Personal Finance

Why Zumiez Inc. Shares Plunged Today

A Zumiez store inside a mall

What happened

Shares of Zumiez Inc. (NASDAQ: ZUMZ) were heading lower once again today after the apparel retailer posted weak guidance in its fourth-quarter earnings report. As of 12:41 p.m. EST, the stock was down 14.4%.

So what

Zumiez actually topped estimates during the key holiday quarter, as comparable sales increased 5.1%, following a 9.5% drop in sales at established stores in the year-ago quarter.

A Zumiez store inside a mall

Image source: The Motley Fool.

Overall sales increased 8.7% to $263.6 million, beating expectations at $261.7 million, while earnings per share improved from an adjusted $0.53 a year ago to $0.74, ahead of the consensus at $0.66.

CEO Rick Brooks said that "performance exceeded expectations driven by efficiencies in omnichannel and localization efforts," and that the tax rate fell from 37.3% to 35.3%, which also boosted earnings.

Now what

Despite the strong fourth-quarter performance, Zumiez guidance was lacking as Brooks noted headwinds in the industry. Comparable sales turned negative in February, slipping 3.1%, but the company projected comparable-sales growth of 0% to 2% in the first quarter, and called for total revenue of $178 million to $182 million. However, that was short of estimates at $184.6 million.

On the bottom line, management said it expected a loss per share of $0.21 to $0.17, much worse than expectations of a loss of $0.03.

Considering the struggles of the overall apparel retail industry and Zumiez's inability to deliver consistent comparable-sales growth, investors are probably best off avoiding this stock.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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