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Zumiez Inc. (ZUMZ - Free Report) reported better-than-expected results for third-quarter fiscal 2022. However, both the metrics compared unfavorably with the respective year-earlier fiscal quarter’s reported figures. A tough operating environment, including inflationary pressures, a promotional landscape, increased costs and foreign currency headwinds remain deterrents.
During the reported quarter, sales exceeded management’s expectations as the back-to-school season did slightly better than expected in the US. The company witnessed sales growth of 13.8% year over year across the European and Australian markets on a currency-neutral basis.
Over the past six months, shares of this currently Zacks Rank #2 (Buy) player have dipped 2.8% compared with the industry’s 21.5% decline.
Results in Detail
Zumiez posted quarterly earnings of 36 cents per share, which surpassed the Zacks Consensus Estimate of 17 cents. The bottom line plunged sharply from earnings of $1.25 per share reported in the year-earlier fiscal quarter.
Total net sales of $237.6 million came above the Zacks Consensus Estimate of $225 million but fell 17.9% from the year-ago fiscal period’s reading. This decline from the last fiscal year’s quarterly level was driven by gains from the U.S. stimulus realized in the year-ago period and increased macroeconomic challenges as inflation impacted consumer discretionary spending in the reported quarter. Also, currency headwinds hurt sales to the tune of 200 basis points (bps).
From a regional perspective, North American net sales were $206.3 million, down 19.9% from the year-ago fiscal quarter’s tally. Other international sales, comprising Europe and Australia, were $31.3 million, down 2.3% from the year-ago fiscal quarter’s level. Excluding the impacts of adverse foreign currency translations, North American net sales fell 19.6%, while other international net sales rose 13.8% from the respective fiscal 2021 readings.
All categories reported a comparable sales decline from the year-ago fiscal quarter’s tally in the reported fiscal quarter with the mens category being the most negative, followed by hard goods, accessories, women’s and footwear.
Gross profit decreased 28.5% from the year-ago fiscal quarter’s tally to $82 million. The gross margin decreased 510 bps to 34.5%. The fall in gross margin from the year-ago fiscal quarter’s level was mainly due to lower sales along with deleveraged fixed costs and rate increases in many areas.
Store occupancy costs deleveraged 250 bps on reduced sales volumes, and buying and private label costs increased 40 bps. Web-shipping costs jumped 100 bps and distribution center costs climbed 70 bps. Also, product margins fell 40 bps while shrink rose 30 bps in the reported quarter.
SG&A expenses dipped 4.4% from the year-ago fiscal quarter’s tally to $71.5 million during the fiscal quarter under review. As a percentage of sales, SG&A expenses increased 430 bps to 30.1% from the year-ago fiscal quarter’s tally.
Zumiez reported an operating profit of $10.4 million, down from $39.8 million recorded in the year-earlier fiscal quarter. The operating margin was 4.4%, significantly down from the 13.8% witnessed in the year-ago fiscal period.
Financial & Other Updates
As of Oct 29, 2022, ZUMZ had cash and current marketable securities of $141.1 million compared with $338.1 million as of Oct 30, 2021. The decline was due to capital expenditures and share repurchases, partly offset by cash provided through operations.
Total shareholders’ equity at the end of the fiscal quarter stood at $380.7 million. Zumiez had no debt at the end of the fiscal third quarter and maintained full unused credit facilities. ZUMZ ended the fiscal quarter with $177.2 million in inventory, up 1.2% from the year-ago fiscal quarter’s tally. The company repurchased shares for $87.9 million during the first nine months of fiscal 2022.
As of Nov 26, 2022, Zumiez operated 763 stores, including 615 in the United States, 52 in Canada, 75 in Europe and 21 in Australia. Management intends to open roughly 33 stores in fiscal 2022, including about 16 stores in North America, 13 in Europe and 4 in Australia.
Other Updates
Net sales for the fiscal fourth quarter to date for 31 days ended Nov 29, 2022, tumbled 23.9% from the year-ago fiscal quarter’s reported number. Total comparable sales for the aforementioned period declined 24.8% from the comparable period in the prior fiscal year.
From a regional perspective, net sales for the North American business fell 27.7% from the year-ago fiscal quarter’s tally in the 31-day period, while the metric at the international business dipped 4% from last fiscal year’s quarterly level. Excluding the foreign currency impacts, North American sales were down 27.4% while other international sales grew 7.7% versus fiscal 2021.
For the fiscal fourth quarter to date, all categories were down in comparable sales from the year-ago fiscal period’s level. The mens category remained the most negative, followed by hard goods, women's, accessories and footwear.
Outlook
Management projects total sales for the fourth quarter of fiscal 2022 between $258 million and $265 million. Consolidate operating profit as a rate of sales for the same quarter is likely to be 3.4-4.7% and earnings per share are envisioned to be 36-51 cents.
For fiscal 2022, ZUMZ anticipates the total sales to be down in the 20-21% range versus fiscal 2021. Despite the inflationary pressures and a promotional landscape as well as mixed pressures between categories and across countries, the company has witnessed only a modest decline in product margin. Management believes that it will see some product margin erosion in the fiscal fourth quarter and is likely to decline approximately 50 bps year over year. ZUMZ has been managing costs across its business.
However, it anticipates deleveraged fixed costs in the business. Management forecasts an operating margin of 2.6-3% for fiscal 2022, due to lower sales, inflationary cost pressures and reverting to normal for items such as mall hours, travel, and training and events.
Earnings per share are expected to decrease less than operating profit for fiscal 2022. Zumiez envisions earnings per share of 85 cents and $1 for the current fiscal year. Capital expenditures are predicted between $27 million and $29 million versus $16 million in fiscal 2021, mostly attributable to the additional stores in fiscal 2022.
Tecnoglass manufactures and sells architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 40.5% and 76.4%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
GMS, a distributor of wallboard and suspended ceiling systems, currently sports a Zacks Rank #1. GMS has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for GMS’ current financial-year sales and EPS suggests growth of 10.8% and 10.2%, respectively, from the year-ago reported figures. GMS has an expected EPS growth rate of 10.7% for three-five years.
Wingstop, which franchises and operates restaurants, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Wingstop’s current financial-year sales and earnings per share suggests growth of 25.3% and 22.2%, respectively, from the year-ago reported numbers. WING has an expected EPS growth rate of 11% for three-five years.
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Zumiez's (ZUMZ) Q3 Earnings Beat Mark, Revenues Decline Y/Y
Zumiez Inc. (ZUMZ - Free Report) reported better-than-expected results for third-quarter fiscal 2022. However, both the metrics compared unfavorably with the respective year-earlier fiscal quarter’s reported figures. A tough operating environment, including inflationary pressures, a promotional landscape, increased costs and foreign currency headwinds remain deterrents.
During the reported quarter, sales exceeded management’s expectations as the back-to-school season did slightly better than expected in the US. The company witnessed sales growth of 13.8% year over year across the European and Australian markets on a currency-neutral basis.
Over the past six months, shares of this currently Zacks Rank #2 (Buy) player have dipped 2.8% compared with the industry’s 21.5% decline.
Results in Detail
Zumiez posted quarterly earnings of 36 cents per share, which surpassed the Zacks Consensus Estimate of 17 cents. The bottom line plunged sharply from earnings of $1.25 per share reported in the year-earlier fiscal quarter.
Zumiez Inc. Price, Consensus and EPS Surprise
Zumiez Inc. price-consensus-eps-surprise-chart | Zumiez Inc. Quote
Total net sales of $237.6 million came above the Zacks Consensus Estimate of $225 million but fell 17.9% from the year-ago fiscal period’s reading. This decline from the last fiscal year’s quarterly level was driven by gains from the U.S. stimulus realized in the year-ago period and increased macroeconomic challenges as inflation impacted consumer discretionary spending in the reported quarter. Also, currency headwinds hurt sales to the tune of 200 basis points (bps).
From a regional perspective, North American net sales were $206.3 million, down 19.9% from the year-ago fiscal quarter’s tally. Other international sales, comprising Europe and Australia, were $31.3 million, down 2.3% from the year-ago fiscal quarter’s level. Excluding the impacts of adverse foreign currency translations, North American net sales fell 19.6%, while other international net sales rose 13.8% from the respective fiscal 2021 readings.
All categories reported a comparable sales decline from the year-ago fiscal quarter’s tally in the reported fiscal quarter with the mens category being the most negative, followed by hard goods, accessories, women’s and footwear.
Gross profit decreased 28.5% from the year-ago fiscal quarter’s tally to $82 million. The gross margin decreased 510 bps to 34.5%. The fall in gross margin from the year-ago fiscal quarter’s level was mainly due to lower sales along with deleveraged fixed costs and rate increases in many areas.
Store occupancy costs deleveraged 250 bps on reduced sales volumes, and buying and private label costs increased 40 bps. Web-shipping costs jumped 100 bps and distribution center costs climbed 70 bps. Also, product margins fell 40 bps while shrink rose 30 bps in the reported quarter.
SG&A expenses dipped 4.4% from the year-ago fiscal quarter’s tally to $71.5 million during the fiscal quarter under review. As a percentage of sales, SG&A expenses increased 430 bps to 30.1% from the year-ago fiscal quarter’s tally.
Zumiez reported an operating profit of $10.4 million, down from $39.8 million recorded in the year-earlier fiscal quarter. The operating margin was 4.4%, significantly down from the 13.8% witnessed in the year-ago fiscal period.
Financial & Other Updates
As of Oct 29, 2022, ZUMZ had cash and current marketable securities of $141.1 million compared with $338.1 million as of Oct 30, 2021. The decline was due to capital expenditures and share repurchases, partly offset by cash provided through operations.
Total shareholders’ equity at the end of the fiscal quarter stood at $380.7 million. Zumiez had no debt at the end of the fiscal third quarter and maintained full unused credit facilities. ZUMZ ended the fiscal quarter with $177.2 million in inventory, up 1.2% from the year-ago fiscal quarter’s tally. The company repurchased shares for $87.9 million during the first nine months of fiscal 2022.
As of Nov 26, 2022, Zumiez operated 763 stores, including 615 in the United States, 52 in Canada, 75 in Europe and 21 in Australia. Management intends to open roughly 33 stores in fiscal 2022, including about 16 stores in North America, 13 in Europe and 4 in Australia.
Other Updates
Net sales for the fiscal fourth quarter to date for 31 days ended Nov 29, 2022, tumbled 23.9% from the year-ago fiscal quarter’s reported number. Total comparable sales for the aforementioned period declined 24.8% from the comparable period in the prior fiscal year.
From a regional perspective, net sales for the North American business fell 27.7% from the year-ago fiscal quarter’s tally in the 31-day period, while the metric at the international business dipped 4% from last fiscal year’s quarterly level. Excluding the foreign currency impacts, North American sales were down 27.4% while other international sales grew 7.7% versus fiscal 2021.
For the fiscal fourth quarter to date, all categories were down in comparable sales from the year-ago fiscal period’s level. The mens category remained the most negative, followed by hard goods, women's, accessories and footwear.
Outlook
Management projects total sales for the fourth quarter of fiscal 2022 between $258 million and $265 million. Consolidate operating profit as a rate of sales for the same quarter is likely to be 3.4-4.7% and earnings per share are envisioned to be 36-51 cents.
For fiscal 2022, ZUMZ anticipates the total sales to be down in the 20-21% range versus fiscal 2021. Despite the inflationary pressures and a promotional landscape as well as mixed pressures between categories and across countries, the company has witnessed only a modest decline in product margin. Management believes that it will see some product margin erosion in the fiscal fourth quarter and is likely to decline approximately 50 bps year over year. ZUMZ has been managing costs across its business.
However, it anticipates deleveraged fixed costs in the business. Management forecasts an operating margin of 2.6-3% for fiscal 2022, due to lower sales, inflationary cost pressures and reverting to normal for items such as mall hours, travel, and training and events.
Earnings per share are expected to decrease less than operating profit for fiscal 2022. Zumiez envisions earnings per share of 85 cents and $1 for the current fiscal year. Capital expenditures are predicted between $27 million and $29 million versus $16 million in fiscal 2021, mostly attributable to the additional stores in fiscal 2022.
3 Top Retail Stocks
We highlighted three better-ranked stocks, namely Tecnoglass (TGLS - Free Report) , GMS (GMS - Free Report) and Wingstop (WING - Free Report) .
Tecnoglass manufactures and sells architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 40.5% and 76.4%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
GMS, a distributor of wallboard and suspended ceiling systems, currently sports a Zacks Rank #1. GMS has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for GMS’ current financial-year sales and EPS suggests growth of 10.8% and 10.2%, respectively, from the year-ago reported figures. GMS has an expected EPS growth rate of 10.7% for three-five years.
Wingstop, which franchises and operates restaurants, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Wingstop’s current financial-year sales and earnings per share suggests growth of 25.3% and 22.2%, respectively, from the year-ago reported numbers. WING has an expected EPS growth rate of 11% for three-five years.