Good afternoon, ladies and gentlemen. And welcome to the Zumiez Inc. First Quarter Fiscal 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will conduct the question-and-answer session towards 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 this 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 on Zumiez’s filing with the SEC. At this time, I’ll turn the call over to Rick Brooks, Chief Executive Officer. Please go ahead, sir.

Thank you, and welcome everyone. Joining me on the today's call is Chris Work, our Chief Financial Officer. I’ll start today’s call with a few brief remarks regarding our first quarter performance. I’ll then give an update on our broader strategy, and will hand the call to Chris, who will take you through the numbers. After that, we’ll open the call to your questions. First quarter net sales came in at $181.2 million, up 4.7% compared to the first quarter of 2016. Comparable sales increased 1.8%, which was near to the high-end of our guidance range of flat to plus 2%. As we expected, our monthly comp performance varied widely during the first quarter. Following a difficult February, comps returned to positive territory in March and accelerated the high single-digit in April, driven by the later Easter holiday this year. Overall, small traffic trends for the quarter in total appear to be more challenging than the industry expected. While we are not immune to these challenges, we are encouraged to see our third consecutive quarter of positive comparable sales and transaction gains. We continue to believe that the retail environment is radically changing as the customer continues to redefine their shopping experience. In response to this change, we've made great progress towards evolving the business and believe the investments we have made in several key areas have created competitive advantages, allowing us to enhance the brand and customer experience. It is these investments that we believe will allow us to capture market share in the current environment. Let me outline a few of these key focus areas. We’ve continued to enhance our brand experience through unique product and investment in our people. 2016, we launched over 100 new brands, which was consistent with each of the last five years and…

Thanks, Rick and good afternoon everyone. I'm going to start with the review of our first quarter results, I'll then provide a brief update on May before discussing our second quarter guidance and some high level perspective on how we're thinking about the year. First quarter net sales increased $8.2 million or 4.7% to $181.2 million from $173 million a year ago. Contributed to this increase was the net addition of 25 stores since the end of last year's first quarter, including six Fast Times stores in Australia; and positive comparable sales growth of 1.8%. During the 2017 first quarter, we saw an increase in transaction volume, partially offset by a decrease in dollars per transaction. The decrease in dollars per transaction resulted from lower units per transaction, partially offset by an increase in average unit retail. men's and junior's categories comp positive while footwear, hardgoods and accessories comp down for the quarter. From a regional perspective, North America net sales increased $6.1 million or 3.9% to $162.5 million. International net sales, which consists of Europe and Australia increased $2.1 million or 12.5% to $18.6 million. First quarter gross profit was $52 million, an increase of $2 million or 4.2% compared to the first quarter of 2016. Gross margin was 28.7% in the quarter, down 20 basis points compared to 28.9% a year-ago. The decrease was primarily driven by 50 basis points increase in inventory shrinkage, partially offset by 40 basis points increase in product margins. SG&A expense was $58.3 million in the first quarter compared to $53.9 million a year ago. SG&A as a percentage of net sales was 32.2% compared to 31.2% of net sales in the first quarter of last year. The increase was primarily driven by 80 basis points related to investment in salaries, minimum wage…

Thank you [Operator Instructions]. Our first question comes from Jeff Van Sinderen from B. Riley.

First, let me say great work delivering comps that is outperforming many in the space. You guys deserve credit for that. Maybe you can give us a little bit more color on how we should think about emerging brands. I know you touched on that a little bit in your prepared comments; and whether you believe that the brands that have been your most outstanding brands lately will be the same brands that outperformed as we start thinking about back-to-school. So I guess just trying to get a sense of how you’ve planned those brands, those leading brands, for back-to-school, or if there is a shift that you think is substantial that might incur?

So again I'll just go back and highlight that uniqueness in our product assortment has always been a key part of what we've been about, and that uniqueness historically for us is as traditionally, primarily been driven by young brands becoming, going from the emerging state to going to the growth state in their brand formation. And I think as we've talked about previous calls, those cycles have one of the things that has changed in the new world is how much more quickly brands can launch in today's world, how much more quickly once they find their right spot and really resonate with consumers can grow much more vastly from emerging to grow. And then I still think we're going to see when they're in growth mode, we're going to see that we have a multiyear play on those brands. So I think with the brands we've been talking about for over a year now in terms of really start talking at this time last year about our confidence and some of the brands we saw that were going from the emerging phase to growth phase, we still feel pretty good about where we're at. And we do a number of things internally, Jeff that we’re not only tracking how many brands that we're introducing into the system each year. And again, I would tell you that year-to-date we're feeling good about that relative to our 2017 targets. So I think we’ll be at/or better than our historical levels for bringing new brands into our system. But we also track the position of those brands relative to those brands that are gaining compared to those brands that are going down. Because of course so you have brands that are gaining in our world, as you know from our concentrations…

And I know you guys, you mentioned that you have incentive comp this year and so forth versus not much last year. But let me ask you if you continue to grow sales, both from new stores, ecommerce and a positive comp. At what point do you think we should start considering SG&A leverage coming back into play?

I think it's a really good question Jeff. And it's something we're very focused on too. And I think as we think about the incentive, I just want to make sure that I'm clear on how that's working for us this year, because as we entered 2016 much over a year ago and we built our plan, we really -- based on the challenges we had in 2015 and how we're seen in '16 play out, we could not build a plan that we thought warranted a full incentive payout. So what you saw in the first quarter of 2016 and the second quarter of 2016 is really throughout the year was us accruing to and planning to a level of incentives that we thought was warranted with the results. Obviously, 2016 was not as strong as we had hoped, and those results came in on a consolidated level much lower than we had anticipated actually approximately around 30% of the total planned incentive payout. So as we move to 2017, we believe that we had built a plan that work to payout the full incentive, as well as reward our shareholders with sales and earnings growth. And that incremental step up on the year is about $4.4 million. And what I'd tell you about that is as all incentive payout, its contingent on us hitting those sales and earnings growth, contingent of paying that amount out. So as we move through 2017, we'll continue to evaluate that based on where we're at. But what we plan to do is as we move through this and we can hopefully more normalize our positioning is that we would get into a spot where we can leverage SG&A just like you'd expect and we'd expect to grow earnings over the long term. So I would anticipate as we continue to plan that that's going to be part of our goal is leveraging SG&A and growing gross margin. And hopefully, we can do that while we're still able to payout our incentive levels.

Thank you. [Operator Instructions] Our next question comes from Benjamin Bray with Robert W Baird.

Just wanted to talk about the Q2 comp guidance and some of these assumptions built into that. Obviously, May was pretty strong at plus 3.3, the rest of the quarter seems to imply a little bit slower than that. Should we interpret that was just conservatism or was there anything there that you would call out in terms of what is that guidance?

No, there is not a lot to call out here. I think basically, as you called out, we came in a quarter at 3.3, we have spent a lot of time analyzing our own results, obviously, in relation to how the first quarter came in, which as Rick pointed out in his prepared remarks was a little bit choppy. And we're trying to -- we've been trying to analyze where the run rate is. And quite frankly, we felt pretty good at that low single-digit one to three comp range for the second quarter. So I think it's in line with where we landed in May. And as we think about what are the drivers of the business and how we're thinking about June and July heading into back-to-school, it filled up at an appropriate level for us to plan the second quarter. So I can promise you, Ben, we're going to going to try to beat it. That's always our goal. But I think in this type of environment, we were feeling pretty good about that range.

And then I also just wanted to ask about your ecommerce business and was curious to hear if some of these localization efforts or any other investments you’re making there. Just what kind of impact you’re seeing on your digital business?

I'll let Chris talk about the digital business. Let me, kick it off, though, Ben with again. We don’t think about the digital business as a standalone entity. These are from our perspective we’re working in a channel-less world to serve our customers. And that's why things like the omnichannel efforts, things like localized fulfillment, creating great brand experiences at every touch point, whether that’d be in the digital touch point or physical touch point, it's so critical to our long-term success. And you heard us talk about the comps of the trade area and how we think about measuring trade area and about where sales really belong, are they digital or physical, what's the -- where is it aligned. Those are hard things to tell nowadays. So I just -- I'll let Chris take the comments we hear about. I just want to make sure as we think about here the -- I hope that over the next few years we’re not going to talk about digital channels, we’re going to talk about this trade area success and how we might measure success and marketplace differently based on our performance and how we’re serving customers in an integrated channel-less world. So just keep that in the back of mind, and I'll turn it over to Chris.

Yes, and I’d just add to what Rick said. As we analyze all of our numbers from many different directions, we firmly believe in Rick's comment because of what we see in the numbers. And where we don’t have stores, we really don’t have much of a Web presence. When we open stores, we typically get a pretty big Web impact. And so what I would tell you is we think the customer is shopping in both channels. And what's hard for us, as far as I can tell you what the Web numbers are, I can tell you what the store numbers are, I just am not sure how accurate they are anymore, because the customer may shop in an in-store channel and go home and make the purchase or start online and come into the store and make the purchase. And I think that makes the complexity of reporting one channel or the other more challenging. When I do breakout the numbers, which the numbers we lay out are based on origination, meaning where did the sale actually take place and originate, but to the best of our knowledge. I can tell you that our Web penetration year-over-year has grown and our Web comp is performing ahead of the consolidated comp that I've given you today. But again, knowing our customer pretty well and spending time in stores like we do, we certainly see that customer start online and head into store and get an experience in store that translates to their online activity. So we believe they're very integrated but we're seeing Web growth ahead of our comp growth just like most retailers out there.

Thank you. Speakers, I'm showing no further questions, at this time. I'd like to turn the call back over to you.

All right, thanks very much. Again, we appreciate everyone's attention today and time. And we’ll look forward to talking to you as we get through second quarter, and of course, post our Labor Day weekend. Thanks everybody very much. Bye.

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