Why Zumiez (ZUMZ) Stock Is Falling Today

What Happened:

Shares of clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) fell 11.2% in the morning session after the company reported fourth-quarter results that missed analysts' EPS expectations. The European division underperformed, and as a result, the company expects to slow its store growth in the region (it expects to open three new stores in Europe in 2024). Because of the weakness, Zumiez shared Q1 2024 revenue and EPS guidance that missed analysts' expectations. 

On the other hand, Zumiez exceeded analysts' revenue and gross margin expectations during the quarter, driven by a better-than-expected performance in its North American men's business. Overall, this was weaker quarter for Zumiez.

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What is the market telling us:

Zumiez's shares are somewhat volatile and over the last year have had 19 moves greater than 5%. But moves this big are very rare even for Zumiez and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 6 months ago, when the company dropped 8.8% on the news that the company reported second quarter results and guided for revenue and EPS for the next quarter to come in below Consensus estimates. 

On the other hand, revenue and EPS exceeded Wall Street's expectations during the quarter. Management called out "continued headwinds facing consumer discretionary spending combined with a heightened promotional marketplace". However, it added that there had been a moderation in some of the sales trends observed in Q2 due to the back-to-school season and higher volumes. 

Management noted that the trends remained below year-ago levels. The company also continued to burn cash for the second straight quarter. In response to the challenges, Zumiez cut back on its growth plans. The company planned to open 19 new stores in fiscal 2023, down from the previous expectation of 23 new stores. The bulk of the cut was expected to come from the North American business, which Zumiez noted "remains under pressure." Overall, it was a weaker quarter for the company, highlighting several headwinds.

Zumiez is down 33.7% since the beginning of the year, and at $13.40 per share it is trading 36.6% below its 52-week high of $21.14 from November 2023. Investors who bought $1,000 worth of Zumiez's shares 5 years ago would now be looking at an investment worth $558.33.

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