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Zumiez (ZUMZ) Unveils Substantial Challenges in Holiday Sales

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Zumiez Inc. (ZUMZ - Free Report) has shared its sales figures for the nine weeks ended Dec 30, 2023. This announcement reflects a challenging end to 2023. The company reported a 4.4% year-over-year decline in the total net sales during the nine weeks, reflecting a shift in its revenue pattern, consumer spending habits, market trends and operational challenges.

This also highlights the volatility in the retail sector during these nine weeks, especially in markets targeting younger demographics. During the same period, comparable sales declined 5.9% year over year. External environmental factors like unseasonably warm weather and reduced snowfall affected key winter sports regions, thereby impacting sales.

 

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Regional Sales Analysis

Zumiez's performance in North America was particularly concerning, with net sales dropping 6.6% and comparable sales declining 6.3% year over year in the nine weeks ended Dec 30, 2023. This decline outpaced the overall decrease in sales, suggesting region-specific challenges. Factors such as local economic conditions, competition and regional consumer behavior shifts have contributed to this more substantial downturn. Excluding foreign-currency translation effects, net sales in North America decreased 6.6% year over year.

On the international front, comprising Europe and Australia, Zumiez saw a mixed picture. The prominent retailer catering to young men and women saw a 4.2% year-over-year increase in net sales against a 4.2% year-over-year fall in comparable sales in the nine weeks ended Dec 30, 2023. Notably, when accounting for foreign-currency translation effects, international sales increased 0.8% year over year, indicating that the international markets have not been immune to the challenges faced in North America.

Category-Wise Sales Insights

Amid broader sales challenges, the men's apparel segment emerged as a beacon of success, registering an increase in comparable sales. This reflects a strong resonance of Zumiez's product offerings with the preferences and trends within the male consumer segment.

Contrastingly, categories like Women's, Hardgoods, Accessories and Footwear did not fare as well. This disparity emphasizes the importance of understanding and catering to different consumer needs and preferences across categories.

Financial Projections and Adjustments

Considering these mixed results, Zumiez forecasts fourth-quarter 2023 sales to hover around the lower end of $275-$281 million. Earnings per share are also expected to be near the lower end of 24-34 cents per share.

Interestingly, these projections include the benefits of an extra week in the fourth quarter of 2023, which is anticipated to positively influence the year-over-year growth rate by 4%. This cautious forecast reflects the company's realistic approach to the uncertainties in the current retail landscape.

Strategic Outlook and Prospects

Despite these hurdles, Zumiez can navigate through these turbulent times. Leveraging its history of overcoming tough market conditions and a robust financial base, the company is poised to explore long-term growth opportunities. The focus will likely be on aligning merchandise assortments with consumer demands and adapting to evolving market dynamics to regain momentum.

Additionally, Zumiez is gaining from its one-channel approach and advanced in-store fulfillment capabilities. The company’s focus on building a customer-centric business model rooted in strong brands has been yielding.

Shares of this Zacks Rank #3 (Hold) company have rallied 6.6% in the past three months compared with the industry’s growth of 35.4%.

Three Solid Picks

A few better-ranked stocks are The Gap, Inc. , Abercrombie & Fitch Co. (ANF - Free Report) and Deckers Outdoor Corporation (DECK - Free Report) .

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Gap’s current fiscal-year sales indicates growth of 387.5% from the previous year’s reported figures. GPS has a trailing four-quarter average earnings surprise of 138%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company currently flaunts a Zacks Rank #1. ANF delivered a 60.5% earnings surprise in the last reported quarter.

The Zacks Consensus Estimate for Abercrombie’s current fiscal-year sales implies growth of 13.5% from the previous year’s reported number. ANF has a trailing four-quarter average earnings surprise of 713%.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 21.9% and 11.7%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter average earnings surprise of 26.3%.


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