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Zumiez's (ZUMZ) Q1 Loss Wider Than Expected, Revenues Down
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Zumiez Inc. (ZUMZ - Free Report) reported dismal results for first-quarter fiscal 2023, with a wider-than-anticipated loss per share. Also, 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 and a promotional landscape coupled with foreign currency translations, remain deterrents.
During the quarter under review, the company witnessed continued weaker sales due to persistent inflationary pressures.
Over the past three months, shares of this current Zacks Rank #4 (Sell) player have decreased 33.3%, compared with the industry’s 23% decline.
Results in Detail
Zumiez posted a quarterly loss of 96 cents per share, wider than the Zacks Consensus Estimate of a loss of 87 cents per share. The bottom line also compared unfavorably with a loss per share of 2 cents reported in the year-earlier quarter.
Total net sales of $182.9 million came slightly above the consensus estimate of $182 million but fell 17.1% from the year-ago period’s reading. This decline was due to the North American unit’s results being offset by impressive performance in Europe and Australia. Currency headwinds also hurt sales to the tune of 87 basis points (bps). Comparable sales also decreased 18.8% during the quarter under review.
From a regional perspective, North America’s net sales were $144 million, down 22.7% from the year-ago fiscal quarter’s tally. Other international sales, comprising Europe and Australia, were $38.9 million, up 13.3% from the year-ago quarter’s level. Excluding the impacts of foreign currency translations, North America’s net sales fell 22.4%, while other international net sales rose 17.1% from the fiscal 2022 readings. Comparable sales for North America plunged 24. 2% while the metric for other international increased 12.2% for the quarter.
All categories reported a comparable sales decline from the year-ago fiscal quarter’s tally with the men’s category being the most negative, followed by footwear, accessories, hardgoods and women's.
Gross profit decreased from $72.4 million seen in the year-ago fiscal quarter’s tally to $49.4 million. The gross margin decreased 580 bps to 27%. 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.
Store occupancy costs deleveraged 290 bps on reduced sales, buying and private label costs increased 40 bps and inventory shrinkage rose 40 bps. Web-shipping costs jumped 60 bps, distribution center costs climbed 50 bps while product margins fell 70 bps.
Selling, general and administrative (SG&A) expenses dipped 1.5% from the year-ago fiscal quarter’s tally to $70.7 million during the quarter under review. As a percentage of sales, SG&A expenses increased 610 bps to 38.7% from the year-ago quarter’s tally.
Zumiez reported an operating profit of $21.4 million, versus an operating income of $0.5 million recorded in the year-earlier fiscal quarter.
Financial & Other Updates
As of Apr 29, 2023, ZUMZ had cash and current marketable securities of $155.3 million, compared with $173 million as of Apr 30, 2022. The decline was due to capital expenditures of $27.5 million.
Total shareholders’ equity at the end of the fiscal quarter was $391.8 million. Zumiez had no debt at the end of the fiscal first quarter and maintained full unused credit facilities. The company ended the fiscal first quarter with $147.9 million in inventory, up 4.2% from the year-ago quarter’s tally.
As of May 27, 2023, Zumiez operated 758 stores, including 608 in the United States, 49 in Canada, 80 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 four-week period ended May 27, 2023, tumbled 12.8% from the year-ago period. Comparable sales for the aforementioned period declined 14.3% from the prior fiscal year’s quarter.
From a regional perspective, net sales for the North American business fell 17% from the year-ago fiscal quarter’s tally in the four weeks that ended May 27, while the metric for the international business decreased 12.7% from last fiscal year’s comparable period. Excluding foreign currency impacts, North American sales were down 16.7% while the other international sales grew 10.4%. Comparable sales for North America dropped 17.5% while the metric for other international rose 4.2% for the same four-week period last year.
In fiscal May 2023, all categories were down in comparable sales from the year-ago fiscal period’s level. The footwear category remained the most negative, followed by hard goods, accessories, men's and women's. We note that the company’s May sales were marginally better than the first-quarter trends, but below the year-ago levels as consumer demand continues to be pressurized, stemming from the impacts of inflation on discretionary spending.
Outlook
Zumiez’s second-quarter view includes certain inherent uncertainty and complexity while projecting sales, product margin and earnings.
Second-quarter sales are estimated between $187 million and $192 million and product margins are expected to be down 50-70 bps year over year as the company continues to operate in a tough sales landscape. Consolidated operating loss as a rate of sales for the same quarter is likely to be between negative 7.7% and negative 9.2% and loss per share is envisioned to be 63-73 cents. The decrease in earnings is mainly due to cost structure deleverage on reduced sales with strained margins.
For fiscal 2023, management believes that the top line will remain under pressure, mainly as the company wraps up the first half. Product margins fell 50 bps in fiscal 2022 after six straight years of growth. The majority of this decline is 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 2023 are expected between $20 million and $22 million versus $26 million in the last fiscal.
Solid Picks in Retail
We have highlighted three top-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) and Hibbett Sports (HIBB - Free Report) .
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings per share suggests growth of 2.1% and 472%, respectively, from the year-ago reported figures. ANF delivered a negative trailing four-quarter earnings surprise of 141.2%.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO has delivered an earnings surprise of 23.3% in the last reported quarter.
The consensus estimate for American Eagle Outfitters’ current financial-year sales and earnings per share suggests growth of 1.4% and 15.5%, respectively, from the year-ago reported figures.
Hibbett, a sporting goods retailer, currently carries a Zacks Rank of 2. The company has a negative trailing four-quarter earnings surprise of 13.9%, on average.
The consensus estimate for Hibbett’s current financial-year sales suggests growth of 5.7% from the year-ago reported figure.
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Zumiez's (ZUMZ) Q1 Loss Wider Than Expected, Revenues Down
Zumiez Inc. (ZUMZ - Free Report) reported dismal results for first-quarter fiscal 2023, with a wider-than-anticipated loss per share. Also, 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 and a promotional landscape coupled with foreign currency translations, remain deterrents.
During the quarter under review, the company witnessed continued weaker sales due to persistent inflationary pressures.
Over the past three months, shares of this current Zacks Rank #4 (Sell) player have decreased 33.3%, compared with the industry’s 23% decline.
Results in Detail
Zumiez posted a quarterly loss of 96 cents per share, wider than the Zacks Consensus Estimate of a loss of 87 cents per share. The bottom line also compared unfavorably with a loss per share of 2 cents reported in the year-earlier quarter.
Zumiez Inc. Price, Consensus and EPS Surprise
Zumiez Inc. price-consensus-eps-surprise-chart | Zumiez Inc. Quote
Total net sales of $182.9 million came slightly above the consensus estimate of $182 million but fell 17.1% from the year-ago period’s reading. This decline was due to the North American unit’s results being offset by impressive performance in Europe and Australia. Currency headwinds also hurt sales to the tune of 87 basis points (bps). Comparable sales also decreased 18.8% during the quarter under review.
From a regional perspective, North America’s net sales were $144 million, down 22.7% from the year-ago fiscal quarter’s tally. Other international sales, comprising Europe and Australia, were $38.9 million, up 13.3% from the year-ago quarter’s level. Excluding the impacts of foreign currency translations, North America’s net sales fell 22.4%, while other international net sales rose 17.1% from the fiscal 2022 readings. Comparable sales for North America plunged 24. 2% while the metric for other international increased 12.2% for the quarter.
All categories reported a comparable sales decline from the year-ago fiscal quarter’s tally with the men’s category being the most negative, followed by footwear, accessories, hardgoods and women's.
Gross profit decreased from $72.4 million seen in the year-ago fiscal quarter’s tally to $49.4 million. The gross margin decreased 580 bps to 27%. 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.
Store occupancy costs deleveraged 290 bps on reduced sales, buying and private label costs increased 40 bps and inventory shrinkage rose 40 bps. Web-shipping costs jumped 60 bps, distribution center costs climbed 50 bps while product margins fell 70 bps.
Selling, general and administrative (SG&A) expenses dipped 1.5% from the year-ago fiscal quarter’s tally to $70.7 million during the quarter under review. As a percentage of sales, SG&A expenses increased 610 bps to 38.7% from the year-ago quarter’s tally.
Zumiez reported an operating profit of $21.4 million, versus an operating income of $0.5 million recorded in the year-earlier fiscal quarter.
Financial & Other Updates
As of Apr 29, 2023, ZUMZ had cash and current marketable securities of $155.3 million, compared with $173 million as of Apr 30, 2022. The decline was due to capital expenditures of $27.5 million.
Total shareholders’ equity at the end of the fiscal quarter was $391.8 million. Zumiez had no debt at the end of the fiscal first quarter and maintained full unused credit facilities. The company ended the fiscal first quarter with $147.9 million in inventory, up 4.2% from the year-ago quarter’s tally.
As of May 27, 2023, Zumiez operated 758 stores, including 608 in the United States, 49 in Canada, 80 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 four-week period ended May 27, 2023, tumbled 12.8% from the year-ago period. Comparable sales for the aforementioned period declined 14.3% from the prior fiscal year’s quarter.
From a regional perspective, net sales for the North American business fell 17% from the year-ago fiscal quarter’s tally in the four weeks that ended May 27, while the metric for the international business decreased 12.7% from last fiscal year’s comparable period. Excluding foreign currency impacts, North American sales were down 16.7% while the other international sales grew 10.4%. Comparable sales for North America dropped 17.5% while the metric for other international rose 4.2% for the same four-week period last year.
In fiscal May 2023, all categories were down in comparable sales from the year-ago fiscal period’s level. The footwear category remained the most negative, followed by hard goods, accessories, men's and women's. We note that the company’s May sales were marginally better than the first-quarter trends, but below the year-ago levels as consumer demand continues to be pressurized, stemming from the impacts of inflation on discretionary spending.
Outlook
Zumiez’s second-quarter view includes certain inherent uncertainty and complexity while projecting sales, product margin and earnings.
Second-quarter sales are estimated between $187 million and $192 million and product margins are expected to be down 50-70 bps year over year as the company continues to operate in a tough sales landscape. Consolidated operating loss as a rate of sales for the same quarter is likely to be between negative 7.7% and negative 9.2% and loss per share is envisioned to be 63-73 cents. The decrease in earnings is mainly due to cost structure deleverage on reduced sales with strained margins.
For fiscal 2023, management believes that the top line will remain under pressure, mainly as the company wraps up the first half. Product margins fell 50 bps in fiscal 2022 after six straight years of growth. The majority of this decline is 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 2023 are expected between $20 million and $22 million versus $26 million in the last fiscal.
Solid Picks in Retail
We have highlighted three top-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) and Hibbett Sports (HIBB - 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 earnings per share suggests growth of 2.1% and 472%, respectively, from the year-ago reported figures. ANF delivered a negative trailing four-quarter earnings surprise of 141.2%.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO has delivered an earnings surprise of 23.3% in the last reported quarter.
The consensus estimate for American Eagle Outfitters’ current financial-year sales and earnings per share suggests growth of 1.4% and 15.5%, respectively, from the year-ago reported figures.
Hibbett, a sporting goods retailer, currently carries a Zacks Rank of 2. The company has a negative trailing four-quarter earnings surprise of 13.9%, on average.
The consensus estimate for Hibbett’s current financial-year sales suggests growth of 5.7% from the year-ago reported figure.