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Zumiez's (ZUMZ) Q4 Earnings & Sales Top Estimates, Comps Solid

Zacks Equity Research
·5 min read

Zumiez Inc. ZUMZ reported robust fourth-quarter fiscal 2019 results. While the company’s earnings surpassed the Zacks Consensus Estimate for the eighth straight quarter, revenues outpaced the consensus mark for the fourth consecutive quarter. Also, both the top and the bottom line grew year over year. It also delivered the 14th successive quarter of positive comparable sales (comps).

Impressively, Zumiez delivered its fourth straight successful holiday quarter, ending fiscal 2019 with sales exceeding $1 billion. Also, this Zacks Rank #2 (Buy) company delivered the highest earnings per share of $2.62 in fiscal 2019. Management noted that the company saw a solid start to first-quarter fiscal 2020.

Q4 Highlights

Zumiez reported earnings of $1.48 per share, which surpassed the Zacks Consensus Estimate of $1.36. Also, the bottom line increased 25.4% from $1.18 reported in the prior-year quarter. Notably, higher sales and margin expansion were the primary reasons for the bottom-line growth in the reported quarter.

Zumiez Inc. Price, Consensus and EPS Surprise

 

Zumiez Inc. Price, Consensus and EPS Surprise
Zumiez Inc. Price, Consensus and EPS Surprise

Zumiez Inc. price-consensus-eps-surprise-chart | Zumiez Inc. Quote

Net sales rose 7.9% year over year to $328.8 million and also exceeded the Zacks Consensus Estimate of $326 million. The top line benefited from comps growth and net addition of 11 stores since the end of fourth-quarter fiscal 2018 and adjustment to deferred revenue associated with the STASH loyalty program. Growth was partly offset by adverse foreign currency rates.

Region-wise, North American net sales grew 7.8% to $280.9 million, while other International net sales, consisting of Europe and Australia, rose 8.5% to $47.9 million. Excluding adverse foreign currency impact, North American net sales grew 7.7% and other International net sales increased 11.6%.

Comps grew 6.4% during the reported quarter, outpacing the company’s guided range of 2-4%. Comps benefited from higher transaction volume and growth in dollars per transaction. Strength in the hard goods, accessories, footwear and men’s categories aided comps. However, the upside was somewhat offset by negative comps in the women’s category.

Zumiez’s comps for the four-week period ended Feb 29, 2020, rose 5.8% compared with the same period last year.

Gross profit increased 12.6% to $128.3 million in the fiscal fourth quarter, with gross margin expansion of 160 basis points (bps) to 39%. The improvement was mainly backed by leveraged store occupancy costs, better inventory management, gains from the STASH loyalty program deferred revenue adjustment, higher product margins, and lower shipping and distribution costs.

Zumiez’s SG&A expenses increased 4.3% to $79.5 million. However, SG&A expenses, as a percentage of sales, declined 90 bps to 24.1% due to leverage in store operating expenses and decline in impairments of fixed assets. This was somewhat offset by higher incentive compensation.

Furthermore, operating income amounted to $48.9 million, up 29.6% from $18.4 million in the prior-year quarter. The company’s operating margin increased approximately 250 bps to 14.9% of net sales.

Financial Update

Zumiez ended the quarter with cash and marketable securities of $251.2 million. Total shareholders’ equity at the end of the quarter was $466.1 million. During fiscal 2019, the company generated $105.6 million as cash flow from operations. It incurred capital expenditures of $19 million in the fiscal year.

For fiscal 2020, Zumiez anticipates capital expenditures between $18 million and $20 million.

Store Update

As of Feb 29, 2020, Zumiez operated 718 stores, including 607 in the United States, 52 in Canada, 48 in Europe and 11 in Australia.

For fiscal 2020, management intends to open nearly 20 stores, including about eight stores each in North America and Europe, and four stores in Australia. Simultaneously, it plans to close about five to six stores.

Guidance

Management issued guidance for first-quarter fiscal 2020. This view does not include the impact of coronavirus. Net sales are anticipated to be $219-$223 million, which indicates an improvement from $304.6 million recorded in the year-ago quarter. Comps are likely to grow between 2% and 4%.

Moreover, consolidated operating margins are projected at 0.4-1.3%. Earnings per share for the fiscal first quarter are envisioned in the band of 1-7 cents, versus 3 cents in the year-ago quarter. Notably, the Zacks Consensus Estimate for first-quarter sales and earnings stands at $221.7 million and 8 cents, respectively.

For fiscal 2020, consolidated comps are projected to grow in the low single-digit range. Moreover, earnings per share for the fiscal year are envisioned between $2.70 and $2.80, which suggests growth of 3-7% growth over $2.62 earned last fiscal. The Zacks Consensus Estimate for fiscal 2020 earnings stands at $2.66, which is likely to witness upward revisions in the coming days.

More Key Picks in Retail

The Buckle BKE delivered a positive earnings surprise of 12.8% in the last reported quarter. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chico's FAS CHS has an expected long-term earnings growth rate of 15% and a Zacks Rank #2.

The Gap GPS, also a Zacks Rank #2 stock, has a long-term earnings growth rate of 9%.

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