Battered by higher operating expenses owing to continued
investment in strengthening the omni-channel selling strategy,
) third-quarter fiscal 2013 adjusted earnings fell 9.8% year over
year to 46 cents per share. This instilled negative sentiment
among investors, which was reflected in a 4.7% decline in
Zuminez's share price in the after-hours trading session.
However, Zumiez's adjusted earnings for the quarter remain in
line with the Zacks Consensus Estimate.
Reported earnings, including a charge of 7 cents per share
related to the acquisition of Blue Tomato and a lawsuit
settlement, were 39 cents compared with 40 cents reported in the
year-ago quarter. The prior-year earnings included a charge of 11
cents related to the Blue Tomato acquisition and relocation of
the company's corporate offices.
The company's reported earnings for the quarter were in line
with the lower-end of its earlier guidance range of 39-43 cents
per share. During the quarter, Zumiez benefited from strong
top-line growth but rise in expenses was a headwind.
Quarter in Detail
Net sales increased 6.2% year over year to $191.1 million and
marginally beat the Zacks Consensus Estimate of $191.0 million.
The year-over-year improvement in top line was primarily driven
by solid comparable-store sales (comps) and e-Commerce
performance, along with benefits from store openings.
Comps rose 1.5% against an increase of 3.7% in the year-ago
quarter. By category, the company witnessed comps growth in the
juniors, hard goods and accessories categories, while men's,
boy's and footwear generated negative comps.
In the quarter, gross profit increased 5.5% year over year to
$70.8 million. However, as a percentage of sales, it contracted
30 basis points (bps) to 37.0% primarily due to increased
occupancy costs and e-Commerce fulfillment costs.
On a reported basis, Zumiez's selling, general and
administrative (SG&A) expenses increased 9.7% year over year
to $50.1 million, while as a percentage of sales, it expanded 80
bps to 26.2%. Excluding one-time items for both the periods,
SG&A expenses as a percentage of sales expanded 90 bps due to
higher store operating expenses.
On a reported basis, operating profit for the quarter fell 3.4
% to $20.7 million, while as percentage of sales it contracted
110 bps to 10.8%. The year-over-year decline in operating margin
was primarily due to lower gross margin and increased operating
expenses as a percentage of sales.
As of Nov 2, 2013, cash and marketable securities were $94.2
million, down 4.2% from $98.3 million as of Oct 27, 2012. The
decline was due to capital expenditures toward new stores and
stock repurchases, partially offset by cash flow from operations.
During the first three quarters of fiscal 2013, the company
generated a cash flow of $21.7 million from operational
activities as against $28.2 million in the same period of fiscal
Along with the earnings release, the company announced its
board of directors' approval a new share repurchase program of
$30 million effective from Dec 4, 2013, which would replace its
earlier share buyback program of $12.5 million. The repurchase
program will continue through fiscal 2014 unless and otherwise
extended or shortened by the board.
November 2013 Sales Update
Zumiez reported 1.7% increase in comparable-store sales for
the four-week period ended Nov 30, 2013. This compares with a
comps decline of 4.2% for the four weeks ended Nov 24, 2012. The
comps growth was due to higher comparable store transactions,
partially offset by a decline in dollars per transaction. Net
sales for the period increased 16.3% to $62.4 million from $53.6
million reported in the year-ago period.
Zumiez announced its sales and earnings guidance for the
fourth quarter of fiscal 2013. Management anticipates
fourth-quarter revenues in the range of $230-$237 million, while
comps are likely to range from negative 1% to a positive 2%
Based on sales projections for the quarter, the company
expects earnings per share to be 60-66 cents. The earnings
expectation also includes estimated charges of 5 cents per share
related to the Blue Tomato acquisition. Operating margin is
anticipated to be in the range of 13.5%-14.5%.
For fiscal 2013, Zumiez expects capital expenditure to be
around $36-$38 million, mainly directed at store openings and the
remodeling of outlets. Further, depreciation and amortization
expenses will be nearly $26 million.
As of Nov 30, 2013, Zumiez had opened 57 stores, close to
completing its target of opening 59 stores in fiscal 2013. The
company is expecting to open the remaining 2 outlets during the
fourth quarter. As of Nov 30, Zumiez operated 513 stores in the
U.S., 28 in Canada and 10 in Europe.
Other Stocks to Consider
Zumiez currently carries a Zacks Rank #3 (Hold). Some
better-ranked apparel/shoe retail stocks include
Finish Line Inc.
Fossil Group, Inc.
Five Below, Inc.
). All these have a Zacks Rank #2 (Buy).
FINISH LINE-CLA (FINL): Free Stock Analysis
FIVE BELOW INC (FIVE): Free Stock Analysis
FOSSIL GRP INC (FOSL): Free Stock Analysis
ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
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