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Zumiez (ZUMZ) Stock Tumbles on Q1 Loss & Dismal Outlook
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Shares of Zumiez Inc. (ZUMZ - Free Report) declined 8.3% in the after-market trading session yesterday, as the company reported a loss in first-quarter fiscal 2017, alongside providing a dismal bottom-line outlook for the second quarter. Further, this Zacks Rank #4 (Sell) stock has plunged 33.9% on a year-to-date basis, underperforming the Zacks categorized Retail – Apparel/Shoe industry’s decline of 19.1%.
Interestingly, the company posted positive comparable store sales (comps) data for the month of May. Also, both the top and the bottom line surpassed the Zacks Consensus Estimate, thus keeping the positive surprise streak alive for the seventh straight time.
Q1 Highlights
Zumiez posted a loss of 18 cents per share for the quarter, which was wider than the year-ago loss of 8 cents, though it fared better than the Zacks Consensus Estimate of a loss of 20 cents. This could be partly accountable to increased costs, and a challenging retail environment with sluggish store traffic.
Net sales advanced 4.7% year over year to $181.2 million, beating the Zacks Consensus Estimate of $179.4 million. The improvement in the top line was mainly attributable to 25 net new store additions since last year and favorable comps.
Quarterly comps grew 1.8%, meeting the higher end of the company’s forecasted range. Comps were boosted by Zumiez’ brand value, combined with management’s efforts to improve omnichannel capacity; enhance merchandise choices and deliver better sales quality. Further, comps gained from higher transaction volume, somewhat offset by a drop in dollars per transaction. Comps benefited from robust performance of the men’s and junior’s categories, partly negated by lower comps across footwear, hardgoods and accessories.
The momentum seemed to have continued into May, as reflected by Zumiez’s monthly sales results. Concurrent with the first-quarter results, Zumiez reported its sales data for the four-week period ended May 28, 2017. This marked the company’s third consecutive month of posting positive comps. Comps for May ascended 3.3%, compared with a 7.6% drop recorded a year-ago. Moreover, net sales for the month grew 6.5% year over year to $53.2 million.
In the reported quarter, gross profit jumped 4.2% to about $52 million, though the gross margin contracted 20 basis points (bps) to 28.7%. The gross margin was hurt by inventory shrinkage, somewhat compensated by higher product margins.
Zumiez’s selling, general and administrative expenses increased 8.1% to nearly $58.2 million, while as a percentage of sales, the same escalated 100 bps to 32.2%. Consequently, Zumiez posted operating loss of $6.2 million that rose considerably from the loss of $3.9 million reported in the same period last year.
Financial Update
As of Apr 29, Zumiez’s cash and marketable securities were $76.5 million, up 23.2% year over year. The upside was driven by cash flow from operations, partly offset by capital expenditures, share buybacks and cash used for Fast Times’ buyout. Total shareholders’ equity at the end of the quarter was $305.6 million.
Further, the company generated $4.7 million as cash flow from operations during the first quarter. For fiscal 2017, the company expects capital expenditures in a range of $24–$26 million.
Guidance
Management remains pleased with the way the company is progressing toward attaining its near-term goals amid a tough retail landscape. Alongside, the company is undertaking necessary strategies to drive long-term growth. In response to the rapidly changing consumers’ shopping pattern, Zumiez is making significant investments in core areas, to expand its business. This is likely to enable the company to enhance its brand value and consumers’ experience, which in turn will help it capture market share and counter competition.
Thus, the company remains confident of achieving the top and bottom-line growth in the long run, which is likely to generate greater shareholders value. However, based on the current situation and the retail hurdles, management issued a dull earnings outlook for second-quarter fiscal 2017.
The company expects net sales for the quarter in the $185–$189 million range, while comps growth is expected in a range of 1–3% growth, over the same period. Gross margin is expected in a band of down 20 bps to increase 20 bps, while consolidated operating margins are projected to range from negative 1% to negative 2%. Finally, the company projects a loss of 6–11 cents per share, wider than the year-ago loss of 3 cents. Also, this compares unfavorably with our estimate of earnings of 2 cents.
Management stated that this cautious stance includes the impact from investments, as well as higher incentive compensation levels, planned for this fiscal year.
In fiscal 2017, the company plans to introduce 19 new stores, including four in Europe, two in Australia and up to 3 in Canada.
Better Picks in the Retail Space
Some better-ranked stocks in the retail space include The Children’s Place, Inc. (PLCE - Free Report) , Big 5 Sporting Goods Corp. (BGFV - Free Report) and The Buckle, Inc. (BKE - Free Report) .
Big 5 Sporting has a long-term earnings growth rate of 12%, and has a superb earnings surprise history. Further, the company flaunts a Zacks Rank #1.
Buckle, which carries a Zacks Rank #2 (Buy), has a VGM Style Score of “A”.
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Image: Bigstock
Zumiez (ZUMZ) Stock Tumbles on Q1 Loss & Dismal Outlook
Shares of Zumiez Inc. (ZUMZ - Free Report) declined 8.3% in the after-market trading session yesterday, as the company reported a loss in first-quarter fiscal 2017, alongside providing a dismal bottom-line outlook for the second quarter. Further, this Zacks Rank #4 (Sell) stock has plunged 33.9% on a year-to-date basis, underperforming the Zacks categorized Retail – Apparel/Shoe industry’s decline of 19.1%.
Interestingly, the company posted positive comparable store sales (comps) data for the month of May. Also, both the top and the bottom line surpassed the Zacks Consensus Estimate, thus keeping the positive surprise streak alive for the seventh straight time.
Q1 Highlights
Zumiez posted a loss of 18 cents per share for the quarter, which was wider than the year-ago loss of 8 cents, though it fared better than the Zacks Consensus Estimate of a loss of 20 cents. This could be partly accountable to increased costs, and a challenging retail environment with sluggish store traffic.
Zumiez Inc. Price, Consensus and EPS Surprise
Zumiez Inc. Price, Consensus and EPS Surprise | Zumiez Inc. Quote
Net sales advanced 4.7% year over year to $181.2 million, beating the Zacks Consensus Estimate of $179.4 million. The improvement in the top line was mainly attributable to 25 net new store additions since last year and favorable comps.
Quarterly comps grew 1.8%, meeting the higher end of the company’s forecasted range. Comps were boosted by Zumiez’ brand value, combined with management’s efforts to improve omnichannel capacity; enhance merchandise choices and deliver better sales quality. Further, comps gained from higher transaction volume, somewhat offset by a drop in dollars per transaction. Comps benefited from robust performance of the men’s and junior’s categories, partly negated by lower comps across footwear, hardgoods and accessories.
The momentum seemed to have continued into May, as reflected by Zumiez’s monthly sales results. Concurrent with the first-quarter results, Zumiez reported its sales data for the four-week period ended May 28, 2017. This marked the company’s third consecutive month of posting positive comps. Comps for May ascended 3.3%, compared with a 7.6% drop recorded a year-ago. Moreover, net sales for the month grew 6.5% year over year to $53.2 million.
In the reported quarter, gross profit jumped 4.2% to about $52 million, though the gross margin contracted 20 basis points (bps) to 28.7%. The gross margin was hurt by inventory shrinkage, somewhat compensated by higher product margins.
Zumiez’s selling, general and administrative expenses increased 8.1% to nearly $58.2 million, while as a percentage of sales, the same escalated 100 bps to 32.2%. Consequently, Zumiez posted operating loss of $6.2 million that rose considerably from the loss of $3.9 million reported in the same period last year.
Financial Update
As of Apr 29, Zumiez’s cash and marketable securities were $76.5 million, up 23.2% year over year. The upside was driven by cash flow from operations, partly offset by capital expenditures, share buybacks and cash used for Fast Times’ buyout. Total shareholders’ equity at the end of the quarter was $305.6 million.
Further, the company generated $4.7 million as cash flow from operations during the first quarter. For fiscal 2017, the company expects capital expenditures in a range of $24–$26 million.
Guidance
Management remains pleased with the way the company is progressing toward attaining its near-term goals amid a tough retail landscape. Alongside, the company is undertaking necessary strategies to drive long-term growth. In response to the rapidly changing consumers’ shopping pattern, Zumiez is making significant investments in core areas, to expand its business. This is likely to enable the company to enhance its brand value and consumers’ experience, which in turn will help it capture market share and counter competition.
Thus, the company remains confident of achieving the top and bottom-line growth in the long run, which is likely to generate greater shareholders value. However, based on the current situation and the retail hurdles, management issued a dull earnings outlook for second-quarter fiscal 2017.
The company expects net sales for the quarter in the $185–$189 million range, while comps growth is expected in a range of 1–3% growth, over the same period. Gross margin is expected in a band of down 20 bps to increase 20 bps, while consolidated operating margins are projected to range from negative 1% to negative 2%. Finally, the company projects a loss of 6–11 cents per share, wider than the year-ago loss of 3 cents. Also, this compares unfavorably with our estimate of earnings of 2 cents.
Management stated that this cautious stance includes the impact from investments, as well as higher incentive compensation levels, planned for this fiscal year.
In fiscal 2017, the company plans to introduce 19 new stores, including four in Europe, two in Australia and up to 3 in Canada.
Better Picks in the Retail Space
Some better-ranked stocks in the retail space include The Children’s Place, Inc. (PLCE - Free Report) , Big 5 Sporting Goods Corp. (BGFV - Free Report) and The Buckle, Inc. (BKE - Free Report) .
Children’s Place, with a long-term earnings growth rate of 8% and solid earnings surprise history, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Big 5 Sporting has a long-term earnings growth rate of 12%, and has a superb earnings surprise history. Further, the company flaunts a Zacks Rank #1.
Buckle, which carries a Zacks Rank #2 (Buy), has a VGM Style Score of “A”.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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