Zumiez (NASDAQ:ZUMZ) Reports Strong Q2, Stock Soars

Clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) reported Q2 CY2024 results exceeding Wall Street analysts’ expectations, with revenue up 8.1% year on year to $210.2 million. Guidance for next quarter’s revenue was also optimistic at $223 million at the midpoint, 2.8% above analysts’ estimates. It made a GAAP loss of $0.04 per share, improving from its loss of $0.44 per share in the same quarter last year.

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Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, “We experienced a noticeable acceleration in our sales trend as the second quarter unfolded, with July North America comparable sales increasing in the high-single digits. The work our merchandise teams have done refining our apparel and footwear assortments combined with enhanced customer engagement tactics from our in-store and online sales associates led to better than expected second quarter results and a strong back-to-school season in North America. With back-to-school a good indicator for holiday demand in the past, we are encouraged about our prospects for growth over the remainder of fiscal 2024. Looking farther ahead, we are confident that our global customer centric operating model has the Company positioned to continue building on the progress we’ve made towards delivering enhanced value for our shareholders in the years to come.”

With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.

Apparel Retailer

Apparel sales are not driven so much by personal needs 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 Growth

Zumiez 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 2.3% annually as it failed to grow its store footprint meaningfully and observed lower sales at existing, established stores.

This quarter, Zumiez reported solid year-on-year revenue growth of 8.1%, and its $210.2 million in revenue outperformed Wall Street’s estimates by 4.1%. The company is guiding for revenue to rise 3.1% year on year to $223 million next quarter, improving from the 8.9% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.

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Same-Store Sales

Same-store sales growth is an important metric that tracks demand for a retailer’s established brick-and-mortar stores and e-commerce platform.

Zumiez’s demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 12.4% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.

Key Takeaways from Zumiez’s Q2 Results

We were impressed by how significantly Zumiez blew past analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates. Although its earnings forecast for next quarter missed analysts’ expectations, revenue guidance for next quarter exceeded expectations. Overall, we think this was a decent quarter (especially as many retailers struggled this quarter) with some key metrics above expectations. The stock traded up 6% to $27.20 immediately after reporting.

Zumiez may have had a good quarter, but does that mean you should invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.