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Zumiez (ZUMZ) to Pull Another Surprise this Earnings Season?

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Zumiez Inc. is slated to release second-quarter fiscal 2017 results on Sep 7. The question lingering in investors’ minds is whether this mall-based specialty retailer of action sports related products will be able to deliver a positive earnings surprise in the quarter to be reported. The company has a splendid surprise history, as it has delivered positive bottom-line surprises consistently in the last seven quarters, while its top line has surpassed the Zacks Consensus Estimate for three consecutive quarters now. Let’s see how things are shaping up prior to this announcement.

Zumiez Inc. Price and EPS Surprise

Zumiez Inc. Price and EPS Surprise | Zumiez Inc. Quote

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at a loss of 6 cents compared with a loss of 3 cents delivered in the year-ago quarter. However, we noted that our loss estimate has narrowed by a penny over the last 30 days. Further, analysts polled by Zacks expect revenues of $191.6 million, up almost 7.5% from the year-ago quarter.

What the Zacks Model Unveils?

Our proven model shows that Zumiez may beat earnings estimates because it has the right combination of two key components.

Zacks ESP: Zumiez currently has an Earnings ESP of +16.67%. This is because the Most Accurate estimate of a loss of 5 cents is narrower than the Zacks Consensus Estimate of a loss of 6 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Zumiez currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. The combination of Zumiez’s Zacks Rank #3 and a positive ESP make us reasonably confident of a positive earnings beat.

Factors Driving This Quarter

Zumiez recently delivered comparable store sales (comps) and sales numbers for July, which marked the company’s fifth straight month of comps growth. Comps for July improved 5.1%, while sales jumped 8.9% year over year. Notably, Zumiez has been gaining from its efforts to keep pace with the evolving retail trends, as evident from its focus on omni-channel development. Additionally, its strategic initiatives, authentic lifestyle positioning and commitment to enhancing customer service place it well for market share gains.

Incidentally, Zumiez had raised its projections for the second quarter, following its June sales results. The company expects sales in a range of $189-$191 million compared with the old guidance of $185-$189 million. Further, it anticipates comps growth to range from 3-4%, up from 1-3% forecast earlier. Finally, management expects to incur a loss of 6-8 cents per share in the second quarter, as compared with a loss of 6-11 cents guided earlier. While soft mall traffic and a tough retail landscape have caused Zumiez to tumble 10.1% in the past three months, it has fared better than the industry’s 15% decline.

Other Stocks with Favorable Combination

Here are some other companies you may want to consider as our model shows that these also have the right combination of elements to post an earnings beat:

Dave & Buster's Entertainment, Inc. (PLAY - Free Report) has an Earnings ESP of +2.15% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Restoration Hardware Holdings Inc. (RH - Free Report) has an Earnings ESP of +2.88% and a Zacks Rank #3.

G-III Apparel Group, Ltd. (GIII - Free Report) has an Earnings ESP of +4.76% and a Zacks Rank #3.

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