ANF Abercrombie and Fitch Co

Zumiez Inc. (ZUMZ) is scheduled to report third-quarter 2011 financial results on December 1, 2011. The current Zacks Consensus Estimate for the quarter is earnings of 41 cents a share.

Second-Quarter 2011, Summary

Zumiez 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 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.

Management 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 the band of 37 cents to 39 cents per share.

Zacks Consensus

The analyst covered by Zacks expects Zumiez to post third-quarter 2011 earnings of 41 cents a share, higher than the prior-year quarter’s earnings of 40 cents. The current Zacks Consensus Estimate ranges between earnings of 40 cents and 43 cents a share.

For fiscal 2011, the Zacks Consensus Estimate stood at $1.08 per share, substantially higher than the previous fiscal earnings of $2.05. The current Zacks estimate ranges between $1.03 and $1.12 a share.

Agreement of Estimate

For the third quarter of fiscal 2011, out of 18 analysts covering the stock, 2 have revised their estimates upward, while none have revised in the opposite direction in the last 30 days. For fiscal 2011, out of 18 analysts, 2 analysts have positively revised the estimate while 1 moved downward in the last 30 days.

Among the 18 analysts covering the stock, no estimate revisions were witnessed for the last 7 days. Estimates for fiscal 2011 likewise witnessed no movement in either direction in the past one week.

Magnitude of Estimate Revisions

The Zacks Consensus Estimate remains constant at 41 cents per share for third-quarter 2011 despite a positive revision in estimates by analysts over the last 30 days. The consensus estimate for fiscal 2011 has also remained constant at $1.08 per share.

Surprise History

With respect to earnings surprises, Zumiez showed a favorable trend in the last four quarters. The company has recorded positive surprises in the trailing four quarters with a low of 4.3% and a high of 200%. On average, the earnings surprise was a positive 68.1%. Based on the current flow, we expect the company to bring healthy results in the upcoming quarter.

Our View

Currently, Zumiez maintains a Zacks #2 Rank, which translates into a short-term Buy rating. Our long-term recommendation on the stock remains Neutral.

Zumiez is a mall-based specialty retailer of action-sports related apparel, footwear, equipment and accessories. The company’s strategy is based on offering action-sports merchandise focused on young men and women in the age of group of 12 to 24 years, enabling the company to carve a distinct niche for itself.

Furthermore, the company’s stores are strategically located in busy areas of the mall, such as food courts, movie theatres and music/game stores, which are generally frequented by the company’s target customers.

Moreover, the company is currently in the early phase of its store expansion program and plans to enlarge its network by opening 45 new stores during fiscal 2011, including its first store in Canada.

On the flip side, 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) and Aeropostale Inc. (ARO). Furthermore, Zumiez also competes with large-format sporting goods stores, such as Big 5 Sporting Goods Corp. (BGFV) and Dick's Sporting Goods Inc. (DKS) as well as local snowboard and skate shops.

Being in such a competitive industry, Zumiez may find it difficult to execute new business strategies, which in turn, may impact its operations adversely.

 
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