), a mall-based specialty retailer of action sports apparel,
footwear, equipment and accessories, reported better-than-expected
results for the second quarter of fiscal 2012 based on robust sales
and an improved gross margin. Quarterly adjusted earnings of 17
cents per share beat the Zacks Consensus Estimate of 13 cents,
reflecting a jump of more-than-double from the prior-period level
of 8 cents.
Net sales in the reported quarter increased 20.4% to $135.1
million from $112.2 million a year ago, marginally beating the
Zacks Consensus Estimate of $135 million. The year-over-year growth
in sales was primarily driven by the company's strong merchandise,
store expansion and e-commerce strategies. In the second quarter of
fiscal 2012, comparable store sales at Zumiez were up 9.5% compared
with an increase of 7.5% reported in the previous-year quarter.
Cost of goods sold in the quarter increased 18% year over year
to $88.6 million, but as a percentage of sales it improved 140
basis points (bps) to 65.6% from 67% in the year-ago quarter.
Consequently, gross profit grew 25.3% to $46.4 million in the
second quarter, while gross margin expanded 140 bps to 34.4%.
Excluding the impact of costs and expenses related to the Blue
Tomato acquisition and the relocation of its e-commerce fulfillment
center, operating income more-than-doubled during the quarter to
$7.6 million from $3.6 million in the year-ago quarter.
Consequently, the company's operating margin expanded 240 bps to
5.6% from 3.2% in the prior-year period.
As of July 28, 2012, cash and marketable securities were $96.8
million, a sharp decline of 26.6% from $131.9 million as of July
30, 2011. The decline can be attributed to the use of cash by the
company to fund its Blue Tomato acquisition. Total long-term
liabilities increased to $46 million at quarter end compared with
$33.4 million at the end of the prior-year quarter.
Following solid second quarter results, Zumiez initiated its
sales and earnings guidance for the third quarter of fiscal 2012.
Management anticipates third quarter revenues to be in the range of
$181-$185 million, on the back of a 3%-5% growth in comparable
Based on sales projections for the quarter, the company expects
earnings per share to come in the band of 42 cents- 45 cents. The
earnings expectation also includes the estimated costs and expenses
of 6 cents and 3 cents per share related to Blue Tomato acquisition
and inventory estimations, respectively. Further, the company is
still on track of opening 50 new stores during the fiscal 2012, of
which 10 to be opened in Canada.
Everett, Washington-based Zumiez targets young men and women, in
the age group of 12 to 24 years, who seek popular brands that
represent a lifestyle centered on extreme sports activities. We
expect Zumiez's focus on teenage action-sports based merchandise
and expanding store network to deliver solid performance in the
Moreover, in the recent years, Zumiez has launched stores
averaging 3,000 square feet, which enables it to offer extended
merchandise without compromising the store ambience. These
initiatives provide the company with a strong platform to
effectively capitalize on the emerging opportunities.
However, intense competition from other specialty retailers,
seasonal nature of the business and risks associated with sourcing
merchandise from foreign countries might weigh upon the company's
results. The company competes head-to-head with
Hot Topic Inc.
Pacific Sunwear of California Inc.
Currently, the stock has a Zacks #3 Rank implying a short-term
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ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
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