Zumiez Beats on Q3 Earnings, Strong Comparable Sales Drive Revenues

Zumiez Inc. ZUMZ reported third-quarter 2024 results, wherein the revenues came in line with Zacks Consensus Estimate and increased year over year. The bottom line fared better than the Zacks Consensus Estimate and the year-ago quarterly number.Zumiez posted quarterly earnings of 6 cents per share, which surpassed the Zacks Consensus Estimate of 3 cents per share. The bottom line also improved from a loss of 12 cents per share reported in the year-earlier quarter.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Total net sales of $222.5 million were slightly ahead of the Zacks Consensus Estimate of $222 million. Also, net sales increased 2.9% from $216.3 million reported in the prior-year quarter. Net sales benefited from robust North America business. The shift in the retail calendar hurt the sales growth by 510 basis points (bps).Zumiez Inc. Price, Consensus and EPS Surprise Zumiez Inc. price-consensus-eps-surprise-chart | Zumiez Inc. QuoteComparable sales (comps) rose 7.5%, fueled by an increase in the number of transactions and higher dollar value per transaction.ZUMZ’s Regional & Category PerformanceFrom a regional perspective, North America’s net sales improved 2.9% year over year to $186.8 million. Other international sales, comprising Europe and Australia, rose 2.7% year over year to $35.7 million. Excluding the foreign currency translation impacts, North America’s net sales rose 2.9%, while other International net sales slipped 0.3% from the prior-year quarter.Comps were up 10.4% for North America and down 5.6% for the other international business. We note that North America reported positive comps for the third consecutive quarter. However, the decline in International sales was due to full-price selling in Europe that buoyed margins but hurt the top line.From a category perspective, men's emerged as the strongest performer with the highest positive comps, followed by women's and footwear. Conversely, hardgoods recorded the largest negative comps, trailed by accessories.Insights Into ZUMZ’s Margins & CostsGross profit jumped 7% year over year to $78.3 million, while gross margin expanded 140 bps to 35.2%. The improvement in the gross margin stemmed from a 70 bps increase in product margin, 60 bps of leverage in store occupancy costs and 60 bps benefits in web shipping costs. These gains were partially offset by a 30 bps impact from inventory shrinkage and a 10 bps effect from higher incentive compensation.Selling, general and administrative (SG&A) expenses of $75.9 million declined 3.4% year over year. As a percentage of sales, SG&A expenses increased 20 bps from the year-ago quarter to 34.1%. This increase was driven by 50 bps from higher incentive compensation and 20 bps of deleverage in non-wage store operating costs, negated by a 40 bps reduction related to employee training. Zumiez reported an operating income of $2.4 million, faring better than the operating loss of $0.2 million recorded in the year-ago fiscal quarter.ZUMZ’s Financial HealthAs of Nov. 2, 2024, ZUMZ had cash and current marketable securities of $99.3 million compared with $135.8 million as of Oct. 28, 2023. The decline was due to capital expenditures of $14.2 million and share repurchases of $25.2 million, somewhat offset by cash flow from operations of $3.7 million. It had no debt at the end of the fiscal third quarter.Total shareholders’ equity was $317.1 million. The company ended the fiscal third quarter with $187.2 million in inventory, up 6.5% from the year-ago quarter’s figure.As of Nov. 30, Zumiez operated 752 stores, including 592 in the United States, 46 in Canada, 86 in Europe and 27 in Australia. Management intends to open roughly seven stores in fiscal 2024, comprising three stores in North America and two in Europe and Australia. The company anticipates closing 33 stores in fiscal 2024, with 31 closures in North America.A Closer Look at ZUMZ’s Other UpdatesNet sales for the fourth quarter-to-date, covering the 31 days ending Dec. 3, 2024, rose 10% compared to the same period in the prior year ending Nov. 28, 2023.Regionally, net sales in North America for the same period climbed 10.8% and international business increased 7.3%. Excluding the foreign currency translation impacts, North America sales rose 10.9%, while other international sales rose 8.3% compared with 2023.Comps for the 31 days ending Dec. 3, 2024, were up 2.9%. Comps increased by 5.5% for North America, while they decreased by 5.9% for the other international business.In terms of category, the women's category exhibited the highest growth in comps, followed by men’s. Meanwhile, the hardgoods category reported the largest comps decline, followed by footwear and accessories. The increase in comps is attributed to a rise in dollars per transaction somewhat negated by lower transactions.ZUMZ’s 2024 GuidanceZumiez has plans to launch 100 new brands in 2024 following the launch of 150 brands in 2023. It has also been expanding its Private Label brand portfolio in 2024.Zumiez provided its guidance for the fiscal fourth quarter of 2024. Total sales growth will face a negative impact due to the additional 53rd week in the prior year and a shift in the retail calendar. These factors are expected to reduce sales growth by approximately 520 basis points for the quarter.The company anticipates net sales to be $284 million-$288 million, indicating an increase of 0.7-2.2% year over year. Comp is projected to be between 6% and 7.5% for the 13 weeks ending Feb. 1, 2025, unaffected by the 53rd week or calendar shift. It expects consolidated operating income, as a percentage of sales, to be between 7.3% and 8%. It envisions the bottom line to be between 83 cents and 93 cents compared with a loss of $1.73 per share reported in the year-ago quarter.The company anticipates total sales growth for fiscal 2024 to range between 2% and 2.5%. The 53rd week accounts for a 150-basis-point negative impact on annual sales growth. Driven by the decent sales environment and full-price strategy in Europe, management expects an increase in product margin for the fiscal year. It further anticipates leveraging SG&A costs year over year and returning to positive operating margins. The effective tax rate is likely to be 80% in fiscal 2024.Management forecasts capital expenditures of $14-$16 million compared with $20.4 million in fiscal 2023 and $25.6 million in fiscal 2022. The reduction is mainly due to lower store openings. Depreciation and amortization, excluding non-cash lease expenses, are expected to be $23 million, consistent with the preceding year. Management projects diluted shares outstanding to be 19.3 million.Shares of this Zacks Rank #3 (Hold) company have declined 7.4% in the past three months against the industry’s growth of 15.5%.Image Source: Zacks Investment ResearchThree Picks You Can't MissWe have highlighted three better-ranked stocks in the broader sector, namely Deckers DECK, The Gap, Inc. GAP and Abercrombie & Fitch Co. ANF.Deckers, a footwear and accessories dealer, currently sports a Zacks Rank #1 (Strong Buy). DECK delivered an earnings surprise of 41.1% in the trailing four quarters, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Deckers’ fiscal 2024 sales and earnings indicates growth of 13.6% and 12.8%, respectively, from the year-ago reported figures.Gap operates as an apparel retail company, which offers apparel, accessories and personal care products for men, women and children. It currently flaunts a Zacks Rank #1.The Zacks Consensus Estimate for Gap’s fiscal 2024 sales and earnings indicates growth of 0.7% and 39.9%, respectively, from the year-ago quarter’s reported numbers. GAP has a trailing four-quarter earnings surprise of 101.2%, on average.Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank of 1. Abercrombie has a trailing four-quarter earnings surprise of 14.9%, on average.The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and earnings indicates growth of 14.9% and 67.5%, respectively, from the year-ago reported figures.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Zumiez Inc. (ZUMZ): Free Stock Analysis Report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report Deckers Outdoor Corporation (DECK): Free Stock Analysis Report The Gap, Inc. 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