Zumiez Q3 Profit Slides; Q4 Forecast Misses Estimates

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Holiday gift guide look from Zumiez

Lynwood, WA—Hit by charges and lower sales at its Blue Tomato acquisition in Europe, Zumiez reported Thursday that its third quarter earnings fell 10% and its fourth quarter forecast missed analysts’ estimates.

For the quarter ended Oct. 27, the board sports and accessories retailer reported net income of $12.7 million, or 40 cents a share, down from $14.1 million, or 45 cents a share, a year ago. The quarter included acquisition-related costs of 10 cents a share and expenses related to the relocation of its headquarters of a penny a share.

Net revenue increased 16.9% to $180 million driven primarily by store expansion and e-commerce strategies. Comparable store sales increased 3.7% on top of a 6% increase posted a year ago. The company mainly benefited from a higher average per unit retail price, partially offset by declines in the number of transactions and units per transaction.

Hurricane Sandy Dulls November Comps

Despite the sales increases, the report missed analysts’ average estimate for earnings of 48 cents a share on sales of $182.3 million. Zumiez noted that back to school sales in Europe didn’t meet its expectations.

Gross margins fell to 37.3% from 38.9% and overhead costs were up 23%. The gross margin decline was mostly due to increased inventory due to the Blue Tomato acquisition as well as higher e-commerce and shipping expenses. Excluding Blue Tomato, margin actually improved slightly.

For the fourth quarter, Zumiez forecast earnings in the range of 59 to 62 cents a share on total sales of $218 million to $221 million. That was disappointing to analysts who projected earnings of 71 cents a share and sales of $223 million.

Zumiez reported that its November comparable store sales declined 4.2%. According to Rick Brooks, chief executive, sales were hurt by the impact of Superstorm Sandy early in the month but he has been encouraged by stronger sales since Black Friday weekend.


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