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Here's How Zumiez (ZUMZ) Looks Just Ahead of Q2 Earnings

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Zumiez Inc. ZUMZ is likely to register a slight decline in the top line when it reports second-quarter fiscal 2020 numbers on Sep 10, after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $226.7 million, indicating a marginal decline of 0.7% from the prior-year reported figure. We note that the rate of sales decline is likely to decelerate sharply on a sequential basis. The company had witnessed a decline of 35.3% in the last-reported quarter, when stores were closed in the wake of coronavirus.

The Zacks Consensus Estimate for earnings for the quarter under review has increased by 9 cents to 34 cents over the past seven days. The current Zacks Consensus Estimate indicates that the company is likely to swing back to profit following a loss in the last-reported quarter. However, the consensus estimate still suggests a decline of 5.6% from earnings of 36 cents reported in the year-ago period.

Notably, this Lynnwood, WA-based company has a trailing four-quarter earnings surprise of 14.3%, on average. In the last reported quarter, this specialty retailer of apparel, footwear and accessories delivered a negative earnings surprise of 68.1%.

Key Factors to Note

Zumiez began reopening stores late in the first quarter of fiscal 2020, and as of May 30, 69% of its total stores were opened. On its last earnings call, management informed that total net sales decreased 8.6% for the four-week period ended May 30, 2020, primarily owing to store closures continuing into May. Nonetheless, the company witnessed better-than-expected performance in stores opened and registered sturdy e-commerce demand. Notably, comparable sales, consisting of stores opened and e-commerce traffic, improved 79.6% during the month of May. By channel, comparable store sales for locations opened in May rose 38.5%, while e-commerce comparable sales soared 181.6%.

The company has been striving to expand e-commerce and omni-channel platforms to provide consumers with the facility of quick and easy access to its products and brands. No wonder, the company has been bolstering competitiveness by making investments in logistics, planning and allocation. We also note that the company’s second-quarter performance might have benefited from the pent-up demand and government stimulus program to an extent.

Certainly, the company has been taking every measure to mitigate the impact of the pandemic. These include curbing of capital expenditures, extending payment terms for vendor invoices and reducing inventory receipts by canceling or delaying orders. Also, management has been minimizing operating costs, which comprise marketing and other non-essential items.

However, investments in pay and benefits for frontline team members, shift in channel mix toward digital fulfilment and any decline in the sales of higher-margin discretionary items are likely to have weighed on margins. Cumulatively, these are likely to get reflected in the second-quarter bottom line.

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What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Zumiez this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zumiez has a Zacks Rank #3 but an Earnings ESP of -47.37%.

3 Stocks With a Favorable Combination

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

RH RH has an Earnings ESP of +13.47% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darden Restaurants DRI has an Earnings ESP of +67.17% and a Zacks Rank #2.

Costco COST has an Earnings ESP of +2.50% and a Zacks Rank #3.

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