Zumiez Q1 Profit Flat With Last Year, Sees Q2 Earnings Below View

(RTTNews) - Specialty retailer of action sports related apparel and accessories Zumiez Inc. (ZUMZ) on Thursday reported a profit for the first quarter that was flat with last year as higher expenses and lower margins more than offset a double-digit increase in sales.

However, both revenues for the quarter beat analysts' estimates. But the company forecast earnings for the second quarter below Street estimates.

Rick Brooks, Chief Executive Officer of Zumiez said, "Our merchandise and selling strategies helped deliver better than expected first quarter results, including positive comps, and continue to distinguish Zumiez as the leading global action sports lifestyle retailer. The investments we've made in our people and systems including expanding our digital capabilities are allowing us to better meet the needs of our North American and European customers and supporting full price selling in a challenging retail environment."

Lynnwood, Washington-based Zumiez reported net income for the first quarter of $2.50 million or $0.09 per share, compared to $2.50 million or $0.08 per share in the year-ago period. On average, twenty analysts polled by Thomson Reuters expected the company to report earnings of $0.05 per share for the quarter. Analysts' estimates typically exclude special items.

The latest quarter's results include costs of about $0.6 million or $0.01 per share for charges associated with the acquisition of Blue Tomato, while the year-ago quarter's results include charges of about $1.7 million or $0.05 per share associated with the acquisition.

Net sales for the quarter grew 10 percent to $162.93 million from $148.50 million in the year-ago period. Analysts had a consensus revenue estimate of $159.21 million for the quarter.

Comparable sales, or sales from stores open at least a year, increased 1.8 percent, compared to a decrease of 0.7 percent in the year-ago period.

Gross margin for the quarter declined to 31.0 percent from 32.3 percent in the same period last year, while operating margin edged down to 2.3 percent from 2.7 percent.

Brooks said, "We remain confident that our strategic course will continue to yield market share gains and improved profitability over the long-term."

Looking ahead to the second quarter, Zumiez forecast net income per share of about $0.12 to $0.16 per share, which includes about $0.02 per share for charges associated with the acquisition of Blue Tomato. The company projects net sales for the quarter in a range of $167 million to $171 million. The guidance is based on an anticipated comparable store sales result in the range of a low single-digit decrease to flat for the quarter.

Analysts currently expect the company to report earnings of $0.18 per share for the quarter on revenues of $170.77 million for the first quarter.

The company currently intends to open about 55 new stores in fiscal 2014, including up to 7 stores in Canada and 5 stores in Europe.

ZUMZ closed Thursday's regular trade at $27.22, up $0.51 or 1.91 percent on a volume of 413,250 shares. In after-hours, the stock further gained $0.24 or 0.88 percent to $27.46.