Zumiez Tumbles on Dismal Dec Comps - Analyst Blog

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Shares of Zumiez Inc. ( ZUMZ ) have been declining since it reported dismal comps for the 5 weeks ended Jan 4, 2014 last Wednesday. In the two trading sessions following the sales results, the company has seen a downward movement of 12.3%, closing trade at $22.97 on Friday. Moreover, we at Zacks Investment Research have downgraded the stock to a Zacks Rank #5 (Strong Sell) on Jan 8.

The Wash.-based retailer of sports-related teen apparel reported a 2.4% decline in comparable-store sales for December. This compares with a comps decline of 1.0% for the 5 weeks ended Dec 29, 2012. However, net sales for December climbed 4.2% to $125.3 million from $120.3 million reported in the year-ago period.

In November, the company reported net sales of $62.4 million, up 16.3% to $53.6 million reported in the year-ago period. Comparable-store sales for the 4 weeks ended Nov 30, 2013 rose 1.7% compared with a comps decline of 4.2% for the 4 weeks ended Nov 24, 2012. The comps growth was due to higher comparable store transactions, partially offset by a decline in dollars per transaction.

Based on the company's dismal quarter-to-date sales performance and lower-than-anticipated merchandise margins, it lowered its sales and earnings forecasts for the fourth quarter of fiscal 2013. The company now sees sales in the $226 - $229 million range, compared to the prior forecast of $230 - $237 million. Moreover, the company projects comps to decline in the low single digit range in the quarter.

The company expects earnings per share to be 56-59 cents compared to 60-66 cents guided earlier. Currently, the Zacks Consensus Estimate for the fourth quarter stands at 63 cents, way above the company's forecasted earnings range. The company's guidance for the fourth quarter includes estimated charges of $1.7 million or 5 cents related to the Blue Tomato acquisition.

We believe that the company's well-balanced store expansion and e-Commerce strategies will drive its top line further. Moreover, Zumiez aims to increase its store network to 600-700 stores in the long run. As of Jan 4, 2014, the company operated 553 stores, including 513 in the United States, 28 in Canada and 12 in Europe.

Other better-performing stocks among apparel/shoe retailers are Finish Line Inc. ( FINL ), The Men's Wearhouse Inc. ( MW ) and Shoe Carnival Inc. ( SCVL ). All of these have a Zacks Rank #2 (Buy).

FINISH LINE-CLA (FINL): Free Stock Analysis Report

MENS WEARHOUSE (MW): Free Stock Analysis Report

SHOE CARNIVAL (SCVL): Free Stock Analysis Report

ZUMIEZ INC (ZUMZ): Free Stock Analysis Report

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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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