Battered by weak European economy, comparable store sales
(Comps) of
Zumiez Inc.
(
ZUMZ
), for the four-week and thirteen-week periods ended October 27,
2012, remain below the company's own guidance. Owing to the
below-expected sales result, the company lowered its earnings
guidance range for the third-quarter.
Comps of this Washington-based retailer of sports-related teen
apparel inched up 0.6% for the four-week period, compared with an
increase of 3.3% in the four-weeks ended October 29, 2011.
Positive comps at the company's juniors and men's sections were
mostly offset by negative comps in accessories, hardgoods, boys
and footwear sections.
Net sales for the month under review surged 20.2% to $41.9
million from $34.9 million reported in the year-ago period. We
believe the company's store expansion and investment in enhancing
e-commerce capabilities has driven this year-over-year growth in
total sales.
Comps for the thirteen-week period ended October 27, 2012,
remains at the lower end of its guidance range of 3%-5%,
increasing 3.7% against a 6.0% increase recorded in the year-ago
period. The company revealed that its comps result for the
third-quarter missed its own expectations due to the weakness in
European economy.
Citing below-than-expected sales results, the company trimmed
down its earnings outlook for the third quarter of fiscal 2012.
Zumiez now expects earnings per share to come in the band of
38-39 cents, down from the previously guided range of 42 cents to
45 cents. The earnings expectation also includes the estimated
costs of 10 cents per share related to the Blue Tomato
acquisition.
Our Recommendation
We believe that the company will again be on track of growth
with its well-balanced store expansion and e-commerce strategies.
The company's store expansion plans remain on course as it is
nearing its target of opening 50 new stores during the fiscal
2012, of which 10 are to be opened in Canada.
During the last few years, Zumiez launched stores averaging
3,000 square feet, which enabled it to offer extended merchandise
without compromising on the store ambience. These initiatives
provide the company with a strong platform to effectively
capitalize on emerging opportunities.
However, the sporting goods retail industry is a
consumer-driven industry, and hence is very sensitive to the
health of economy since sports come under leisure activity.
Spending on sporting goods is heavily dependent on personal
disposable income of consumers. The current macroeconomic
challenges such as high household debt and unemployment levels
may restrain consumers spending on sporting goods.
Dealing in action sports-related apparel, footwear, equipment,
and accessories, Zumiez targets young men and women in the 12 to
24 year age-group who seek popular lifestyle brands centered on
extreme sports activities. The company competes with
Hot Topic Inc.
(
HOTT
) and
Pacific Sunwear of California Inc.
(
PSUN
).
Zumiez's stores offer couches and video game stations to its
customers so that they spend more time for shopping. These stores
are strategically located near busy areas of the mall, such as
food courts, movie theatres, music/game stores and other popular
teenage hang-out destinations. As of October 29, 2012, the
company operated a total of 495 stores, including 471 in the
United States, 19 in Canada and 5 in Europe.
Currently, Zumiez carries a Zacks #3 Rank, implying a
short-term Strong Hold rating. Moreover, we are maintaining a
long-term 'Neutral' recommendation on the stock.
HOT TOPIC INC (HOTT): Free Stock Analysis
Report
PAC SUNWEAR CAL (PSUN): Free Stock Analysis
Report
ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
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