Zumiez Beats EPS, Misses Sales - Analyst Blog
September 01 2011 - 10:45AM
Zacks
Specialty retailer Zumiez Inc. (ZUMZ) reported
second-quarter earnings of 8 cents a share, beating the Zacks
Consensus Estimate of 5 cents a share. The company also outpaced
earnings of 2 cents a share posted in the second quarter of fiscal
2010. Net income from operations was $2.6 million compared with
$1.9 million in the prior-year quarter.
Net sales in the reported quarter increased 14.9% year over year
to $112.2 million from $97.7 million a year ago. Comparable store
sales rose 7.5% in the quarter compared with an increase of 9.3% in
second-quarter 2010. Total revenue missed the Zacks Consensus
Estimate of $152 million.
Cost of goods sold in the quarter increased 11.5% year over year
to $74.9 million. Gross margin nevertheless expanded 200 basis
points to 33.2% in the quarter propelled by net sales increase.
Selling, general and administrative expenses were $33.7 million,
down 360 basis points to 30% as a percentage of net sales. The
company reported an operating income of $3.5 million, reversing the
operating loss of $2.4 million in the prior-year quarter. Operating
margin for the quarter came in at 3.2%.
Financial Update
Cash and cash equivalents at quarter end were $14.2 million, up
sharply from $6.8 million at the end of the second quarter of
fiscal 2010.
Total long-term liabilities increased to $33.4 million at the
end of second quarter 2011 from $29.8 million at the end of second
quarter 2010.
Store Update
At quarter end, Zumeiz operated 425 stores. The company expects
to open approximately 45 new stores in fiscal 2011, including its
first set of stores in Canada.
Guidance
For the third quarter of 2011, management expects comparable
store sales to increase in the low-single-digit range and net
income to come in a band of 37 cents to $39 cents 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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