Clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) beat analysts' expectations in Q2 FY2023, with revenue down 11.6% year on year to $194.4 million. However, next quarter's revenue guidance of $213.5 million was less impressive, coming in 1.99% below analysts' estimates. Turning to EPS, Zumiez made a GAAP loss of $0.44 per share, down from its profit of $0.16 per share in the same quarter last year.
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Zumiez (ZUMZ) Q2 FY2023 Highlights:
- Revenue: $194.4 million vs analyst estimates of $190.2 million (2.25% beat)
- EPS: -$0.44 vs analyst estimates of -$0.67 (34.6% beat)
- Revenue Guidance for Q3 2023 is $213.5 million at the midpoint, below analyst estimates of $217.8 million
- EPS (non-GAAP) Guidance for Q3 2023 is $0.20 at the midpoint, below analyst estimates of $0.21
- Free Cash Flow was -$17.8 million compared to -$6.37 million in the same quarter last year
- Gross Margin (GAAP): 31.7%, down from 34.1% in the same quarter last year
- Store Locations: 761 at quarter end, increasing by 8 over the last 12 months
With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.
Apparel sales are not driven so much by personal need but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.
Sales GrowthZumiez is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale.
As you can see below, the company's revenue has declined over the last four years, dropping 2.61% annually despite opening new stores and expanding its reach.
This quarter, Zumiez's revenue fell 11.6% year on year to $194.4 million but beat Wall Street's estimates by 2.25%. The company is guiding for a 10.1% year-on-year revenue decline next quarter to $213.5 million, an improvement from the 17.9% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 4.7% over the next 12 months.
Number of StoresA retailer's store count often determines on how much revenue it can generate.
When a retailer like Zumiez keeps its store footprint steady, it usually means that demand is stable and it's focused on improving its operational efficiency to increase profitability. Zumiez's store count increased by 8 locations, or 1.06%, over the last 12 months to 761 total retail locations in the most recently reported quarter.
Over the last two years, the company has only opened a few new stores, averaging 2.39% annual growth in new locations. This sluggish pace lags the broader sector. A flat store base means that revenue growth must come from increased e-commerce sales or higher foot traffic and sales per customer at existing stores.
Key Takeaways from Zumiez's Q2 Results With a market capitalization of $370.1 million, Zumiez is among smaller companies, but its more than $57.9 million in cash on hand and near break-even free cash flow margins puts it in a stable financial position.
Zumiez beat revenue and EPS expectations. However, guidance was below for revenue and EPS. Management called out "continued headwinds facing consumer discretionary spending combined with a heightened promotional marketplace". The company is down 4.18% on the results and currently trades at $17.87 per share.
The author has no position in any of the stocks mentioned in this report.
