor shortages; inflation; and in some cases, closures due to COVID. Despite these challenges, this quarter, we grew net income 5.4 percent over Q3 of 2020, and a remarkable 60 percent over the third quarter of 2019 prepandemic levels.

In fact, we've now generated more income in the first nine months of 2021 than in any full-year period in the company's history, and we still have the important holiday season ahead of us. Looking at the underlying drivers of the record earnings quarter, net sales were up seven percent and 10 percent on a one- and two-year basis, respectively. With the majority of school districts around the country resuming in-person learning this year, back to school is highlighted by strong full-price selling, reflecting pent-up demand and our ability to serve the customer through our integrated model however they want to interact with us. The increase in sales, combined with product margin growth, offset an uptick in SG&A expenses as we saw an expansion of store hours, an increase in marketing, and the completion of our first national store manager in-person event in 18 months in North America.

Looking ahead, the fourth quarter started well despite numerous challenges, underscoring our ability to capitalize on strong consumer demand and expand our market share. Fourth quarter to date through Tuesday, November 30, total sales are up 11.5 percent year over year, and up 8.6 percent compared to the same period of 2019. Our performance of the Black Friday weekend bodes well for the remainder of this holiday season. While we continue to experience global supply chain challenges, labor shortages, inflation, closures tied to COVID, and now, risk associated with new omicron variant, we are confident that our investments of people, sourcing, and fulfillment will allow us to serve our customers with a distinct merchandise offering, great service, and seamless shopping experiences that are the pillars of Zumiez's long-term success.

As we like to say, periods of significant change create opportunities. And companies that have the right people, strategies, and resources in place can take advantage of times like this to advance their brand and business. While Zumiez isn't fully resistant to all the challenges that are plaguing the industry, we believe the current environment will accelerate further consolidation globally and that our adaptability and focus on our customers will lead to further wallet and mindshare gains. We believe this is evident domestically and also internationally.

We continue to win share in Europe and Australia despite being hit with closures in both regions throughout the year and the current closures in Australia during the important lead-up to holiday -- excuse me, in Austria, in the lead-up to holiday. While we're tactically adaptable, our overarching consumer-centric strategy rooted in strong brand and culture will remain constant to build a business in which we partner with great brands to bring diversity and uniqueness to our customers that allows them to individuate. We've built an infrastructure for which customers can shop with us to get what they want, when they want, how they want, and as fast as they want. We marked our business into a channel-less organization with inventory visibility from all touchpoints and back-end capabilities that allow us to effectively leverage expenses regardless of the channel in which sales originate.

Each of these distinct attributes will serve us well in today's hybrid shopping model in logistically challenged environment. Our unique position in the marketplace leaves us well-positioned to capitalize on consumer demand and expand our market share over the near and long term. To close, I want to thank the entire Zumiez team for their hard work and dedication to upholding the cultural values that are directly tied to a strong third quarter and a positive start to the fourth quarter. Despite the fantastic financial results, these are not easy times to operate in.

And our teams continue to work relentlessly in service of our customers. With that, I'll turn the call to Chris to discuss the financials.

Chris Work -- Chief Financial Officer

Thanks, Rick, and good afternoon, everyone. Similar to last quarter, I'll provide a comparison to both the prior year and the third quarter of fiscal 2019, where appropriate, given the impact of the pandemic on the year-ago period. Following my review of the third quarter results, I'll provide an update on the fourth quarter-to-date sales trends and our current perspective on the full year. Third quarter net sales were $289.5 million, up 6.8 percent from $271 million in the third quarter of 2020, and up 9.6 percent from $264 million in the third quarter of 2019.

The year-over-year increase in sales was primarily driven by our ability to capitalize on current trends, the reopening of stores compared to short-term store closures-related COVID-19 pandemic in the prior year and a more normalized back-to-school season in our U.S. business. Our stores were open approximately 99 percent of the potential operating days during the third quarter of 2021, compared to approximately 95 percent of the third quarter of 2020, and 100 percent in third quarter of 2019. From a regional perspective, North America net sales were $257.5 million, an increase of 7.1 percent over 2020, and up eight percent compared to the same period in 2019.

Other international net sales, which consists of Europe and Australia were $32 million, up 4.5 percent from last year, and up 25.2 percent from two years ago. Excluding the impact of foreign currency translation, North America net sales increased 6.8 percent, and other international net sales increased five percent compared with 2020. We continue to experience temporary COVID-related store closures during the third quarter in Australia, noted they are open for approximately 42 percent of the available operating days. During the quarter, the men's category was our largest growth category, followed by footwear and accessories.

Hardgoods was the largest negative category followed by women's. Third quarter gross profit was $114.7 million, compared to $105.8 million in the third quarter of last year, and $94.6 million in the third quarter of 2019. Gross margin as a percent of sales was 39.6 percent for the quarter, compared with 39 percent in the third quarter 2020, and 35.8 percent in the third quarter 2019. The 60-basis-point improvement from the third quarter 2020 was largely due to a 60-basis-point decrease in web shipping, a 60-basis-point decrease in impairment losses related to the operate-and-lease rights of these assets, and a 50-basis-point increase in product margin.

These increases were partially offset by a 110-basis-point increase in inventory shrinkage after historically low results in 2020 with stores closed. Gross margin improved 380 basis points from 2019, driven largely by product margin improvements of 220 basis points, occupancy leverage of 120 basis points, and shrink improvement of 40 basis points. SG&A expense was $74.8 million or 25.8 percent of net sales in the third quarter, compared to $67.9 million or 25 percent net sales a year ago, and $70.3 million or 26.6 percent net sales two years ago. Compared to 2020, the increase in SG&A expense as a percent of net sales was primarily driven by 80 basis points of increased store payroll as many stores increased operating hours from the pandemic-related reductions in the prior year; 50 basis points due to corporate costs consisting primarily of increased travel, training, and marketing; and 30 basis points due to a decrease in governmental subsidies.

These increases are partially offset by a 40-basis-point decrease in annual incentive compensation and 30 basis points due to leverage of our nonwage store costs. Operating income in the third quarter of 2021 was $39.8 million or 13.8 percent of net sales, compared with $37.9 million or 14 percent of net sales last year. In the third quarter of 2019, we had operating profit of $24.3 million or 9.2 percent of net sales. Net income for the third quarter was $30.7 million or $1.25 per diluted share.

This compares with net income of $29.1 million or $1.16 per diluted share for the third quarter of 2020, and net income of $19.2 million or $0.75 per diluted share for the third quarter of 2019. Our effective tax rate for the third quarter of 2021 was 25.5 percent, compared to 24.7 percent a year ago period and 25 percent two years ago. Turning to the balance sheet. The business ended the quarter in a very strong financial position.

Cash and current marketable securities increased 6.9 percent to $338.1 million as of October 30, 2021, compared to $316.2 million as of October 31, 2020. The increase in cash and current marketable securities is driven by cash generated through operations, partially offset by share repurchases and capital expenditures. The company repurchased 2.2 million shares during the quarter at an average cost of $41 per share and total cost of $91.6 million. Fourth quarter to date through Tuesday, November 30, the company has repurchased an additional 0.4 million shares at an average cost of $47.91 per share and a total cost of $17.5 million.

This brings our total year-to-date stock repurchases to 2.8 million shares at an average cost of $4216 per share and a total cost of $120 million. We have $68.8 million remaining on the current share repurchase authorization. As of October 30, 2021, we have no debt on the balance sheet and continue to maintain our full unused credit facilities. We ended the quarter with $175.1 million in inventory, up 8.8 percent from Q -- from the third quarter of 2020, and down 4.5 percent compared with the third quarter of 2019.

On a constant currency basis, our inventory levels were up 8.4 percent from last year. We continue to be happy with our current inventory position in light of the current sales trends and operating environment. As Rick mentioned, we are not immune to the global supply chain challenges facing the industry over the last 18 months but continue to work closely with our brands and suppliers to navigate the challenges that are facing all of us. Overall, the inventory on hand is healthy and selling at a favorable margin.

Now, to our fourth quarter to date results. Fourth quarter to date sales through Tuesday, November 30, increased 11.5 percent compared to the same period in the prior year into December 1, 2020. Compared to the same period two years ago into December 3, 2019, total net sales increased 8.6 percent. Our stores were open approximately 99 percent of the available days during the period in 2021, compared to approximately 97 percent in the same period last year with our current closures almost exclusively occurring in Europe.

We continue to monitor the situation in Europe with closures closely, and at this time, are planning these stores to be open ahead of holiday. From a regional perspective, net sales for our North America business for the 31-day period into November 30, 2021, increased 7.5 percent over the comparable period last year and were up 8.3 percent compared to the 31-day period in December 3, 2019. Meanwhile, our other international business increased 39 percent versus last year and increased 10.3 percent compared with the same period of 2019 as we continue to see closures in the current year, however less frequent than in 2020. From a category perspective, men's was our most positive category followed by footwear, women's, and accessories.

Hardgoods was our only negative category. Due to limited visibility in the business, we will not be providing specific guidance for the fourth quarter of 2021 or fiscal year 2022 but do want to provide directional update on our expectations for the year. This update assumes the current store closures in Austria, which are expected to reopen by mid-December but does not include any other closures or significant impacts of current or future COVID variants. Concerning revenue, for the full year fiscal 2021, we are projecting net sales to grow in the mid-teens from fiscal 2019.

This translates to net sales growth from 2020 to just over 20 percent. For the fourth quarter, we anticipate sales growth from the prior year in the high-single digits. Moving to gross margin, 2021 gross margin is currently planned to grow substantially year over year, driven by leverage of occupancy costs on increased sales, a reduction in shipping costs as web revenue normalizes with stores being open, and improved product margins. We do not anticipate gross margin -- we do anticipate gross margin growth in the fourth quarter but more modest than the year-over-year growth experienced in the third quarter of this year.

Fiscal 2021 SG&A costs are expected to increase in line with our sales growth from 2020 for several reasons discussed on our Q2 2021 earnings call, many related to the pandemic. As a reminder, the drivers of the SG&A increase include store wages and benefits increase with expanded mall hours from reductions in 2020 due to the pandemic, government subsidies received in 2020 not anticipated to repeat in fiscal 2021 at the same level, an increase in incentive compensation and other discretionary accruals related to improved performance, a legal settlement accrued during the second quarter, an increase in costs related to training recognition events that were reduced significantly in 2020 due to the pandemic, an increase in marketing events and other related spending that were not possible with the restrictions of 2020, and an increase in travel costs in the back half of 2021 with very little travel included in our fiscal 2020 results. In summary, we expect to see expansion in gross margin while SG&A expenses grow in line with overall sales. On a net basis, however, we anticipate operating margins will be up year over year in fiscal 2021 reaching low-teens as a percent of sales.

We are currently planning our business assuming an annual effective tax rate of approximately 25 percent in fiscal 2021, compared to 25.6 percent in 2020. We are planning to diluted earnings per share to increase meaningfully in fiscal 2021 compared with fiscal 2020, driven primarily by a significant increase we achieved in the first quarter. And to a lesser extent, our earnings in the back half and the impact of our stock buyback executed during the year. For the fourth quarter of 2021, we anticipate that EPS growth will be in the mid-to-high-single digits as a percentage over the prior year, inclusive of the impact of stock repurchase previously discussed.

We are planning to open 23 new stores in fiscal 2021, including approximately seven stores in North America, 12 stores in Europe, and four stores in Australia. We are planning to close approximately five to six stores during the year. Capital expenditures are planned to be between $90 million and $21 million in fiscal 2021, compared with $9.1 million in fiscal 2020. The majority of that capital spending will be dedicated to new store openings and planned remodels.

We expect the depreciation and amortization, excluding noncash lease expense, will be approximately $22 million in fiscal 2021, compared with $23.5 million in fiscal 2020. We are currently projecting our weighted average diluted share count for the full year to be approximately 24.8 million shares. Given the repurchases over the past quarter, we expect the weighted average diluted share count for the fourth quarter of 2021 to be approximately 23 million shares. Any further share repurchases would reduce these amounts.

With that, operator, we'd like to open the call up for questions.

Questions & Answers:

Operator

Thanks. [Operator instructions] Our first question comes from Sharon Zackfia of William Blair your line is open.

Sharon Zackfia -- William Blair and Company -- Analyst

Hi, good afternoon. I apologize, Chris, you talk really fast. So, if you talked about this, I just didn't catch it. I guess I'm curious there's been a lot of conversations about, you know, consumer shopping earlier this holiday season.

And I'm wondering if you think you've seen any evidence of that and how you are handicapping that as you talk about, you know, the fourth quarter revenue growth rate, particularly that last week into Christmas. And then any thoughts on what you're thinking about for store openings in '22.

Chris Work -- Chief Financial Officer

Sure. Yeah, I'll go ahead and take that. I think, you know, as it relates to Q4 and sales trends, this is certainly something we've been trying to monitor and understand. I think from our perspective, you can tell that our Q4 growth rate is lower than what we've produced year -- quarter to date.

And I think that's a factor of considering what you've mentioned here and also a factor of the fact that January last year was extremely strong. And so, if you look in our cadence last year, we got quite a bump in January that really drove the quarter up, and that was primarily related to that period of stimulus. So, we're not expecting that as well. So, I think if you take those two factors as kind of factored into our guidance, you know, this is something we also heard a lot about last year of people waiting until the end.

And we obviously didn't experience that as much last year. So, we're kind of waiting that with probably a lesser impact in -- probably we'll see in January but definitely factored into our thoughts. As it relates to store count in 2020, you know -- 

Rick Brooks -- Chief Executive Officer

2022.

Chris Work -- Chief Financial Officer

Or 2022, thank you. You know, I think, as we've always said, we'd like to be very opportunistic in how we think about this. And if we look back at the last significant downturn in rental rates, which is probably during the last recession, we opened some really good stores in 2008, 2009, and coming out of that recession. And I think we're looking at this market very similarly to saying that there's there's good opportunities to work with landlords, to fill spaces, and find markets that we think we can do well over the long term.

So, at this point, as we think to 2022, I think you could expect us to increase the number of store openings in each of the geographies that we operate.

Sharon Zackfia -- William Blair and Company -- Analyst

Thank you very much.

Operator

Thank you. [Operator instructions] Our next question comes from Jeff Van Sinderen of B. Riley. Your line is open.

Jeff Van Sinderen -- B. Riley and Company -- Analyst

Hi. Thank you, guys. Can you please just give a little bit more color on digital versus in-store sales that you saw over Thanksgiving week? Maybe if you could touch a little bit on Black Friday and Cyber Monday and how that differed versus the same period in 2019. Thanks. 

Chris Work -- Chief Financial Officer

Sure. You know, I think what we've seen in digital really throughout the whole year -- let me start a little bit higher level before I kind of tackle the holiday, is that we've actually seen -- when we look at where we were in 2019 compared to 2020, we were about 16 percent annually penetrated digitally in 2019. That went to 26 percent in 2020 as we were predominantly, you know, closed during large portions of the year. And as we were planning this year, we actually sort of anticipated that we would be somewhere in between that.

That there'd be some level of digital that would hold and that -- but we wouldn't be as high as we were in 2020. I think we're really happy today to tell you that we're much closer to the 2019 numbers than we are to the 2020 numbers, which I think is a really good thing for our brand and our customer. And again, you have to kind of frame this into that 12- to 24-year-old who's trying to self-express and figure out who they are and they, you know, they come into our stores, which are pretty energy-filled with a, you know, an awesome sales team that can, you know, talk with them human-to-human and connect, and I think, create a really good buying experience. So, we're really quite happy that our digital sales have moved much closer to 2019.

That being said, and as Rick said in his remarks, you know, we're pretty impartial to how they shop. So, we've sort of set up our model to, you know, you can buy online, you can buy in-store, it's kind of their choice. And we're here to serve them, and we've built our cost structure on the back end to really not care which way that they -- would they choose to shop. So, you know, as it played out over the holiday weekend here, what's really interesting is, you know, our results got stronger as we moved through November, and the holiday weekend was good.

I think we saw a much larger return to stores than we had seen, which was a detriment to the web but not quite as strong as where we were in 2019. So, probably somewhere in between, kind of like what we had -- what we've seen across the year in digital present -- penetration.

Jeff Van Sinderen -- B. Riley and Company -- Analyst

Great. Thank you. And then another question for me. So, relevant to incoming spring merchandise, what changes are you guys seeing in the supply chain and how are you planning inventory for the spring?

Chris Work -- Chief Financial Officer

Well, I'll take a crack at this and then I'll let Rick add anything he'd like to add. I mean, I think from a supply chain perspective, you know, it's certainly something that's gotten a lot of publicity. And whether you're talking about spring or whether you're talking about many periods across this year, including holidays, it's been a grind. And, you know, I think fortunately or unfortunately however you want to look at it, it's not different than what we've been experiencing now over the last 18-plus months.

It's been challenging since we came out of the significant closures of 2020. I think our teams have done a phenomenal job working with our brands and our vendors to get products in. We certainly have departments that have been more challenging, some of which have been pretty well-publicized like, you know, footwear has been a challenge with some of the global supply chain headaches. And so, I think as we, you know, as we move to spring, our thought process is to continue to navigate this with brands.

And where we have areas where our brands are going to have a tougher time delivering on what we're hoping to get to, we're looking to other areas of the business that are working and trying to move those sales around. And I think, you know, this actually gets to one of the strengths of our model is that, you know, if you look back in time and you look at our sales and our comparable sales performance over time, what we know about our model is, you know, as much as we'd like to have all departments positive at all times, that's not very likely. And what we find is that, you know, there's different cycles and, you know, departments get really hot for a year or two years, sometimes three or four years. And then we typically see those dollars move to other departments that we operate on.

And so, I think that's why we're very happy with our positioning. It's really a lifestyle retailer of having, you know, the apparel, the accessories, the footwear, the hardgoods. All of those things kind of play against each other and help us navigate periods like this, specifically times like this spring that you've mentioned in your question, where we probably will have some challenges in some departments, and we'll have to try to shift dollars to other places.

Jeff Van Sinderen -- B. Riley and Company -- Analyst

Awesome. And then just quickly one final question. Can you speak a tiny bit more about what you're seeing in the Europe segment and any changes to strategy or new initiatives you're working on in there?

Chris Work -- Chief Financial Officer

Sure. Yeah, let me just kind of cover Europe in a pretty high level. I mean, we're super proud of the Europe team for their 2021 results in light of the challenging backdrop. You know, this is an area where really stores across the region have continued to be challenged with closures.

It's not like here in -- domestically where we've been open pretty much all year. You know, we saw 60 percent of the possible days in Q1, we were open -- I'm sorry, closed, 12 percent of Q2. And while we were open all of Q3, we've now been closed eight percent in November with, you know, all of our Austrian stores closed until right now, we believe, December 13. And, you know, this is compared that they were closed 25 percent of all of 2020.

So, you know, our Austrian stores do represent about 25 percent of our store base over there. They represent a higher percent of our store sales just because it's our original market. It's where some of our strongest stores are in that market. So, you know, we're currently estimating that will have an impact on Q4.

But what I would say is, you know, despite those challenges and closures, you know, we find ourselves in a spot where we're up double digits in sales than the prior year. You know, we're only down modestly to our budget. We view our customers extremely loyal. I mean, we're seeing very similar trends, too, when we've had closures here of -- the moving to digital penetration.

And, you know, overall, we do expect this downturn to help propel us, you know, in the months and years ahead. As I think, you know, we're creating a very strong loyal base there, and some of our regional players are challenged. I think, you know, long term, as you talk about strategy in your question of how we think about it, I mean, I would just say we continue to believe in the long term for Europe. You know, I think it's a good time to invest in the market, you know, similar to Sharon's question about store growth next year.

I think we're seeing some good opportunities on the rent side in Europe. You know, we're opening 12 stores this year with our first store in Norway, and we plan to increase that next year and continue to open new markets. You know, our strategy there has been a mix of filling in markets where we have a presence and then adding stores in markets that are new. It's kind of a way to both grow markets and also manage the risk of each start class, right, as we kind of grow along.

You know, so, I think this is really, you know, aligned with our strategy to continue to grow there. You know, I think we believe the investment we've put in has put us in a place to really capitalize on the marketplace. We've got a really strong team there and have built out a lot of the back office to be able to, you know, manage this growth. And we, you know, we believe we're one of the largest lifestyle retailers now in Europe.

I think it's a pretty fragmented space and a space that we can really win kind of market-to-market. So -- and then lastly, I'd just say it really ties in with our belief of being a global retailer, right? Our ability to find brands that emerge locally and grow them globally. So, that can be brands here that we take to Europe and introduce to that marketplace. It could be brands that start in Europe that we bring back here, and I think it helps us be a better brand partner across the globe and, obviously, in working with our brands.

So, you know, I think we're really, you know, quite happy despite the challenges, right? And I think with 2021, we still have some uncertainties with COVID and how that's going to impact the winter, how much travel people can do, you know, what's going to happen from a restriction perspective. While we're able to open our stores in December, there still are some travel restrictions in other areas of the economy like restaurants and hotels that aren't able to fully open until after the holidays, so we're obviously monitoring that. And, you know, I think our planning that we've laid out today is inclusive of those restrictions, but you're never quite sure where this is going to go. That being said, I think long term, as we look past 2021 thinking to 2022 and getting beyond this -- the virus, I think we feel like we're in a really good spot.

I think -- we believe that the customer returns to kind of normal habits, and we can recapture what we've lost here in some of the closures. I think we're in a really good path to profit and, you know, still consider that in that kind of 12- to 24-month timeframe.

Jeff Van Sinderen -- B. Riley and Company -- Analyst

Great. Thank you so much.

Operator

Thank you. Our next question comes from Sharon Zackfia of William Blair. Your line is open. 

Sharon Zackfia -- William Blair and Company -- Analyst

Hi. Sorry, I had a follow-up question. I was just curious just given, you know, this being such a high season for you. How are you doing on staffing in the stores? And I mean, are you going to bring in seasonal labor? Can you talk about your ability to actually kind of service this holiday season? Thanks.

Rick Brooks -- Chief Executive Officer

Sure, Sharon. Glad to give you some color around that topic. I think we're -- as we said in our comments, we're clearly not immune to the challenges around labor in the marketplace. But I also think we are more adept than many of our competitors of being able to be relative to our labor.

And that's fundamentally because we have a such a loyal customer base, and we essentially hire our customers. And so, we are hiring seasonal staff through this season and getting hours for them on the floor. And of course, we're also maximizing hours for existing teams and our top salespeople through the process, too. And I think, again, that the loyalty of our consumer base gives us a great population of young people to hire.

So, we're seeing them all a lot in our stores, and it gives our managers a chance to basically take a look at who -- which are those loyal customers have the cultural values that we want, that we expect in our employees. Bringing them in, giving them the training, and then unleashing them on the sales floor. So, you know, we've had some challenges here, but I think we're generally faring better than most people are on this topic.

Sharon Zackfia -- William Blair and Company -- Analyst

Thanks. And then one more question for Chris. I guess, you know, the lack of giving more color on the fourth quarter, is that primarily due to the uncertainty around Europe at this point? And did you touch on Australia at all? Did I miss that?

Chris Work -- Chief Financial Officer

No. I think -- when we think about the fourth quarter, I think that is probably the biggest hurdle out there, as well as the fact that, you know, that the January stimulus impact is still something we're continuing to measure. We certainly have our estimates, we've now had a couple rounds of this, and I think have some good planning there. But I think we felt that it was best to kind of stay higher level at this point until we have complete certainty around where our stores are going to be.

And I think the second part of your question on Australia, we are fully open in Australia. I think they've done a really good job. They have had a lot of challenges, too. As I mentioned their Q3, they were still closed the majority of that quarter, so, they're -- we're happy to get them back open.

I think they're performing at a really good clip. We feel very similarly about Australia than we do in Europe. I think our growth there has been really successful. You know, we've been able to open new stores at both in existing and new markets, and it, you know, they've performed pretty well.

So, we feel good about where we're at in that market.

Sharon Zackfia -- William Blair and Company -- Analyst

Great. Thank you.

Operator

Thank you. I'm showing no further questions at this time. I'll turn the call -- I apologize. [Operator instructions] I'm showing no further questions at this time.

I'd like to turn the call back over to Rick Brooks for any closing remarks.

Rick Brooks -- Chief Executive Officer

All right. Thank you, Valerie. I appreciate that. Again, I just want to thank everyone for all of your interest in Zumiez and your passion following what we do, and wish everyone a great, safe holiday season.

And we'll look forward to talk to you again in March. Thank you, everybody.

Operator

[Operator signoff]

Duration: 35 minutes

Call participants:

Rick Brooks -- Chief Executive Officer

Chris Work -- Chief Financial Officer

Sharon Zackfia -- William Blair and Company -- Analyst

Jeff Van Sinderen -- B. Riley and Company -- Analyst

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