Zumiez (ZUMZ) Posts Soft Holiday Results, Comps Down 23.9%
Zumiez Inc. ZUMZ reported soft results for the holiday period. ZUMZ has persistently witnessed challenging economic conditions during the holiday season, driven by a pullback in discretionary spending, inflation-driven cost issues and a promotional marketplace.
Though sales marginally came ahead of the company’s guided levels, it experienced further discounting to move inventory. This resulted in earnings coming within the expected range. Management is focused on effectively balancing the protection of short-term profitability as well as investing in the people and major projects. This is likely to aid growth.
Let’s Take a Look
Zumiez’s total net sales plunged 22.2% for the nine-week period ended Dec 31, 2022 versus the nine weeks that ended Jan 1, 2022. Comparable sales (comps) also decreased 23.9% during the aforementioned period.
On a regional basis, quarter-to-date North American net sales declined 26.7% while other international net sales, which consists of Europe and Australia, edged up 1.9%. Excluding the foreign currency impacts, North American net sales fell 26.4% versus the prior-year period while other international net sales jumped 10.5% for the nine weeks ended Dec 31, 2022.
In the nine-week period, all categories’ comps were down versus the year-ago period. We note that men’s was the most negative category, followed by hardgoods, accessories, women’s and footwear.
Hence, management now projects sales for the final quarter of fiscal 2022 to remain slightly above the upper end of its fourth-quarter sales view of $258-$268 million. ZUMZ currently envisions earnings per share to be in the mid-high end of its guided range of 36-51 cents. Zumiez recorded sales of $347 million and earnings per share of $1.70 in the year-earlier quarter.
Over the past six months, shares of this current Zacks Rank #5 (Strong Sell) player have lost 7% against the industry’s 15.6% growth. A tough operating environment, including inflationary pressures, a promotional landscape, increased costs and foreign currency headwinds remain deterrents. Consequently, the company has been witnessing higher costs and lower margins for a while.
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On its last earnings call, management had projected consolidated operating profit as a rate of sales for the fiscal fourth quarter is likely to be 3.4-4.7%.
For fiscal 2022, ZUMZ had then anticipated the total sales to be down in the 20-21% range versus fiscal 2021. Management also cited that it will see some product margin erosion in the fiscal fourth quarter of approximately 50 basis points year over year. It also forecast deleveraged fixed costs in the business.
Solid Picks in Retail
We highlighted three top-ranked stocks, namely Tecnoglass TGLS, Chico's FAS CHS and Wingstop WING.
Tecnoglass manufactures and sells architectural glass,windows and aluminum products for residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 43.4% and 82.2%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
Chico's FAS, an omnichannel specialty retailer, currently sports a Zacks Rank of 1. CHS has a trailing four-quarter earnings surprise of 87.5%, on average.
The Zacks Consensus Estimate for Chico's FAS’s current financial-year sales and EPS suggests 19.6% and 127.5% growth, respectively, from the year-ago reported figures.
Wingstop, which franchises and operates restaurants, currently holds a Zacks Rank of 2 (Buy). The company has a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Wingstop’s current financial-year sales and earnings per share suggests 25.5% and 23% growth, respectively, from the year-ago reported numbers. WING has an expected EPS growth rate of 5.8% for three-five years.
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