Zumiez, Inc. (ZUMZ) is scheduled to report second-quarter 2011 financial results on August 31, 2011. The current Zacks Consensus Estimate for the quarter is earnings of 5 cents a share.
First-Quarter 2011, Summary
Zumiez reported first-quarter earnings of 6 cents a share, beating the Zacks Consensus Estimate of 2 cents a share. The company also turned around from a loss of 3 cents a share posted in the first quarter of fiscal 2010. Net income from operations was $1.9 million compared with a loss of $0.7 million in the prior-year quarter.
Net sales in the reported quarter increased 18.8% year over year to $105.9 million from $89.1 million a year ago. Comparable store sales rose 12.6% in the quarter compared with an increase of 9.1% in first-quarter 2010. Total revenue beat the Zacks Consensus Estimate of $101 million.
Agreement of Estimate
For the second quarter of fiscal 2011, out of 19 analysts covering the stock, 2 have revised their estimates upward, while 2 moved in the opposite direction in the last 30 days. For fiscal 2011, out of 19 analysts, 1 analyst has positively revised the estimate while six moved downward in the last 30 days.
The last 7 days saw no estimate revisions from the 19 analysts covering the stock. Estimates for fiscal 2011 likewise witnessed no movement in either direction in the past one week.
Magnitude of Estimate Revisions
With positive and negative estimate revisions cancelling each other out, for the second quarter 2011, over the last 30 days, the Zacks Consensus Estimate has hit a plateau at 5 cents a share. The consensus estimate for 2011 has also remained constant at $1.12 per share.
Surprise History
With respect to earnings surprises, Zumiez showed a favourable trend in the last four quarters. The company has recorded positive surprises in the trailing four quarters with a low of 4.3% and a high of 200%. On an average, the earnings surprise was a positive 78.1%. Based on the current flow, we expect the company to come up with healthy results in the upcoming quarter.
Our View
Currently, Zumiez maintains a Zacks #3 Rank, which translates into a short-term Hold rating. Moreover, our long-term recommendation on the stock remains Neutral.
Zumiez is a mall-based specialty retailer of action-sports related apparel, footwear, equipment, and accessories. Zumiez’s strategy is based on offering action-sports merchandise focused on young men and women in the age of group of 12 to 24 years, which has enabled the company to carve a distinct niche for itself.
Furthermore, the company’s stores are strategically located in busy areas of the mall, such as food courts, movie theatres and music/game stores, which are generally frequented by the company’s target customers.
Moreover, the company is currently in the early phase of its store expansion program and plans to enlarge its network by opening 44 new stores during fiscal 2011, including its first store in Canada.
Moreover, Zumiez has near to debt-free balance sheet with total long-term debt of $31.3 million and shareholders’ equity of $231.3 million, reflecting a debt-to-capitalization ratio of just 11.9% at the end of first-quarter 2011. The company ended the quarter with $130.7 million of cash and marketable securities offering financial flexibility to drive future expansion.
On the flip side, the company operates in a highly fragmented specialty retail sector and faces intense competition from larger teenage-focused retailers, such as Abercrombie & Fitch Co. (ANF) and Aeropostale Inc. (ARO). Furthermore, Zumiez also competes with large-format sporting goods stores, such as Big 5 Sporting Goods Corp. (BGFV) and Dick’s Sporting Goods Inc. (DKS) as well as local snowboard and skate shops. Being in such a competitive industry, Zumiez may find it difficult to execute new business strategies, which in turn may impact its operations adversely.
