Zumiez Thrives, Reverses Loss - Analyst Blog
May 20 2011 - 5:00AM
Zacks
Specialty retailer Zumiez Inc. (ZUMZ) reported
first-quarter earnings of 6 cents a share, beating the Zacks
Consensus Estimate of 2 cents a share. The company also outpaced a
loss of 3 cents a share posted in the first quarter of fiscal 2010.
Net income from operations was $1.9 million compared with a loss of
$0.7 million in the prior-year quarter.
Net sales in the reported quarter increased 18.8% year over year
to $105.9 million from $89.1 million a year ago. Comparable store
sales rose 12.6% in the quarter compared with an increase of 9.1%
in first-quarter 2010. Total revenue beat the Zacks Consensus
Estimate of $101 million.
Cost of goods sold in the quarter increased 13.9% year over year
to $72.4 million. Gross margin nevertheless expanded 300 basis
points to 31.6% in the quarter propelled by net sales increase.
Selling, general and administrative expenses were $30.9 million, up
7.4% year over year. The company reported an operating income of
$2.6 million, reversing the operating loss of $3.3 million in the
prior-year quarter.
Financial Update
Cash and cash equivalents at quarter end were $13.3 million, up
sharply from $2.0 million at the end of the first quarter of fiscal
2010.
Total long-term liabilities increased to $31.3 million at the
end of first quarter 2011 from $28.9 million at the end of first
quarter 2010.
Store Update
At quarter end, Zumeiz operated 406 stores. The company expects
to open approximately 44 new stores in fiscal 2011, including its
first stores in Canada.
Guidance
For the second quarter of 2011, management expects comparable
store sales to increase in the mid-single-digit range and net
income to come in a band of $0.02 to $0.04 per share.
We expect Zumiez’s focus on teenage action-sports based
merchandise and expanding store network to deliver solid
performance in the upcoming quarters. However, intense competition
from other specialty retailers, seasonal nature of the business and
risks associated with sourcing merchandise from foreign countries
might weigh on the company’s results.
The company operates in a highly fragmented specialty retail
sector and faces intense competition from larger teenage-focused
retailers such as Abercrombie & Fitch Co.
(ANF), Aeropostale Inc. (ARO) and American
Eagle Outfitters Inc. (AEO).
We maintain our long-term “Neutral” recommendation on Zumiez.
The quantitative Zacks #3 Rank (short-term Hold rating) for the
company indicates no clear directional pressure on the stock over
the near term.
AMER EAGLE OUTF (AEO): Free Stock Analysis Report
ABERCROMBIE (ANF): Free Stock Analysis Report
AEROPOSTALE INC (ARO): Free Stock Analysis Report
ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
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