Good afternoon, ladies and gentlemen. And welcome to the Zumiez Inc. Third Quarter Fiscal 2018 Earnings Conference Call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the 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 upon 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 would like to turn the call over to Rick Brooks, our Chief Executive Officer. Rick.

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 third quarter performance and our start to the fourth quarter. Then I will share some thoughts about the future before handing the call to Chris who will take you through the numbers. After that, we will open the call to your questions. Our third quarter was highlighted by successful back-to-school season and solid full priced selling throughout the period. The combination of a mid-single-digit comparable sales gain and 100 basis point increase in gross margins helped us offset the loss of a high volume week that moved out of third quarter and into the second quarter. On earnings side, we ended the quarter at $0.55 per share, up from $0.48 a year ago, which is $0.04 ahead of the high-end of our guidance range. Our ongoing success continue to be driven by the strength of our diverse and differentiated assortments that are presented through a seamless shopping experience across all consumer touch points, accompanied by the world-class customer service that our teams continue to deliver globally. The third quarter marked our ninth consecutive quarter of comparable sales growth and transaction gains. And the fourth quarter is off to a solid start with November comparable sales of 2.3% highlighted by the Black Friday weekend comp of 4.1%. We’re pleased with our year-to-date results and remain confident in our outlook for fiscal 2018, which we’re forecasting consist of strong sales gains and operating profit growth, and exceptional earnings growth, all while growing cash and strengthening our balance sheet. Chris will outline all these items for you later in the call. As we look at the next year and beyond, we…

Thanks Rick and good afternoon everyone. I’m going to start with a review of our third quarter 2018 results. I'll then provide a brief update on November before discussing our fourth quarter guidance and our current perspective on the full year. Third quarter net sales increased 1.2% to $248.8 million from $245.8 million in the third quarter of 2017. Contributing to this increase was positive comparable sales growth of 4.8% and the net addition of nine stores since the end of last year's third quarter. This is partially offset by the loss of approximately $9.6 million from the movement of the retail calendar, which shifted several days in early August, which are in the back-to-school season into Q2 this year versus Q3 last year. During the 2018 third quarter, our comparable sales were driven by an increase in transaction volume, as well as increase in dollars per transaction. The increase in dollars per transaction resulted from higher average unit retail, partially offset by lower units per transaction. During the quarter, our footwear category was the largest positive comping category followed by men's, women's and accessories, hard goods was our only negative comping category. From a regional perspective, North America net sales increased 1.5% to $226.5 million. Other international net sales, which consist of Europe and Australia, decreased to 1.8% to $22.3 million. Excluding the impact of foreign currency translation, North American net sales grew 1.9% and other international net sales grew 1.1% for the quarter. Third quarter gross profit was $86.9 million, an increase of $3.5 million or 4.2% compared to the third-quarter of 2017. Gross margin was 34.9% in the quarter, an increase of 100 basis points compared to 33.9% a year ago. This increase was primarily driven by 70 basis points improvement in product margin and 70 basis…

[Operator Instructions] And our first question comes from the line of Mitch Kummetz with Pivotal Research. Your line is now open.

I guess, I've got a few. I’m going to go start with you, Chris, on the Q3 comp. Could you -- is it possible to break that out stores versus digital?

We certainly can. We've talked about this in the past. This is not only the way we look at it but as we look at the web penetration overall. The web did grow ahead of the stores, but not by much. And I think some of that relates to our strategy coming into the third quarter. And we talked about that as part of the second quarter. In the prior year, our situations specifically in Europe, was that we had some aged inventory. We were pretty promotional in moving through that and a lot of it we were able to do online. And so we did see the web online sales go down in Europe, but we saw more products margin dollars overall. So is much better quality sales and definitely the way that we would like to have it. If we exclude the Blue Tomato web, our web is growing at approximately twice the store comp. But I would say the store comp is very much in line with the overall comps for the quarter. So we feel good about how both channels are working. And more importantly, we feel really good about how both channels are working together to serve the customer, because I think all of our data and all of our analysis, whether we were looking in North America or internationally, is showing how closely aligned these two channels are. And for us our focus is not pushing one channel or the other, our focus is growing overall sales.

Actually Chris follow-up to that, and I've got one for Rick. But you mentioned Blue Tomato in Europe and obviously the product margins were very strong in the quarter. Is there any way you can say how much of that product margin improvement was attributable to Europe? I know that there were some promotions there a year ago that you were lapping. And is there much product margin opportunities there going in the fourth quarter?

I think what I would say is as we -- we're not a company that falls with love with our inventory. So when we have challenges with the inventory, we try to move through it pretty quickly. So we were able to push a lot of that product margin through in Q3 2017. There will be some opportunity in the fourth quarter as it relates to Europe, but the majority of it was utilized in the third quarter. I will say that North America product margins were also very strong in the third quarter. And as Rick pointed out in his prepared comments, the full priced selling we had across all entities throughout the third-quarter. So it wasn't just Europe, but Europe was a pretty meaningful impact.

And then, Rick, correct me if I am wrong. But in the past, I think you've talked about looking at the business more on a trade area basis and maximizing your share opportunity across trade areas. Can you talk about where you are in the process of doing that? I mean is it like a pilot program that you started? Are there any trade areas where you are further along than others and any examples that you can give, any specifics in terms of what you've done what you've seen in order to maximize that opportunity?

Sure, glad to talk about that topic, Mitch. Trade area is, I would tell you I believe that -- we've actually been working on for quite a while but I believe we're still very early in the process. So an example of trade area the most obvious one we've talked about previously is localized fulfillment. And that’s an areas that we can assort total demand in a geographic area trade area and we total in the marketplace to serve local customers. So that's probably one of the simplest ideas that we've been working on for a long time. But simple but not so, because we acquired a lot of investment and this is about -- Mitch, about the infrastructure investment we made in technology, we've got order management, order routing algorithms. Orders don't just randomly go some place, they go to the right location based in -- and that's been planned based upon the product assortments and the tools we have to do that when looking at total demand in a marketplace. So that we can choose where we put the digital demand in terms of where we think fulfillment should happen. So this is probably the most simple idea one of -- they are all -- they don’t sound hard or simple -- they sound simple but they are actually really hard to do. But it's been very successful for us. So what we do, Mitch, just like we did in all the omni-channel efforts, we are laying out and have laid out a roadmap on trade areas of a whole series of initiatives that we intend to make a lot of progress on -- we've been making progress on and we tend to make a lot more progress on in 2019. So this is one of the areas…

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

I want to maybe ask a little more about the comps. And maybe just get a little bit more color about what you've seen across the business more recently, including in November and then just follow up on the guidance for the quarter, flat to up 2% would be one of the lower readings in a while. So I’m just wondering as we diagnose the trends and some of the drivers if you've seen any big changes or how we should be reading the guidance you put out.

Well, let me start with the guidance piece and I will see if I can try to answer some of your November and the overall comp as we go through this. And I think before I jump to the guidance, I will start with looking back at Q3. And the reason I would look back in Q3 is because, as you know, we had a phenomenal August and then as we moved out of back to school things slowed a little bit. This definitely will be the trend we've seen over time where the piece has gotten bigger and the trough has gone a little lighter. So as we think to Q4, I think we certainly have that component again here. We also have the fact that we've had some pretty good Q4s here for the last couple of years with both last year being at 7.5 comp and the year before that being at 5.1 comp. So as we think about how Q4 is planned, obviously, we ran positive November and we're happy about that. We did see, as Rick mentioned in his section that important Thursday through Monday, the Thanksgiving, Black Friday, cyber Monday weekend, was up 4.1% ahead of the November comp. obviously, as you would expect during that peak period. But we came in at 2.3%. So as we thought about the quarter, our expectation is that we will continue to have some trough here between now and the important Christmas week driven largely by the online business. And then as we are transition and get closer to Christmas, we expect as we've seen the few years that this stores will light up. So our assumption around the metrics that are driven to get to 0 to 2 assume a similar path to that, and that's where we came in and where we're at. So to the extent that we significantly exceed our estimates around that important holiday week, we will obviously come back. But at this point in time, I think we have a reasonable estimate set for the fourth quarter. We have reasonable estimates that for that important week, and it's going to generate pretty positive returns we think for our shareholders in light of both the Q4 results, as well as the annual results, that’s how we planted it.

And maybe just a follow-up, I'm wondering the phenomenon I'm seeing some lower troughs during the non-peak period. Do you think there's been any change in the consumer patterns, maybe versus if you go back four or six quarters ago? Or is there not enough in terms of emerging brands that drive the trend forward despite a natural traffic pattern. I'm just trying to think about if there has been any change in behavior that's caused that pattern?

Yes, I think we have been on this multiyear run and we've seen periods of his before. I mean June of this year was a good example where things got pretty soft within the second quarter before it lit back-up in July as we headed into back-to-school. So I think we've seen periods of this. I mean we've also as you know I think we've performed pretty well here now over the last nine quarter, and we've had some pretty unique product within the marketplace. And so I think there were periods of time within the last nine quarters where we even performed -- we performed well in the trough just based on the uniqueness of product that we've had. Now, we've done that from quarters-on-quarters and Q4 will be a planned third quarter in a row of positive comp on a stacks basis, so there is those factors to play in. But I think that this is the normal cycle that we have. And our goal will always be to drive comps throughout the year. But I think in a normalized cycle, this is what we would expect to see.

And maybe last one from me, it looks like making all the adjustments to the year ago fourth quarter that you are implying some operating margin expansion even on plus in the order of 2% comps. And I'm just wondering thinking about some of the various moving parts. Looking ahead, if that's the relationship that can continue or what type of comps you need for all the various puts and takes, looking forward?

So your analysis is correct. We are planning excluding all those adjustments to grow operating profit and obviously overall income as well in light of the tax reform has been a help with that from an EPS perspective. I think as we go forward, I'll try to stay away from specific comments around 2019 and leave that more for our time we'll spend together here in March of '19 when we do our Q4 call. however, I'll tell you this will be -- this is our goal over the long-term plan is that we can grow comps and sales in our mature companies here in North America at a reasonable clip and still grow earnings. So that means you have to have really focused investments really centered around driving that customer experience and high return projects. And you need to mange cost outside of that. And so that’s our focus in what we'd refer to as our maturities here in North America. And as we look internationally, these are still growth concepts, both Europe and Australia have a lot of room ahead of them. And so we feel good about the base that we felt specifically in Europe and our ability to leverage that, going forward. And I think we're building a really good base in Australia as well. So our plan will be in those growth entities is that we can still grow the top line at a higher rate, but we will also be seeing earnings growth in those NPs as well as we leverage the concept and have high return unit and web growth driving value over the long-term plan.

And Jonathan, I just want to add a little bit to that too from our side. I mean we've always been really good planners and I think five-year planners and then how we turn our five-year plan objectives into annual budgets that move the plans forward. And so I think we have a real advantage over a lot of other retailers in this world, particularly when we look at what I really think of some business -- structural business model issues in consumer retail today, which is rising wages and rising shipping costs. So I just want to give you a sense of how we've been addressing over the years. So I think is one of the reasons we can do some of the things that you're seeing in the results and that Chris has talked about here as we think about the longer term. So we have made I think a number of really important investments in the new commerce engine, new order management systems, order routing algorithms, new investments in our assortment planning and how we think about localized fulfillment strategies. And our theory behind all that was building towards was really restructuring the business to think of the business in a new way. And that new way is that we only have one cost structure to leverage, that’s our store cost structure. We don’t care if it's a digital sale we don’t care if it's the fiscal sale, yet all the costs fulfilled and serve those consumers goes through our store cost structure. It’s a real advantage I think we have structurally over a lot other retailers that allows us to address some of the challenge around wages and shipping cost, because we're shipping both to consumer, for example. Our order algorithms are also really play with…

Thank you. And our next question comes from the line of Jeff Van Sinderen with B. Riley FBR. Your line is now open.

And let me just say, this is a multipart questions. So if you can bear with me a little bit, I'd appreciate it. Can you give us a sense of what your Q4 guidance bakes in for gross margin? And then if you speak to the comp guidance for Q4. Should we think that the U.S. digital comp is expected to be similar to the store comp brick-and-mortar store comp? Or is there a shift in growth there that you may be thinking about? And then how should we think about, I guess, the digital versus store comps going into next year with the comps moderating a bit. And what are you -- I guess, what you think are the main drivers for revenue and comp growth next year. And then finally with wages and shipping costs and other expenses rising, what comp would you need to get operating leverage next year?

Well, let me start with the Q4 question, which we'll probably give the most color on. So as it relates to Q4 guidance, we are planning gross margin down roughly 50 basis points to 80 basis points. And that is a function of a few different things. First, I'll remind you that the adjustments we had in the prior year, both the 53rd week, as well as the Stash deferred loyalty program adjustment, both hit sales in the prior year. So those were a benefit to gross margin in the prior year. And obviously we had detriment as we measure against this year. So I think that's how we're thinking about gross margin in the fourth quarter. From a 2019 perspective of what are those continued drivers and what is our leverage point, we're going to hold again on giving detailed color on 2019. What I hope that you took out of our prior answer to John's question is that our goal is to grow and lever at all times, and so when I talk about the mature entities, we have to build a model that over a five-year window and maybe longer than we can grow on potential low single-digit comps. Now, our plan would be to try to grow comps ahead of that. But I think it's prudent to build the business plan that levers on for maturity that’s not growing units that levers on a low single-digit. In regards to web or store, I don't think it matters to Rick's point. And it doesn't matter because again it comes back to that trade area component. I think this is something that we continue to stress. We are building something that is so integrated and so put together that it just doesn't matter in our world. And when…

Okay, that's a great answer to a really complex bunch of questions. Just a follow-up, if I may on the brand topic. Is there anything notable in terms of the shift happening in your, say, I don't know your top three brands something changing there? And also, is there anything we should be thinking about in terms of the street trend or I guess how you think about the street trend? Is that may be starting to slow? Or I guess how do you think about the street trend as an influence on your business going forward if at all?

Yes, I think they released the brands and as you know we typically do try to give some color in how we think about the top 10 and top 20 brands as part of these calls. Just like we said for the last few quarters, we continue to see some concentration in those brands, meaning that the top 20 brands as a percent of our overall sales have been growing in relation to as we look at it quarter to quarter, or first nine months to first nine months. So we are seeing more concentration on those brands as they continue to grow. We talked about the big three being these kind of unique brands that Zumiez have had, we've been talking about them since really June of 2016. They did continue to grow as a percent of mix in the third quarter. And so, there are just over 10% of sales at this point the three of them together, which again we talk about our largest brands being kind of in that 6 to 9%. So we are seeing some concentration there and I think overall still see some growth too. From the streetwear perspective, I mean this is just a piece of what we do. As you know we represent art and music and action sports and I think I would even classify can find in our stores some brands that just kind of have a fun message. So all of that plays into what we're doing, but we've seen streetwear brands kind of come and go here and I would say that's pretty consistent with what we see in that total brand portfolio. There had been no change in the last quarter or the first nine months of the year in relation to the turnover brands. We still see 20 to 30% turnover in our brand, and I think all of those different types of brands I laid out are important parts of our mix and we sell streetwear brands that I think are important to what we're doing.

Jeff, I'd just add to Chris's answer that, just as another data point that we keep a close eye and here is our pipeline of new brands in our mantra new brands. So, we continue to have a good pipeline and we do expect to hit our target number of launching new brands for this year. So, we're not seeing any weakness in the market in terms of new brands coming into the market. And that's of course is really important about the two years from now and three years. And one of these young brands we're launching this year are going to become important to us in those years, that they emerge out, will move out of that pack competing young brands and move from emerging to growth. So, we're seeing a strong pipeline in terms of emerging brands and I think that is always encouraging sign for us.

Thank you. And our next question comes from the line of Janine Stichter with Jefferies. Your line is open.

I just want to ask a little bit about the inventory. I know you said, it was mostly due to brand timing and the shift of inventory received. Was there any inventory in there that maybe was because the sales slow a little bit at the end of the quarter and that kind of caught off guard? And then as we think about the gross margin guidance for the gross margins to be down 50 to 80 basis points, Is there any expectation and they are embedded that you had to take some markdowns to move through that inventory?

Yes, I can take. I mean as we did call out, inventory was up 19.1% for the quarter. This was really not being caught off guard by the sales. In fact, I would tell you, if you would have assets in market we could run 4.8% comp in the third quarter, we would have said, that was trying a little bit ahead of our plan. So, I don't think we were caught off guard there. We did talk about at the end of August in our September call the fact that we were a little light, as we exit August in a certain brands and then couple of categories. As we move through because we didn't anticipate the strength of back-to-school at the level that it was, we were obviously ready and chased quite a bit, but even at a plus nine comp it was pretty strategic for where we are at. So, we've made some strategic planned adjustments as we move through the third quarter. We're working with some of our important vendors and really saying, hey, we like to bring this in ahead of time, we'd like to have it set and ready for the fourth quarter and that was part of our strategy and part of the reason the inventory was up. So I think overall as we mentioned or I mentioned in my prepared remarks, as we move through November, that inventory growth compared to the prior year is significantly down from the 19% it was at the end of October. We are planning that in the year at or below our growth rate in sales. And an overall, we feel really good with the quality of inventory. The age is about where you'd expected to be very current for bringing that in. As we think about Q4 and the guidance I gave around gross margin, there is some product margin expected to be down in the fourth quarter, but not meaningfully. I think this is really a function more of how strong we've been over the last few years in product margin, in each of the last two years it represented peak product margins. We've run-up in product margin seriously in the first nine months. And so, I think overall, we feel like the inventory is in a really good position. There's nothing to be alarmed. I -- we do recognize obviously it's a large growth rate in light of where sales have been, but try to have some assurance that this is planned and we expect to be in a really good spot exiting year.

And then just also on the gross margin. Can you just remind us what strength looks like? Last year, I think you had a pretty big headwind from shrink, and since in the third quarter you were able to make lot of progress against that. So how are you thinking about the shrink recovery in the fourth quarter of this year compared to last year?

Yes, we are really glad you asked. I think that shrink was certainly not something we were proud to be talking about in 2017, we had quite a few challenges and working through that. The teams came together as we move to 2017. It really put together a good action plan to move through that and that is not easy action plan because when you get the strength of the levels we were talking about it there, there definitely is some internal components of it. And now it's something we have to work through. So, we are really proud of the teams and the work they've done and putting together that plan, executing against that plan, has taken sometime, but we see now this is our third quarter of positive results. As we call it out in the call, we got about 70 basis points of leverage out of that in the third quarter and planned within our fourth quarter guidance is some leverage as well. This is an area where we think we can continue to make traction and will be working on here through remainder of this year and into 2019 something that we still have some initiatives again. So again really proud of the teams coming together and working through this and I think we’re seeing some good leverage and result because of it.

Thank you. Our next question comes from the line of John Morris with D.A Davidson. Your line is now open.

Most of my questions were asked, but maybe two that I want to ask. One, I kind of think about this, I mean the way that you pulled forward the inventory and I know I understand why. I'm just wondering, if there is any puts and takes now that we got this supposed to 90 days of lay, any puts and takes as far as consideration on the P&L is concerned? So that's one question. And then the second is. With the categories, footwear coming, women's and men's are doing really well. I’m wondering about hard lines kind of what your initiatives are there. Is it something that you just need to wait for some of that business to come back? Or are you doing more there proactively to help the hard line business. I am kind of wondering whether or not you had actually planned it down. I don’t know Rick could go speak to that, but a little bit more color on thoughts about the hard lines go forward?

Just to make sure I’m clear, John. Your first part of question relative to pass on that playing forward was that related to, the tariffs and the 90 days now it was another 90 days push forward, is that right.

Yes, I’m thinking that was one of the primary reasons why you thought to do that. And clearly, you've explained -- you guys explained really well why it impact the inventory levels, exiting the quarter and beginning the quarter and so forth. I’m just wondering whether or not, does that actually -- is there a silver lining advantage not that’s change or perhaps alternatively, could there be any additional cost you know that are being baked in here and just in terms of inventory carrying cost and things like that? But I’m actually really wondering whether or not there is actually kind of an advantage to you, that you could actually be in a quicker position to replenish the stores, and I’m just wondering how you think about it.

Well, let me take that question and then I will let Rick answer hard good stuff process here. I mean from an overall pull forward, while are always looking for ways to minimize the risk their as it related to tariff, this was less about that and really more about making sure we have the right product when we wanted to head into Q4. From an overall expense perspective, this was helpful in the standpoint lot of this inventory work through the front end of our systems and its customer facing as we exited the quarter. So, the distribution cost and some of the shipping cost and things like that will work through within the quarter. So, there's probably and minimal P&L benefit there. In regard to tariffs overall, it's not an item that hit us super hard at this point. We continue to monitoring it and staying on top of it as you would expect, hasn’t had a material impact to-date, but it represent a big portion of our product is imported from China that we are watching. And we’re also managing the non-product related side of it and have made some adjustments there, really contemplating what future changes could look like as we relate to fixtures and supplies and things like that. So, managing it very closely, this was not as big of an impact related to tariffs in our inventory strategy here, but definitely something we're monitoring.

And on the hard goods question, John, it's not something that we're constantly -- trust me, we don't like departments to run down. So, we're constantly trying new things as the product team works through a difficult cycle, but skate hard has been a difficult cycle in particular for a number of -- for a couple of years now. So, yes, we off to get a managed inventory relative to sales in the cycle and we'll keep inventory within line with where we're planning the business. But again, the goal of the team would be to the push forward, try new things, come with new brands and this on the skate side. But fundamentally in this particular case, consumers have to embrace the cycle again. Now with skate, this isn't new. We've been through cycles like this and with skate many, many times over my 25 plus years here. So, we're used to cycles like this. And again, our whole business model is built on the premise that great brand diversity, great category diversity, and we can run gains as long as we're pushing forward on uniqueness in the assortment, which would fall in the right trend relative to category, the lifestyle, the key lifestyle things that are trending, and we usually always have a department that is usually not in cycle. So, I don't view where we are today is unusual, yes, we're pushing working hard to find and experiment on the edges what we can do to drive a result there, but all three of the customer has to come back to it.

And I'd add, John, I think this is actually just the strength of the model, right. I mean if we look at something like footwear, which is our largest driver, it was down from 2012 to 2018, it's now been up for four quarters. And we watched it go from 22% of our overall sales, down to the mid teens. So, I think this is the cycles that we run through if you look at the history of our business we've seen it over and over in different departments, what we're really focused on is running out overall comp

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

So, I apologize I got on a little bit late, but I wanted to ask about Europe. And if Europe is impacting the fourth quarter comp expectation at all, I think Europe is a larger impact in the fourth quarter, given the snow business there. And then secondarily, just given that I suspect Europe will be a bigger part of growth going forward. Can you talk about the profitability in that business or the path to profitability and how that's scaling?

Okay, great. Let me start with the fourth quarter. We are planning Europe as you would expect, being a younger concept with a lot more stores that are in their early stages and still kind of an early frame of that maturity curve to comp pretty strongly here in the fourth quarter ahead of where our guidance is planned. So, Europe has been comping positively throughout the first -- for the first nine months they had. We did talk about kind of in Q3 there was some pull back, but that pull back in comp was really led to better product margin dollars. So the margin increased more than offset the loss of sales, which I think is an important factor and definitely where we want to be for the long term. In regards to how Europe growth plays out and its profit, it is a path to profitability. We are forecasting at this point that the loss will be less for our 2018 than it was for 2017. And I think we have a pretty good path to that, and we are continuing to push to get this profitable in the next few years. I think what that comes down to is a few different items. First of all, we really have put the infrastructure in place there, we feel like we have the right leadership team the right level of investment department-by-department across the entity that this is something that we can scale and grow from. We're going to ending year at 41 or 42 stores here and what that means is I think the infrastructure has built to go well beyond that. So the incremental stores are not going to need a corporate investment. As we think about the roadmap from a store perspective, we have pass…

And maybe if I can sneak in one more question, can you update us on what your thoughts are for that cash on the balance sheet?

Sure. As you know, we've grown cash pretty meaningfully, as I laid out in my comments here for the third quarter, and that's been a real focus of ours. We were pretty intentional about buying back shares for a period of time, and I think to utilize that in a pretty good way to get shares down. When we think about cash, we really run through our investment decision tree, which really starts with working with our board every quarter to look through and say, where are the our investments in the current business, what type of investments do we have outside of the current business and to the extent there is cash beyond that, we look at how we return nice cash to the shareholders. And thus far we bought back our stock. We will continue to meet with our board and used them as a sounding board of where they think we should go. Our focus for the last 12 months has really been to grow cash. And obviously, I think we've done a good job of that and we expect to continue to grow cash here through the fourth quarter, and we will continue to evaluate against all three of those options with our board, and obviously update the investment community as we make different decision there.

Thank you. And we have a follow-up question from the line of Jonathan Komp with Baird. Your line is now open.

Chris, if I miss this in your response to that tariff question. I just wanted to ask in more of a worst case scenario after the 90-day period or the truce currently. Could you just update us on the -- what you estimate kind of the indirect expose to China in those would be if you include your vendor base?

Yes, I mean, obviously, we’re just over 20% in third-party vendors. So, we are kind of at their discretion of where they choose to make their product. But if we look to and if we look at our overall sourcing out of China, it's right around 60%. So, that is a combination of both what our vendors produce as well as our own private label. So, we do have good portion of our product it is coming out of China and obviously that’s why we continue to watch it.

And have you gone down the path of any kind of contingency or discussions about different scenario that are out there, and I know it’s hard but talk about hypotheticals, but just curious if you've given any thought about the ability to shift production over different timetables or just broad thoughts about?

I mean the short answer is, yes. We put quite a bit of thought around that. This is not new for us. I think looking at concentration risk where product is made and balancing that with the best quality and pricing and things like that was, as I speech to our own private label products and speed, our all things that we have thought about not just in the last 12 months, but for decades we've been doing private label. So, the answer is, yes. We have lot of factories outside of China that we work with directly with their own private label, and we have active discussions going on with them, and we will continue to monitor in the situation and try to determine what's best for our in consumer and our shareholders.

Thank you. And I’m not showing no further questions at this time. I would now like to turn the call back to Rick Brooks for closing remarks.

Thank you. Chelsea. Again I just want to thank everyone for their interest in Zumiez. And wish everyone a happy holiday, and we will look forward to talking to all of you again in March for our year end results. Thanks everybody.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.