Zumiez hits annual low on 4Q guidance concerns

Zumiez falls to annual low after company says November sales were lower than expected

Associated Press

NEW YORK (AP) -- Shares of Zumiez Inc. slumped to a 14-month low Friday after the action sports retailer reported weak sales in November and offered a disappointing forecast for the fourth quarter.

THE SPARK: Zumiez reported its third-quarter results after the market closed on Thursday. The company's third-quarter results were similar to Wall Street estimates. But it said important sales measurements fell in November, the start of its fourth quarter, and it forecast fourth-quarter earnings and revenue slightly below analyst estimates.

Revenue at stores open at least one year fell 4.2 percent in November. That is considered a key measurement of retailer health because it excludes results from stores that opened or closed within the last year. CEO Richard Brooks said the performance was hurt by warm weather and the effects of Superstorm Sandy early in the month, and got better as November progressed.

Brooks said the company experienced "steep declines in the (snowboarding) business and in men's footwear" in November.

THE BIG PICTURE: Zumiez operates 502 stores in the U.S., Canada and Europe under its namesake brand or Blue Tomato. It expanded into Europe earlier this year when it bought Blue Tomato for about $75.5 million, and during the third quarter the company said Blue Tomato sales were lower than expected. Zumiez reported that back-to-school sales and sales in Europe didn't meet its forecasts.

Excluding one-time costs related to the Blue Tomato deal, Zumiez expects to earn between 67 cents and 70 cents per share in the quarter ending in late January, and it forecast revenue of $218 million to $221 million.

Analysts were expecting the company to earn an adjusted 71 cents per share on revenue $222.9 million, according to FactSet.

THE ANALYSIS: Stifel Nicolaus analyst Richard Jaffe said the company's November sales were "well below our estimate." Analysts surveyed by FactSet expected growth of about 2 percent on average. Jaffe said the company's Black Friday sales improved compared to 2011, but revenue from stores open at least a year will continue to vary in the fourth quarter.

He maintained a "Hold" rating on shares of the Lynnwood, Wash., company

B. Riley & Co. analyst Jeff Van Sinderen lowered his earnings estimate for Zumiez, but said sales should keep growing at a rate of more than 10 percent and its earnings growth should improve.

Van Sinderen kept a "Buy" rating and lowered his price target to $29 per share from $32.

SHARE ACTION: Zumiez shares fell 88 cents, or 4.2 percent, to $19.87 in midday trading after falling as low as $18.58 earlier in the session, its lowest level since September 2011. The stock has lost more than half its value since peaking at $41.96 on June 19.

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