Zumiez Inc. (ZUMZ - Analyst Report) – a mall-based specialty retailer of action sports apparel, footwear, equipment and accessories – reported adjusted earnings of 75 cents per share for fourth-quarter 2012, surpassing the Zacks Consensus Estimate of 73 cents. Bottom-line results benefited from the successful execution of the growth strategies outlined at the onset of fiscal 2012 as well as contributions from the Blue Tomato operations.
Reported earnings, including a charge of 2 cents per share and net gain of 1 cent a share associated with the acquisition of Blue Tomato, were 74 cents compared with 60 cents reported in the year-ago quarter.
Quarter in Detail
Net sales increased 22.1% to $224.4 million from $183.9 million in the comparable year-ago quarter. The year-over-year growth in sales was primarily driven by the addition of 56 new stores through fiscal 2012, offset by weaker comparable store sales (comps). Moreover, quarterly sales were above the Zacks Consensus Estimate of $222.0 million.
Comparable store sales (comps) dipped 1.0% compared with an increase of 9.7% reported in the year-ago quarter. The company’s comps suffered due to a decline in comparable store transactions offset by an increase in dollars per unit, which mainly benefited from a higher average per unit retail price and increase in units per transaction year over year.
During the quarter, gross profit increased 19.8% year over year to $85.7 million, but as a percentage of sales it contracted 70 basis points (bps) to 38.2%. The year-over-year decline in the gross profit margin was mainly the result of increased web fulfillment and shipping cost as a percent of total sales, including the Blue Tomato e-Commerce operation, partially offset by decline in occupancy cost. However, excluding the impact of the Blue Tomato acquisition, product margin improved slightly.
Zumiez’s selling, general and administrative (SG&A) expenses increased 23.4% year over year, while as a percentage of sales it expanded 20 bps to 22.1% compared with 21.9% in the comparable quarter of fiscal 2011. The increase resulted from a rise in web operation costs as a percentage of sales, including the Blue Tomato operations, offset in part by lower fixed costs.
Operating profit for the quarter increased 15.3% year over year to $36.1 million, while as percentage of sales it contracted 90 bps to 16.1%.
Fiscal 2012 Synopsis
For fiscal 2102, Zumiez reported adjusted earnings of $1.58 per share, above the Zacks Consensus Estimate of $1.55 per share. On a reported basis, the company earned $1.35 per share compared with $1.20 per share in fiscal 2011.
Net sales for fiscal 2012 escalated 20.4% year over year to $669.4 million, surpassing the Zacks Consensus Estimate of $668 million. The improvement was driven by a 5.0% increase in comps as well as continued store expansions.
As of Feb 2, 2013, cash and marketable securities were $103.2 million, a sharp decline of 40.3% from $172.8 million as of Jan 28, 2012. The decline is attributed to the use of cash by the company to fund its Blue Tomato acquisition as well as capital expenditures and stock repurchases. During fiscal 2012, the company generated cash flow of $66.2 million from its operational activities.
During the quarter, Zumiez bought back about 1.3 million shares for a total of $25.8 million, with an average price of $20.43. During the year, the company completed its $22 million buyback authorization that was announced in Nov 2012, as well as it purchased shares worth $4 million under its $20 million authorization announced in Dec 2012. As of Feb 2, 2013, the company had $16 million remaining under its Dec 2012 authorization of $20 million.
Zumiez revealed its sales and earnings guidance for the first quarter of fiscal 2013. Management anticipates first-quarter revenues to be in the range of $141–$144 million, while comps are likely to decline in the mid-single-digit range.
Based on sales projections for the quarter, the company expects earnings per share to come in the band of 4–7 cents. The earnings expectation also includes estimated charges of 4 cents related to the Blue Tomato acquisition.
The company plans to expand its store base by opening 60 new stores in fiscal 2013, comprising up to 10 stores in Canada and 6 in Europe.
A Look at Zacks Rank
Zumiez holds a Zacks Rank #2 (Buy). Apart from this, other stocks performing well in the retail space include Express Inc. (EXPR - Snapshot Report), New York & Company Inc. (NWY - Snapshot Report) and Vera Bradley Inc. (VRA - Snapshot Report), all of which carry a Zacks Rank #2 (Buy).