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Zumiez Inc. (ZUMZ - Free Report) reported better-than-expected results for fourth-quarter fiscal 2022. However, both metrics compared unfavorably with the respective year-earlier fiscal quarter’s reported figures. A tough operating environment, including inflationary pressures on consumer discretionary spending, a promotional landscape, a tight labor market, increased operating costs and foreign currency headwinds remain deterrents.
In addition, the company witnessed the pressure of skate hard goods decrease on the business and a push to greater value-oriented offerings away from its increased price point branded products.
Over the past six months, shares of this currently Zacks Rank #4 (Sell) player have decreased 15.8% compared with the industry’s 2.5% rise.
Results in Detail
Zumiez posted quarterly earnings of 59 cents per share, which surpassed the Zacks Consensus Estimate of 49 cents. The bottom line sharply plunged from earnings of $1.70 per share reported in the year-earlier quarter.
Total net sales of $280.1 million came above the Zacks Consensus Estimate of $268 million but fell 19.2% from the year-ago period’s reading. This decline from the year-ago quarter was due to increased macroeconomic issues as inflation hurt consumer discretionary spending. Currency headwinds also hurt sales to the tune of 147 basis points (bps).
From a regional perspective, North America’s net sales were $219.8 million, down 23.4% from the year-ago fiscal quarter’s tally. Other international sales, comprising Europe and Australia, were $60.3 million, up 1.1% from the year-ago quarter’s level. Excluding the impacts of adverse foreign currency translations, North America’s net sales fell 23.1%, while other international net sales rose 8.2% from the fiscal 2021 readings.
All categories reported a 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 28.8% from the year-ago fiscal quarter’s tally to $95.3 million. The gross margin decreased 460 bps to 34%. The fall in gross margin from the year-ago fiscal quarter’s level was mainly due to reduced sales causing deleverage in the fixed costs, partly offset by a 30-bps fall in incentive compensation.
Store occupancy costs deleveraged 180 bps on reduced sales volumes, and buying and private label costs increased 20 bps. Web-shipping costs jumped 80 bps, distribution center costs climbed 70 bps while product margins fell 120 bps.
SG&A expenses dipped 2.6% from the year-ago fiscal quarter’s tally to $80.1 million during the fiscal quarter under review. As a percentage of sales, SG&A expenses increased 490 bps to 28.6% from the year-ago fiscal quarter’s tally.
Zumiez reported an operating profit of $15.2 million, down from $51.7 million recorded in the year-earlier fiscal quarter. The operating margin was 5.4%, significantly down from 14.9% witnessed in the year-ago fiscal period.
Financial & Other Updates
As of Jan 28, 2023, ZUMZ had cash and current marketable securities of $81.5 million compared with $117.2 million as of Jan 29, 2022. The decline was due to capital expenditures and share repurchases.
Total shareholders’ equity at the end of the fiscal quarter was $407.3 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 $134.8 million in inventory, up 4.7% from the year-ago quarter’s tally. Zumiez repurchased shares for $87.9 million during the first nine months of fiscal 2022.
As of Feb 25, 2023, Zumiez operated 756 stores, including 607 in the United States, 50 in Canada, 78 in Europe and 21 in Australia. Management intends to open roughly 23 stores in fiscal 2023, including about 8 stores in North America, 10 in Europe and 5 in Australia.
Other Updates
Net sales for the fiscal first quarter to date for 35 days ended Mar 4, 2023, tumbled 15.5% from the year-ago fiscal quarter’s reported number. Total comparable sales for the aforementioned period declined 16.6% from the comparable period in the prior fiscal year.
From a regional perspective, net sales for the North American business fell 21.9% from the year-ago fiscal quarter’s tally in the 35-day period, while the metric at the international business increased 13.9% from last fiscal year’s quarterly level. Excluding foreign currency impacts, North American sales were down 21.7% while the other international sales grew 19.2% versus 2021.
For the fiscal first quarter to date, all categories were down in comparable sales from the year-ago fiscal period’s level. The men category remained the most negative, followed by women's, footwear, accessories and hard goods.
Outlook
Moving ahead, Zumiez is cautious about the near-term outlook and expects persistent softness in demand on the existing economic landscape. The company’s first quarter-to-date results remain consistent with the fourth-quarter 2022 results and are likely to be impacted by higher inflationary pressures in discretionary spending. The guidance includes certain inherent uncertainty and complexity while projecting sales, product margin and earnings.
First-quarter total sales are estimated between $178 million and $184 million and product margins are expected to be down 100-115 bps year over year as the company continued to work through certain aged inventory in a tough operating landscape. Consolidate operating loss as a rate of sales for the same quarter is likely to be 10.7-12.7% and loss per share is envisioned to be 85-95 cents. The decrease in earnings is mainly due to deleveraging in the cost structure on a reduced sales base with strained margins.
For fiscal 2023, management believes that the top line will remain under pressure, mainly in the first and second quarters. Product margins are likely to be down 50 bps versus fiscal 2022 after six straight years of growth. The majority of this decline will be caused by fourth-quarter 2022 product margin, which was hurt by higher discounting to right size the inventory. Product margins will be tougher in the first half. However, Zumiez expects that margins may stabilize and expand in the back half of fiscal 2023.
Capital expenditures for fiscal 2023 are expected between $21 million and $23 million versus $26 million in the last fiscal.
Three Top Retail Stocks
We have highlighted three top-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) and Boot Barn (BOOT - Free Report) .
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 0.5% and 526.3%, respectively, from the year-ago reported figures. ANF delivered an earnings surprise of 107.7% in the last reported quarter.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently sports a Zacks Rank of 1. AEO delivered an earnings surprise of 82.6% in the last reported quarter.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 3.3% and 24.2%, respectively, from the year-ago reported figures.
Boot Barn, a fashion retailer of apparel and accessories, currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 8.2% and 9.1%, respectively, from the year-ago reported figures.
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Zumiez's (ZUMZ) Q4 Earnings Beat Mark, Revenues Decline Y/Y
Zumiez Inc. (ZUMZ - Free Report) reported better-than-expected results for fourth-quarter fiscal 2022. However, both metrics compared unfavorably with the respective year-earlier fiscal quarter’s reported figures. A tough operating environment, including inflationary pressures on consumer discretionary spending, a promotional landscape, a tight labor market, increased operating costs and foreign currency headwinds remain deterrents.
In addition, the company witnessed the pressure of skate hard goods decrease on the business and a push to greater value-oriented offerings away from its increased price point branded products.
Over the past six months, shares of this currently Zacks Rank #4 (Sell) player have decreased 15.8% compared with the industry’s 2.5% rise.
Results in Detail
Zumiez posted quarterly earnings of 59 cents per share, which surpassed the Zacks Consensus Estimate of 49 cents. The bottom line sharply plunged from earnings of $1.70 per share reported in the year-earlier quarter.
Total net sales of $280.1 million came above the Zacks Consensus Estimate of $268 million but fell 19.2% from the year-ago period’s reading. This decline from the year-ago quarter was due to increased macroeconomic issues as inflation hurt consumer discretionary spending. Currency headwinds also hurt sales to the tune of 147 basis points (bps).
Zumiez Inc. Price, Consensus and EPS Surprise
Zumiez Inc. price-consensus-eps-surprise-chart | Zumiez Inc. Quote
From a regional perspective, North America’s net sales were $219.8 million, down 23.4% from the year-ago fiscal quarter’s tally. Other international sales, comprising Europe and Australia, were $60.3 million, up 1.1% from the year-ago quarter’s level. Excluding the impacts of adverse foreign currency translations, North America’s net sales fell 23.1%, while other international net sales rose 8.2% from the fiscal 2021 readings.
All categories reported a 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 28.8% from the year-ago fiscal quarter’s tally to $95.3 million. The gross margin decreased 460 bps to 34%. The fall in gross margin from the year-ago fiscal quarter’s level was mainly due to reduced sales causing deleverage in the fixed costs, partly offset by a 30-bps fall in incentive compensation.
Store occupancy costs deleveraged 180 bps on reduced sales volumes, and buying and private label costs increased 20 bps. Web-shipping costs jumped 80 bps, distribution center costs climbed 70 bps while product margins fell 120 bps.
SG&A expenses dipped 2.6% from the year-ago fiscal quarter’s tally to $80.1 million during the fiscal quarter under review. As a percentage of sales, SG&A expenses increased 490 bps to 28.6% from the year-ago fiscal quarter’s tally.
Zumiez reported an operating profit of $15.2 million, down from $51.7 million recorded in the year-earlier fiscal quarter. The operating margin was 5.4%, significantly down from 14.9% witnessed in the year-ago fiscal period.
Financial & Other Updates
As of Jan 28, 2023, ZUMZ had cash and current marketable securities of $81.5 million compared with $117.2 million as of Jan 29, 2022. The decline was due to capital expenditures and share repurchases.
Total shareholders’ equity at the end of the fiscal quarter was $407.3 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 $134.8 million in inventory, up 4.7% from the year-ago quarter’s tally. Zumiez repurchased shares for $87.9 million during the first nine months of fiscal 2022.
As of Feb 25, 2023, Zumiez operated 756 stores, including 607 in the United States, 50 in Canada, 78 in Europe and 21 in Australia. Management intends to open roughly 23 stores in fiscal 2023, including about 8 stores in North America, 10 in Europe and 5 in Australia.
Other Updates
Net sales for the fiscal first quarter to date for 35 days ended Mar 4, 2023, tumbled 15.5% from the year-ago fiscal quarter’s reported number. Total comparable sales for the aforementioned period declined 16.6% from the comparable period in the prior fiscal year.
From a regional perspective, net sales for the North American business fell 21.9% from the year-ago fiscal quarter’s tally in the 35-day period, while the metric at the international business increased 13.9% from last fiscal year’s quarterly level. Excluding foreign currency impacts, North American sales were down 21.7% while the other international sales grew 19.2% versus 2021.
For the fiscal first quarter to date, all categories were down in comparable sales from the year-ago fiscal period’s level. The men category remained the most negative, followed by women's, footwear, accessories and hard goods.
Outlook
Moving ahead, Zumiez is cautious about the near-term outlook and expects persistent softness in demand on the existing economic landscape. The company’s first quarter-to-date results remain consistent with the fourth-quarter 2022 results and are likely to be impacted by higher inflationary pressures in discretionary spending. The guidance includes certain inherent uncertainty and complexity while projecting sales, product margin and earnings.
First-quarter total sales are estimated between $178 million and $184 million and product margins are expected to be down 100-115 bps year over year as the company continued to work through certain aged inventory in a tough operating landscape. Consolidate operating loss as a rate of sales for the same quarter is likely to be 10.7-12.7% and loss per share is envisioned to be 85-95 cents. The decrease in earnings is mainly due to deleveraging in the cost structure on a reduced sales base with strained margins.
For fiscal 2023, management believes that the top line will remain under pressure, mainly in the first and second quarters. Product margins are likely to be down 50 bps versus fiscal 2022 after six straight years of growth. The majority of this decline will be caused by fourth-quarter 2022 product margin, which was hurt by higher discounting to right size the inventory. Product margins will be tougher in the first half. However, Zumiez expects that margins may stabilize and expand in the back half of fiscal 2023.
Capital expenditures for fiscal 2023 are expected between $21 million and $23 million versus $26 million in the last fiscal.
Three Top Retail Stocks
We have highlighted three top-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) and Boot Barn (BOOT - Free Report) .
Abercrombie & Fitch, a leading casual apparel retailer, 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 Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 0.5% and 526.3%, respectively, from the year-ago reported figures. ANF delivered an earnings surprise of 107.7% in the last reported quarter.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently sports a Zacks Rank of 1. AEO delivered an earnings surprise of 82.6% in the last reported quarter.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 3.3% and 24.2%, respectively, from the year-ago reported figures.
Boot Barn, a fashion retailer of apparel and accessories, currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 8.2% and 9.1%, respectively, from the year-ago reported figures.