Will Zumiez' (ZUMZ) Surprise Streak Snap in Q1 Earnings?

Zumiez Inc. ZUMZ is slated to release first-quarter fiscal 2017 results on Jun 1. The question lingering in investors’ minds is whether this specialty retailer of action sports related apparel, footwear and accessories will be able to deliver a positive earnings surprise in the quarter to be reported.

In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 31.4%. Notably, Zumiez has delivered positive earnings surprises consistently in the last six quarters. 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 20 cents, wider than the year-ago loss of 8 cents. Further, we noted that our loss estimate has widened in the past 30 days, by a couple of cents. On the positive side, analysts polled by Zacks expect revenues of $179.4 million, up about 3.7% from the year-ago quarter.

Zumiez forms part of the Retail – Wholesale sector. Per the latest Earnings Trends, as of May 24, the Retail – Wholesale sector’s earnings are expected to inch up 0.5%, with 3.1% revenues growth.

Factors at Play

Zumiez recently came up with comparable store sales (comps) and sales data for the four-week period ended Apr 29, 2017. The company recorded a 7.8% increase in April comps, which marked its second consecutive month of comps growth. Also, net sales for the month advanced 10.3% year over year. However, management tweaked its bottom-line outlook for the first quarter owing to a higher-than-expected tax rate.

The company now projects bottom-line results for first-quarter fiscal 2017 at the lower end of its previous guidance of net loss per share of 17–21 cents. The previous projection (provided during the fourth-quarter fiscal 2017 earnings release) remained dismal on account of a challenging retail environment stemming from sluggish mall traffic, volatile consumer spending and macroeconomic volatility.

These factors have been largely weighing upon investors’ sentiment, evident from the company’s bearish run as it approaches its earnings release. Notably, shares of Zumiez have dropped 4.5% over the past five trading sessions. Moreover, the company has slumped 26.5% over the last three months, underperforming the Zacks categorized Retail – Apparel/Shoes industry’s drop of 14.5%. 

Nevertheless, Zumiez remains on track with cost-control efforts and multi-year growth targets, which are aimed at generating greater profits and shareholder-value in the long run. Further, the company’s strategic initiatives, focus on omni-channel growth, authentic lifestyle positioning and commitment to customer service position it well to gain market share.

Given the mixed signals, it remains to be seen whether Zumiez will break or maintain its solid positive surprise trend.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Zumiez is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zumiez currently carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company has an Earnings ESP of -5.00% as the Most Accurate estimate of a loss of 21 cents is wider than the Zacks Consensus Estimate of a loss of 20 cents. The combination of Zumiez’ Zacks Rank #3 and negative ESP makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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:

Fred's, Inc. FRED has an Earnings ESP of +16.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lithia Motors, Inc. LAD has an Earnings ESP of +0.91% and a Zacks Rank #3.

Fastenal Company FAST has an Earnings ESP of +4.08% and a Zacks Rank #3.

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