Good afternoon, ladies and gentlemen. And welcome to the Zumiez Inc. third quarter fiscal 2020 earnings conference call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. Before we begin, I would like to remind everyone of the company's Safe Harbor language. Today's conference call includes comments concerning Zumiez Inc. business outlook and contains forward-looking statements. These forward-looking statements and all other statements that may be made on this call that are not based on historical facts are subject to 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 filings with the SEC. At this time, I will turn the call over to Rick Brooks, Chief Executive Officer. Please go ahead, sir.

Hello and thank you everyone for joining us on the call. With me today is Chris Work, our Chief Financial Officer. I will begin today's call with a few remarks about the third quarter. Then I will share some thoughts on sales for the fourth quarter-to-date before handing the call over to Chris who will take you through the numbers. After that, we will open up the call to your questions. Our teams continue to do an incredible job navigating volatile market conditions. After successfully executing the reopening of the vast majority of our stores during the second quarter, we faced the back-to-school season that was very different from prior years. As many states and districts around the country delayed the start of the new school year or decided to begin with virtual instructions due to the pandemic, we did not see the sustained lift in demand we typically do starting in late July and running through early September. As we saw, the second most important selling period of the year got off to a very challenging start as sales were down in the last week of July and every week in August. Though negative, the trends improved week-over-week throughout August turning positive in the first week of September and remained very strong through the end of the quarter. This supported our hypothesis that we would have a prolonged back-to-school season with some demand shifting out to later in the third quarter. These trends exceeded our expectations and were able to show sales growth during the quarter. Our ability to capture as much late season demand as we did and more than makeup for the lost volumes during the historical peak weeks in August underscores the strength of our brand and culture and speaks to the ability of our business…

Thanks Rick and good afternoon everyone. I am going to start with a few high level comments on the financial strength of the business, review our third quarter and then provide an update on our quarter-to-date sales through the past Tuesday before discussing a few updates on the full year. We entered fiscal 2020 in a strong financial position with cash over $250 million and coming off the highest earnings per share in the history of our company. This resulted from years of commitment and hard work by our teams, coupled with strong financial planning. Now, through the initial store closures in March and continued challenges to-date, we have seen the strength of our one channel model with our teams working diligently to serve the customer. The business ended the third quarter in a strong financial position. Cash and current marketable securities increased 77% to $316.12 million as of October 31, 2020, compared to $178.6 million as of November 2, 2019. The increase in cash and current marketable securities was driven by cash generated through operations, including deferment of $53 million in payment composed of lower inventory levels, landlord obligations, extended vendor terms and deferred payroll tax payments as well as net income improvements related to abatements, credits and expense reductions. This increase was partially offset by $13.4 million of share repurchases through the company's stock buyback program prior to our stores closing in March due to COVID-19 and other planned capital expenditures. As of October 31, 2020, we have no debt on the balance sheet and continue to maintain our full unused credit line of $35 million. We ended third quarter of 2020 with $161 million in inventory, compared with $183.4 million last year, a decrease of $22.4 million or 12.2%. After delaying or canceling orders during the first…

[Operator Instructions]. Our first question comes from Janine Stichter with Jefferies. Your line is now open.

Hi. Thanks for all the color on the gross margin. Two more questions about the driver there. I think first you called out some pretty nice shipping leverage in the third quarter. I was wondering if that's something you can continue into the fourth quarter? And may be talk a little bit more about what's driving that? And then the shrink, the benefit you saw in the third quarter, is there opportunity in the fourth quarter as well? And may be help us compare the magnitude? Thank you.

Sure. Let me tackle each one of those in order here. So from a shipping perspective and leverage, this is something we have worked on for a long time in how we manage our shipping profile. As you know, we are one of the few retailers that's exclusively shipping 100% of our digital orders from stores. And this is part of our model. And we think it's a really competitive part of our model from a standpoint of thinking about one channel cost structure to serve the customer. And as we have continued to refine that really over the last five years we have been operating like this, we have continued to get better at what we are doing from a shipping perspective. And obviously with increased demand here during the COVID time period, we have been able to continue to make strides in what we are doing here from getting inventory in the right place to begin with and minimizing splits to seeing higher DPTs in the cart that's driving a better shipping volume, to continue to work with our carriers and how we are managing costs. So all of these things really play into the model in how are trying to push it going forward. We want to fast to our customers. We want to get them what they want. And we want to try to optimize on the backend. From a shrink perspective, shrink has been a pretty significant benefit to us as we move through the year, as we laid out in our prepared remarks. Clearly, the store closures period, coupled with reduced traffic and metering has been benefit to this but we have also been working behind the scenes for the last couple of years. As you may recall, a couple years ago we were talking about this trend going the other way. But our store team has done a really phenomenal job of putting practices and procedures in place, working as a team to bring this line item down. So I think you kind of those efforts that we had throughout 2019 and coming into 2020, coupled with the operating environment we have had here in the first nine months of the year and how we would see it playing out into the fourth quarter, we would expect to see some benefit in shrink just based on how store volumes are being measured.

Okay. And then just one more on the delivery. I think you mentioned Zumiez Delivery, the sales team going directly to the customer's door. Can you elaborate a little bit more about what that is, how big it is and maybe what the potential is there?

Sure. Janine, I will start and I will have Chris follow-up with some comments too. So I mean it's something we are really exited about that we are able to rollout our Zumiez Delivery effort for this fourth quarter. And we are really excited because it could give us an advantage this year, particularly when shipping companies are restricting shipment due to capacity constraints in the system, because there's so much digital shipping demand. That said, we are really prepared for this opportunity in Q4, because we have been working on our ability to do delivery for the last two years. And I would like, I guess, everyone to think about this on our kind of innovation spectrum for us or an innovation roadmap. And we have been on this march for many years to how we think about evolving our touch points for every consumer need at every consumer touch points. Our teams did a really great job rolling out the program quickly with great training materials based on our learning we had through all the test phase over the last couple of years. And I can tell you that the rollout has gone really well. And for me, more broadly, I like to think this is again another example of Zumiez as a leading innovator in specialty retail. It's how we evolved to meet the needs of this really modern empowered consumer. Our goal is to really, again as I said, evaluate every customer touch point and challenge ourselves to how we can improve the experience for our customers. So I guess I would ask you of all the things about putting Zumiez Delivery in the context of the other programs we have discussed including fully localized fulfillment that Chris just mentioned, which we have been doing for…

Yes. Thanks Rick. And let me just echo my excitement for the program too. This is really cool that our teams are even in spot to be able to execute on this. Obviously, as we started to open stores and starting to operate at full capacity here in the second quarter, we very quickly realized that we could have carrier constraints as we moved into the important holiday peak. And we started brainstorming around those challenges. So as we went to, while we currently do not have full clarity on what's going to happen over the next month, we believe we built a model that we can continue to prioritize our customers. This includes really working with our incumbent carrier to prepare for the increased load and web penetration, discussing modeling and potential capacity limits that we have really been working with them on a daily basis for now months. We have brought on additional carriers to diversify and help with some of the constraints that are out there and the potential risk that we saw around holiday. And we have launched Zumiez Delivery that we are talking about right now in 24 trade areas. This accounts to as much as 5% to 10% of our daily deliveries right now. This accounts for roughly 150 of our stores. And it's a program, as Rick mentioned, we piloted now for over a year. The concept is pretty simple. We hire our employees and we bring that great employee experience right to our customer's door. And we are really excited about what this opportunity is. We are in the early stages of this large rollout. We actually launched the 23 markets beyond our initial test market in late October. So we have a lot to learn here but we have proven through out testing that we think we can be efficient in this type of environment. And we have really proven in our testing that we can exceed the customer's expectation with speed. And similar to our fulfillment five years, our in-store element five years ago we had concerns back then about some of the financial implications of fulfilling from stores. But we knew we had great teams and we knew we had smart people. And if we put effort to it, it was the best thing for the customer. And I think over the last five years, you have seen us really refine our model and that's become accretive service that we have been able to do and we feel comfortable with where we are here on the delivery side too that we can continue to do that as well. So more to come on where this goes for us. But this is a great new capability to add to our suite of capabilities that Rick touched on earlier.

Great. Thanks for the color and best of luck for holiday.

Thank you.

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

Hi. Good afternoon. I actually find that I have a lot of questions. So I will try to narrow it down. I guess, Rick, you talked about strategic opportunities and I know you talked about real estate within that. So I guess a question there, if you are prepared or willing to take advantage of a more favorable real estate market currently? I know as some of the companies I follow in other sectors are doing so. But I haven't seen anybody yet do that in your neck of the woods. So just curious on your thoughts there. And then on the one channel dynamic, are there any M&A opportunities there that would help you accelerate some of what you are doing? I mean, it's tremendous what you are doing. But obviously, developing your own capabilities could take longer than buying them. So just curious about that. And then lastly on the delivery, is that actually cost-effective relative to traditional, like using UPS or what have you? Or is it more because we are in this high-volume season and it's important to have that optionality for the consumer in what's a really constrained channel right now.

Okay. Those are all really great questions, Sharon. So let me start on the first couple and I will let Chris take on Zumiez Delivery the cost structure as we are thinking about it. So yes, we are willing to take advantage on real estate. And obviously, we have the capital to do so. So Sharon, I would tell you that we are already doing so in our international markets, where I think the opportunities are really great. So we are already leaning in, in those markets to where we are really seeing significant drops in rent. Here in North America, where our business is a more mature business, but still has room for growth, we do have a list of targets of centers that we would like to be in. And we are always engaging with our landlords on those targets and these typically are higher-end centers where either we have not been able to negotiate the right rent structure economically to match what we believe are our business, our sales forecast for those markets or we haven't found the right locations in these centers where we feel strongly about our willingness to take a location in the center. So we are clearly, here in the U.S. and North American market, still looking at opportunities there, too. And in some cases, it might be a relocation or a repositioning of an existing location, there may be some of that in there, but we would be moving into higher volumes centers in doing that. It would still be a net plus to the business from a revenue point of view. So we are still looking at those, Sharon. And again, then I would step back and put the concept of what we are doing, particularly here in North America. I…

Yes. Absolutely. And I think it's important to note as we delve deeper into this. This is not a one store to one customer relationship. This does tie directly into what Rick talked about from a trade area perspective. This is a group of stores serving the customers in that market which allows you to increase the inventory base and manage volumes. Now, Sharon, you have followed us for a long time, so you know that we are always mindful of costs as we navigate through things. But we are also mindful of what's right for the customer. And I think one of the beauties of being able to test this program now for over a year is we have been able to see how the volumes react in trade area as we seasonally move through the year, we have been able to see the peaks and see the values and being able to adjust and tweak the program to try to drive effectiveness as you do mass rollout. So at this point in time, we have certainly seen that we can do this for sustained periods at or near what the cost of the carriers are. Obviously, we have had time periods where we have been above and time periods where we have been at. And I think the best part about it is, again, ties back to what I have mentioned earlier is, the experience that the customers had. So we feel pretty confident in moving out into the test group that our teams will be able to manage this. And over time, we will be able to optimize it. We still have a lot to do. We obviously accelerated this rollout based on the current environment we are in. So we have more technology, more process improvement and things we will put in place. But in rolling it out, it was a pretty calculated effort on where we thought costs would go. And obviously, as we move through the fourth quarter months here, we will get a much better read on it.

Maybe, Chris, you could give a little bit color on how much delivery we are doing ourselves within the trade areas we are using the program.

Yes. At this point in time, as I mentioned, from a total company, we are at that 5% to 10%. And within an individual trade area, we have gone to 25% to 30%. So we are able to get more capacity and I think that's a number that we can also see increase, as we continue to move along. And as we are able to increase that overall capacity, obviously, the economics of the program become better. And this is where it actually all feeds itself. And you know we have worked on this for a while as we have localized fulfillment of getting the right products in the right trade areas. And it's a total company effort because it starts with our buyers, really thinking about the product they are going to buy upfront and then the allocation process. And obviously, this delivery drives through to those initiatives to make sure we have the right product in the right places.

Yes. It's a classic old retail maximum, right product, right place, right time. We are just taking it to all new level, I guess, Sharon, in terms of what that means from the concept of trade area and total demand within the trade area. So when we talk about demand and trade, we mean both physical and digital demand and then how we serve customers and plan products for that. And again, remember, what we are looking to do is we are really looking to create amazing brand experiences at every touch point. And so while we don't always share what our roadmaps are, if you just take that idea alone and think about what it means in this empowered consumer world and then we are thinking about how we can do that and make it as human-to-human connections as possible across this. And then we have evolution plan. So while we are in the process now of just making sure that it was going to be a very constrained delivery time period, a holiday and maybe we are going to be able to deliver product closer to the holiday season we have ever been able to deliver it, up in those final days. We have some more work to do to make that transparency available for customers to do and I hope we are going to get there. But it could give us a tremendous leg up in the days in advance of Christmas. But we have more work to do to get there to be clear in this process. But I mean, these are one of the cool things, I think, Sharon, that again I am just so proud of all of our teams to be able to execute. We are able to pull a lever that no…

Thank you.

Thank you. Our next question comes from Jeff Van Sinderen with B. Riley. Your line is open.

Yes. Hi everyone. Just a follow-up on the delivery. Did you say if the plan is to have Zumiez Delivery to all trade areas or all stores? And also will that run all year? Or is that just during peak periods? And I guess how much of your e-com delivery do you expect to be Zumiez Delivery?

Yes. Jeff, thanks. Obviously, as I mentioned, this is very early on. And right now, we are in 24 trade areas. We definitely think there is the potential to expand from 24 trade areas. As you could imagine, there are certain stores that represent their own trade area because of their remoteness in connection to other stores. So we haven't really gone down the path of what it might look like in those types of stores. So this isn't something that we are thinking would be rolled out to all of our stores across the country. But certainly, all of our stores in metropolitan areas that work with each other to serve the customer, we think we can operate in all trade areas like that. And I think, as Rick talked about this kind of innovation lab of the different ways to serve the customer, this is a key part of our strategy, to innovate and export. And we have done it with Europe and Australia already in many different examples and Canada as well. Everyone's at different path points on the path here. Obviously, in many of the markets we are operating internationally, we just need to get to scale of stores and digital to serve the customer. But as we continue to push, we are already seeing that today, including being able to fulfill from store in Europe, which is obviously a challenged market with some of our stores closed there. So as we push long term, we do think it's a program that can rollout internationally, has the potential to rollout internationally, I should say. We think it's a program that we can rollout further domestically. I don't think we are prepared at this time to say what percent of our digital share that's going to be, but we do think it's a program that could work in all metropolitan markets.

Okay. Fair enough. And then can you speak a little bit more about how you are thinking about and managing inventory in Q4? I guess, maybe where you feel like you might be running light? Or if there are areas where you feel like you may need to lean into a little more? Just wondering if there's anything around that.

Sure. Let me just kind of start with some of the numbers and if Rick would like to add anything in, we can go from there. Inventory, obviously, has been a rollercoaster. And our buying teams across all of our entities have just done a phenomenal job navigating through it from what seemed like a very difficult situation in Q1 and canceling orders and trying to get things right. And as you know, we ended the first quarter roughly flat in inventory year-over-year to then seeing our stores reopened and the incredible demand that we saw as stores were reopened and the online demand and we finished Q2 with inventory being down about 16%. To get to down 12% continues to be that effort of chasing and really working with our brands to get product. And overall, we feel really good about where the inventory is at. As we move through Q4, we are being really opportunistic about where we are going to increase penetration. Our goal is not to be down 12%. We certainly would like to have some more inventory in certain key categories. But we have been chasing that and growing our inventory levels to meet the Q4 demand in where we think we need to be within our ecosystem. And as we move through the quarter, we expect to continue to make headway in the year where we would like to be.

Do you feel like you have enough hard goods inventory given the supply chain constraints around that?

It's clearly been a challenge in a lot, but not just hard goods, it's been across a lot of categories of business over the last few months. And I would tell you that, again pretty much as Chris said, Jeff, we are getting sequentially better. So I feel like we are definitely better positioned in hard goods than we have been throughout the earlier parts of this year. We are better positioned now than we have been in most target categories now than we were earlier in this year. So I think our teams have done a really good job. I think we are prepared to meet the consumer demand. But it's been a challenge in a lot of areas. Footwear has been a major challenge in terms of supply chain for us. And that's where actually where we are down the most in inventory is in our footwear business. So I feel pretty good about where we are at. I think, as Chris said, our teams have done a really good job across the country and across our entities to really manage inventory and focus on the things that are most, as you might guess, most important in terms of where we are trending at this point. But in most cases, our skate hard goods department and categories are in a better position here in holiday than they have been earlier in the year.

Okay. Thanks and best of luck for holiday.

Thank you.

Thanks, Jeff.

Thank you. Our next question comes from Jonathan Komp with Baird. Your line is now open.

Yes. Hi. Thank you. Maybe just one quick follow-up on the delivery initiative. I see online it's quoted as a five to seven day window. I am wondering how that compares to your existing options and just any more perspective around speed for that initiative?

Yes. We are pretty darn fast is the headline on Zumiez Delivery. So I think that just our team given a little bit of room to maneuver because we are usually in a day or two.

And Jon, we totally encourage you to test this out. Order a few things.

Yes, order a lot of things for that matter, Jon. Let's see if we can get it to you really quickly in your market. So that's probably just our team being a little bit cautious in the early rollout in the markets we are in. But again, remember, we are not doing this system-wide at this point. We are only doing this in the 24 metropolitan markets that we are in today. So with room, if we need to, over the next few weeks to pull more triggers, depending on how we are doing in the marketplace, we can activate more markets. We are ready to activate more markets if we need to. But we are pretty darn fast on is the headline. I would say this. We are faster than any of the other options in our delivery menu.

I am hopeful. But here, I don't know. I am in a target metro of yours in the top 20 stores, but I will take your word for it. Maybe one other quick follow-up, Chris. Just the thought on North America improving during the balance of the quarter. Any more color there on what you expect?

Yes. Sure. I can talk a little bit about Q4, about how we are thinking about it. I mean, obviously, in our prepared remarks, we talked a little bit about what the cadence has looked like. In North America, included a positive week one, followed by a really solid week two and three and actually a really good lead up to Black Friday weekend, like I think many retailers will have reported or will report. Obviously, Thursday and Friday was definitely challenged by store closures, reduced hours, metered traffic, as we would expect. And then since then, things have been better. And so I think we are looking at Q4 very similarly to how we looked at Q3. The peaks are just more challenged in this type of operating environment. We will not see the levels of mall traffic we have had and actually traffic overall. But yes, you are going to see that spread out much more. So our anticipation that's built into the general comments we gave around getting better than our current run rate and where we think North America will be is really built on the concept of, we will be stronger here as we move through these weeks, which are actually, for the better part of last five to 10 years have declined as the peaks have gotten more important, but we would expect that to be spread out a little bit here in these lower volume periods between the two peaks. And then it will be more challenging the week of Christmas, as volumes have historically picked up and now maybe spread out a little wider. And then we could see after Christmas still be stronger, even into mid, late January. So that's what's built into our thought process for North America and how we are thinking about the remainder of Q4.

Yes. Just to echo Chris's comments, Jon, I think that's exactly what we think about it. It's going to be very similar to Q3. I think this is being driven by how consumers are thinking about the current environment and safety in this current environment and spreading out their spending probably for conservative reasons on their part, too. But I agree with Chris. I think we may think about, as we said, an improving trend line to where we are at today for the whole quarter. But as Chris said, that may take through the end of January to play out because there's no way that we can achieve our store volumes on the 26, with particularly, this year falls on a Saturday, 26, 27 and 28, we are talking monstrous days for us in stores when the kids always come in and use their gift cards. So I think that volume spreads out, as Chris has said, that volume also spreads out, potentially it spreads up all the way through the month of January.

Yes. And I would just add to your question, Jon. I know you didn't ask about international. But I do think it's important to talk a little bit or just about where Europe is. Obviously, the business has performed extremely well through the first nine months of the year, coming into the year with digital being about 50% of our sales. Even when the stores closed, it performed much better than the consolidated run rate. The second quarter and third quarter were really great results for the team there. And we are really proud of the progress that we have made. Entering the fourth quarter, obviously, we have been more impacted by some of the governmental restraints over there with pretty significant closures here. We talked about 17% of our store days being closed through December 1, pretty significant reduced hours and maybe even more challenging is extended stay at home orders. So even where we are able to keep retail open, there is the encouragement that you should be home. And so it's really created a challenge and a slow start. As I mentioned in my comments, we are down 30% in November and Q4 has always been very important for Blue Tomato and a higher penetration than our domestic business. And we are definitely feeling for the team working through these challenging times. That being said, they are doing awesome. They are doing everything they can to gain sales. And we do anticipate or we are hoping, based on what we know today, that we will be opening stores here as we move into December, in the next week actually. And we are hoping that we see some of the pent-up demand we have seen when we had to open and close stores across the year in other markets. So definitely factored that into our guidance thoughts as well and we are hoping we are able to exceed that. We will see where the customer is at as we move through the quarter.

Got it. That's really helpful. And maybe just last one. Chris, you brought up a more normal cost environment looking into next year. Any more color on that? I mean, the fact that you have growing operating margin like you have year-to-date on a down sales number, should we be thinking of anchoring more towards 2019 operating margin as a starting point? Or just trying to read what you are signaling there?

Yes. Totally a fair question, Jon and something we have definitely been thinking a lot about as we have been building budgets and moving into 2021. And obviously, let me just start by saying, we are extremely happy with where we stand from an income statement perspective and balance sheet perspective through the first nine months of the year. Our teams have reacted in a way that I don't think we ever could have anticipated. And so we are really proud of where we stand. As we look to 2021, clearly, there's a lot of uncertainty in what that environment may look like. We are certainly not prepared to give guidance at this point. But we do think it's important to kind of lay out a few things. We are contemplating and hopefully, this helps answer your question, overall, we do expect sales to come back, assuming a more normalized operating environment, our ability for the customer to really come into stores and shop, how they want, when they want in the physical environment, while still utilizing the digital platform. We are expecting quarter-to-quarter volatility in the financial results to be pretty significant, with the first quarter performing much stronger than what we saw here in 2020. The second quarter is going to be more challenged. And the third and fourth quarter, we are hoping to see more normalized results compared to where we have been. We are expecting product margin to be a pretty significant challenge, given the growth we have had this year. However, we are building plans to really maximize our results there and our teams are really thinking about this in a new way. We are expecting more meaningful occupancy growth and step-ups in certain areas of the business as we are not planning on receiving…

Understood. That gives us plenty to contemplate. So thank you.

Thank you. Our last question comes from Mitch Kummetz with Pivotal Research. Your line is open.

Yes. Thanks for taking my questions. I have got a couple. Let me start with Europe. And on the snow business, can you say how much exposure you have to snow in the fourth quarter? And is the issue or part of the issue that some of these resorts might open? Or if they are open, they are closed? I know there have been some headlines around that. And I have got maybe a follow-up on that and then another question.

Yes. Mitch, that is exactly the issue we have in the snow business, which is there's always an issue of when it snows, but it always snows at some point, right. So usually, time has told us that that usually will, the volume will follow the actual weather conditions. The bigger challenge in Europe relative to the snow business at this point in time is related to pandemic. And right now, a lot of the resorts just simply can't open. And that is true in Austria, our home market, with Blue Tomato. There's going to be some restrictions in place for quite a while there yet. There's tourist restrictions for cross-border tourists coming into Austria to use the snow resorts there. So there is a lot of complications around this issue of just whether and how much the resorts are going to be able to be open for business during the season. And here that's been answered a bit differently, I would say, right, with the season passes and reservations to use the mountain, right. They have approached it differently here. But we are going to have the same challenges here in the U.S. in a different way and that's still not going to be a lot of tourism for traveling. As usual, like up here in the Northwest, a lot of trips to Whistler or up in the Central British Columbia. That just can't happen now. So we will see some of the same effects here, but differently. But Europe, it's definitely a more constrained environment in the snow business. Now, all that being said, Mitch, the other thing I would want to point about the snow business in Europe is that we have been diminishing snow as a percent of our total mix over the last number of years because we have been growing our store base. And as you are aware, the digital world attracts particularly larger portion of the snow business. So our store base and digital, snow business that tends to have lower margins in our apparel business. So when doing this is one of the things that as we grow our store base in Europe, we will decrease our dependence upon the snow business while improving margins, as we do that, is kind of the magic of building scale in the marketplace. So that has been happening over the last few years. And as we continue our growth in the marketplace, we will continue to see, snow will still be important to us there, to be clear, but it will be a declining portion of our business as we grow our store base over the next five years.

Got it. And then just a follow-up on Europe and then, again, one other question. So I guess, I am a little surprised to hear that Europe is down 30% quarter-to-date, despite all of the issues over there, partly because I know you guys have a very robust digital business in Europe, more robust than you do in North America. So as stores close and hours come down, I would have thought a lot of that volume would transfer online. Is that not happening with COVID kind of spiking again in Europe? Are people just not shopping in general? Or again, some of this, again, go back to decide that they are just not stopping for shopping for snow in general?

Yes. It's two things, I think, Mitch. The first is, as we just commented on is that the digital business had the disproportion of the snow business, right. So that is one aspect of it, for sure. Because you are not going to spend a lot on gear, if you are not going to be able to go to the mountains, right. I think that's the simple calculus there. And the second, I think, issue that's a factor in Europe is there's no additional stimulus with the shutdowns across virtually all the countries. And it's kind of the worst world for retailers in that sense is because they haven't shut retail down, but yet our operating hours are constrained. There's curfews in place. And in the case of Austria, our stores are actually closed. But there isn't as much stimulus in the economy to drive demand. So I think that's the other aspect of it that has been more difficult for the digital business in Europe.

Okay. And then the last question was on footwear which was your worst comping segment in the quarter, I think it's been your most challenged segment for a few quarters now. Rick, you made the comment that it's the most challenged business from a supply chain standpoint. So does the comp performance reflect the supply chain situation? Or is there something else happening here? I know that I have covered you guys long enough to know that in response to some of these questions, you often talk about how things sort of cycle up, cycle down. I know that footwear is lapping a couple of years of really strong performance. But I am also wondering, is maybe some of the issues in footwear that with COVID there are these trends toward sort of fitness and comfort and that's not necessarily your sweet spot in footwear?

I am not prepared at this point to be able to answer that question, Mitch and partly because of the constraint in the supply chain. So when you lap a lot of inventory, it's hard to know what the issue is. So I am not prepared to, I don't think we know the answer to that question that you just asked at this point because it's hard to know until we have the product to do it and to really see where the demand is in the marketplace. And again, this isn't just a U.S. issue, this is a global issue for us with footwear. And so this has been one of the tougher performing businesses, again, supply chain wise across our global platform. Now, we do have some things that are working in footwear. But again, I would tell you the same thing. Those things that are working, we don't have enough inventory of. So I know our partners here are working their hardest to get product in place for not only us but for all of their partners and probably for their own direct businesses. So I think that what transpired in footwear is just that it's such a size-intensive business that when the pandemic hit, people took some pretty dramatic actions relative to managing their own inventories and supply chain structure. And it takes them a lot longer to get it fired back up again, particularly with the size complexity you have in footwear. So I can't answer the question because I simply don't know. It's hard to make that read with no inventory.

Got it. Okay. Thanks, guys and good luck for the holiday.

Thanks very much.

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to Rick Brooks for closing remarks.

Again, thank you, everyone, for your interest in Zumiez. We always appreciate it and I just want to close by wishing everyone a safe and healthy holiday season. And we are going to look forward to talking with you again in 2021 when we get the chance to report our Q4 results. So thank you, everybody. We really appreciate it. Talk soon.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.