Which Way is Zumiez Headed with its Dismal Comps Trend?

Zumiez Inc. ZUMZ has been in troubled waters for a while now. Given the slowdown in domestic sales due to the absence of defined fashion trends to drive teens, the company has been struggling to deliver positive comparable-store sales (comps). Additionally, the company is battling headwinds like foreign exchange volatility that is affecting its business in borders and tourist spots and delays in receipts due to the West Coast port labor disruptions.

Consequently, the company has reported negative comps for six consecutive months. Most recently, this Washington-based sports-related teen apparel retailer posted comps decline of 1.8% for the month of September as against a 6.6% rise recorded in the prior-year period. Prior to this, the company reported negative comps of 4%, 2.2%, 3.3%, 7.6% and 10.7% for the respective months of April, May, June, July and August.

Although the company managed to meet earnings estimates for the second quarter, earnings fell year over year. Its comps performance was also rather dismal. The company's second-quarter fiscal 2015 adjusted earnings of 12 cents a share were in line with the Zacks Consensus Estimate but descended 55.6% from 27 cents posted in the year-ago quarter.

Net sales rose 1.8% year over year to $179.8 million but were marginally short of the Zacks Consensus Estimate of $180 million. Quarterly comps declined 4.5%, as against a 3.4% increase registered in the year-ago quarter.

Moreover, the company provided a weaker-than-anticipated forecast for the third quarter of fiscal 2015. Management envisions net sales for the quarter to range from $202–$206 million, while comps are anticipated to decline in the range of 7–9% over the same period. The company expects earnings per share for the third quarter to be in the band of 27–31 cents.

However, in order to overcome these challenges, Zumiez remains focused on expanding globally, enhancing omni-channel capacities and maintaining a customer-centric approach. Over the long term, the company is confident of generating profits and boosting shareholder value based on its ongoing growth strategies. Further, the company remains optimistic about its performance in the European market.

Also, Zumiez, which competes with Pacific Sunwear of California Inc. PSUN, Foot Locker, Inc. FL and Finish Line Inc. FINL, has been continuing with its strategy of optimizing store base through expansion in the underpenetrated markets and by either repositioning or closing underperforming stores through constant evaluation, aimed at maximizing long-term productivity.

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