Zumiez Q2 Profit Tops View, But Revenues Miss, Provides Weak Q3 Outlook

(RTTNews) - Sports apparel retailer Zumiez, Inc. (ZUMZ) reported Thursday a profit for the second quarter that surged 57 percent from last year, reflecting double-digit revenue growth and improved operating margins amid lower expenses. Stripping down charges, earnings per share would have topped analysts' expectations, while quarterly revenues missed their estimates by a whisker.

Meanwhile, the company provided earnings guidance for the third quarter, below Street view.

Zumiez operates as a multi-channel specialty retailer of action sports related apparel, footwear, accessories, and hardgoods.

"We are pleased with our second quarter performance. Our ability to connect consumers with our unique assortment of brands drove higher than expected sales which allowed us to better leverage our expense," CEO Rick Brooks said in a statement.

Lynnwood, Washington-based Zumiez reported net income of $7.46 million or $0.26 per share for the second quarter, higher than $4.74 million or $0.16 per share in the prior-year quarter.

Results for the latest quarter include $0.01 per share of charges associated with the acquisition of Blue Tomato, while the year-ago results included $0.04 per share of the same charges.

Excluding the charges, adjusted net income for the latest quarter would have been $0.27 per share, compared to last year's $0.20 per share.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $0.23 per share for the quarter. Analysts' estimates typically exclude special items.

Total net sales for the quarter increased 11.9 percent to $176.71 million from $157.86 million in the same quarter last year, but missed Wall Street analysts' consensus estimate of $176.89 million by a whisker.

Comparable store sales, or sales from stores open for at least a year, for the quarter grew 3.4 percent on top of a 0.9 percent increase last year.

Operating margin for the quarter expanded 160 basis points to 6.6 percent from last year's 5.0 percent, as selling, general and administrative expenses, as a percentage of total sales, improved 200 basis points, partially offset by a 40 basis points drop in gross margin.

For the month of August, Zumiez reported that comparable store sales grew 2.0 percent on top of a 3.0 percent increase last year. Total sales for the month increased 9.4 percent to $94.0 million from $85.9 million reported in August 2013.

Looking ahead to the third quarter, the company said it expects earnings in a range of $0.47 to $0.50 per share, on projected net revenues of between $207 million and $211 million and comparable store sales growth in the low single-digit range.

Excluding an estimated $0.02 per share of charges associated with the acquisition of Blue Tomato, adjusted earnings would be expected in a range of $0.49 to $0.52 per share.

Street is currently looking for earnings of $0.54 per share on revenue of $209.90 million for the third quarter.

The company said it currently intends to open about 55 new stores in fiscal 2014, including up to 7 stores in Canada and 5 stores in Europe. Earlier, the company projected opening 56 new stores, including 7 stores in Canada and 6 stores in Europe.

"Our organization continues to get smarter and more efficient at executing our global omni-channel strategy and we believe there is still runway for added improvement in the years ahead," Brooks added.

ZUMZ closed Thursday's regular trading session at $32.41, up $0.12 or 0.37% on a volume of 0.55 million shares. However, the stock slipped $1.11 or 3.42% in after-hours trading.