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Keeping its positive earnings surprise trend alive for the fifth time, Zumiez Inc. (ZUMZ - Free Report) delivered solid results for third-quarter fiscal 2016. Both the top and the bottom line grew year over year and topped estimates. However, shares dropped 5.3% during afterhours trading yesterday after the company provided a conservative outlook for the fourth quarter on account of troubles looming over the retail environment.
Nonetheless, Zumiez has outperformed the Zacks Categorized Retail – Apparel/Shoe industry, with its shares gaining 62.4% year to date, compared with the industry’s 6.6% decline.
Q3 Highlights
Zumiez posted earnings per share (EPS) of 43 cents for the quarter, which surged 19.4% year over year, coming much ahead of the Zacks Consensus Estimate of 36 cents. The bottom line gained from a robust top line, coupled with efficient expense management.
Further, net sales of this Zacks Rank #2 (Buy) company advanced 8.4% year over year to $221.4 million, surpassing the Zacks Consensus Estimate of $220.4 million. The year-over-year improvement in the top line was attributable to impressive comparable store sales (comps) growth and addition of new stores, which also included stores related to Fast Times buyout.
Quarterly comps jumped 4%, backed by higher transaction volume, somewhat offset by a drop in dollars per transaction. Management stated that Zumiez’s quarterly comps benefited from a robust back-to-school selling season, which improved results in September. Robust performance of the men’s, accessories and junior’s categories also contributed to comps growth. In fact, the momentum has continued into November as well, as reflected by Zumiez’s monthly sales results.
Concurrent with the third-quarter results, Zumiez reported its sales data for November, which marked its second consecutive month of positive comps. Prior to this, the company posted negative metrics continuously for 17 months. Comps for November jumped 5.7%, compared with a 13.8% plunge recorded in the year ago. Moreover, net sales for the four-week period ended Nov 26, 2016, grew 10.3% year over year to $69.3 million.
Quarter in Detail
In the reported quarter, gross profit increased 8.7% to $76.2 million, with gross margin expanding 10 basis points (bps) to 34.4%, primarily aided by higher product margins.
Zumiez’s selling, general and administrative expenses increased 8.1% to nearly $59.3 million and as a percentage of sales, the same remained flat at 26.8%.
Thanks to the gross margin improvement, Zumiez’s operating profit of $16.9 million grew 11.1% year over year, with the operating margin increasing 10 bps to 7.6%.
Financial Update
As of Oct 29, 2016, Zumiez’s cash and marketable securities were $49.2 million, down 3.7% year over year owing to share buybacks and capital expenditures, offset by cash flow from operations. Total shareholders’ equity at the end of the quarter was $289.4 million.
Also, during the quarter, the company repurchased roughly 136,000 shares for $2.3 million, that took its total buybacks for the fiscal to $20.5 million. As of the end of the quarter, the company had shares worth $33.9 million remaining under its standing authorization.
Further, it spent around $16.8 million as capital expenditure on a year-to-date basis. For fiscal 2016, the company expects capital expenditures in a range of $21–$23 million.
Store Update
During the quarter, Zumiez introduced seven North American and three European stores, alongside acquiring five Australian stores. This took the company’s total store growth for the fiscal to 31. Further, the company opened 32 new stores through November that took its total store count to 689 as of Nov 26, 2016. In the remaining fiscal 2016, the company intends to introduce one more store.
Guidance
While the enhanced top line reflects the company’s brand strength and gives positive signals, the overall retail environment remains troubled owing to sluggish mall traffic and macroeconomic volatility. In the face of such headwinds, Zumiez remains on track with its expense control and expansion strategies, which are aimed at placing it on the growth curve and generating profit in the near term.
However, based on the tough retail scenario, management issued a conservative outlook for the fourth quarter of fiscal 2016. The company expects net sales for the quarter in the $258–$263 million range, while comps growth is expected in a range of 3–5%, over the same period.
Further, gross margin is anticipated to expand 50–100 bps year over year, whereas operating margin is projected to range from 9–10%. Finally, for the fourth quarter, the company expects earnings in a band of 60–66 cents per share, while the Zacks Consensus Estimate is currently pegged at 65 cents.
Children's Place has an average positive earnings surprise of 36.3% in the trailing four quarters. The stock, with a long-term growth rate of 10.3%, has seen positive estimate revisions in the last 30 days.
Chico's FAS, with a long-term EPS growth rate of 12.4%, has topped earnings consecutively in the last two quarters. Moreover, the company’s positive estimate revisions for the current fiscal over the past 30 days bode well.
Nordstrom’s long-term EPS growth rate of 9.7% and solid positive estimate revisions for the current fiscal over the past 30 days help it stand strong in the industry. Moreover, the company has delivered back-to-back earnings beat in the last two quarters.
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Zumiez (ZUMZ) Tops Q3 Earnings & Sales, View Hurts Stock
Keeping its positive earnings surprise trend alive for the fifth time, Zumiez Inc. (ZUMZ - Free Report) delivered solid results for third-quarter fiscal 2016. Both the top and the bottom line grew year over year and topped estimates. However, shares dropped 5.3% during afterhours trading yesterday after the company provided a conservative outlook for the fourth quarter on account of troubles looming over the retail environment.
Nonetheless, Zumiez has outperformed the Zacks Categorized Retail – Apparel/Shoe industry, with its shares gaining 62.4% year to date, compared with the industry’s 6.6% decline.
Q3 Highlights
Zumiez posted earnings per share (EPS) of 43 cents for the quarter, which surged 19.4% year over year, coming much ahead of the Zacks Consensus Estimate of 36 cents. The bottom line gained from a robust top line, coupled with efficient expense management.
ZUMIEZ INC Price, Consensus and EPS Surprise
ZUMIEZ INC Price, Consensus and EPS Surprise | ZUMIEZ INC Quote
Further, net sales of this Zacks Rank #2 (Buy) company advanced 8.4% year over year to $221.4 million, surpassing the Zacks Consensus Estimate of $220.4 million. The year-over-year improvement in the top line was attributable to impressive comparable store sales (comps) growth and addition of new stores, which also included stores related to Fast Times buyout.
Quarterly comps jumped 4%, backed by higher transaction volume, somewhat offset by a drop in dollars per transaction. Management stated that Zumiez’s quarterly comps benefited from a robust back-to-school selling season, which improved results in September. Robust performance of the men’s, accessories and junior’s categories also contributed to comps growth. In fact, the momentum has continued into November as well, as reflected by Zumiez’s monthly sales results.
Concurrent with the third-quarter results, Zumiez reported its sales data for November, which marked its second consecutive month of positive comps. Prior to this, the company posted negative metrics continuously for 17 months. Comps for November jumped 5.7%, compared with a 13.8% plunge recorded in the year ago. Moreover, net sales for the four-week period ended Nov 26, 2016, grew 10.3% year over year to $69.3 million.
Quarter in Detail
In the reported quarter, gross profit increased 8.7% to $76.2 million, with gross margin expanding 10 basis points (bps) to 34.4%, primarily aided by higher product margins.
Zumiez’s selling, general and administrative expenses increased 8.1% to nearly $59.3 million and as a percentage of sales, the same remained flat at 26.8%.
Thanks to the gross margin improvement, Zumiez’s operating profit of $16.9 million grew 11.1% year over year, with the operating margin increasing 10 bps to 7.6%.
Financial Update
As of Oct 29, 2016, Zumiez’s cash and marketable securities were $49.2 million, down 3.7% year over year owing to share buybacks and capital expenditures, offset by cash flow from operations. Total shareholders’ equity at the end of the quarter was $289.4 million.
Also, during the quarter, the company repurchased roughly 136,000 shares for $2.3 million, that took its total buybacks for the fiscal to $20.5 million. As of the end of the quarter, the company had shares worth $33.9 million remaining under its standing authorization.
Further, it spent around $16.8 million as capital expenditure on a year-to-date basis. For fiscal 2016, the company expects capital expenditures in a range of $21–$23 million.
Store Update
During the quarter, Zumiez introduced seven North American and three European stores, alongside acquiring five Australian stores. This took the company’s total store growth for the fiscal to 31. Further, the company opened 32 new stores through November that took its total store count to 689 as of Nov 26, 2016. In the remaining fiscal 2016, the company intends to introduce one more store.
Guidance
While the enhanced top line reflects the company’s brand strength and gives positive signals, the overall retail environment remains troubled owing to sluggish mall traffic and macroeconomic volatility. In the face of such headwinds, Zumiez remains on track with its expense control and expansion strategies, which are aimed at placing it on the growth curve and generating profit in the near term.
However, based on the tough retail scenario, management issued a conservative outlook for the fourth quarter of fiscal 2016. The company expects net sales for the quarter in the $258–$263 million range, while comps growth is expected in a range of 3–5%, over the same period.
Further, gross margin is anticipated to expand 50–100 bps year over year, whereas operating margin is projected to range from 9–10%. Finally, for the fourth quarter, the company expects earnings in a band of 60–66 cents per share, while the Zacks Consensus Estimate is currently pegged at 65 cents.
Other Stocks to Consider
Other well-ranked stocks in the same industry include The Children's Place, Inc. (PLCE - Free Report) , with a Zacks Rank #1 (Strong Buy), Chico's FAS Inc. and Nordstrom Inc. (JWN - Free Report) , each carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Children's Place has an average positive earnings surprise of 36.3% in the trailing four quarters. The stock, with a long-term growth rate of 10.3%, has seen positive estimate revisions in the last 30 days.
Chico's FAS, with a long-term EPS growth rate of 12.4%, has topped earnings consecutively in the last two quarters. Moreover, the company’s positive estimate revisions for the current fiscal over the past 30 days bode well.
Nordstrom’s long-term EPS growth rate of 9.7% and solid positive estimate revisions for the current fiscal over the past 30 days help it stand strong in the industry. Moreover, the company has delivered back-to-back earnings beat in the last two quarters.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>