Why Zumiez Inc. Shares Plunged Today

What happened

Shares of Zumiez Inc. (NASDAQ: ZUMZ  ) were heading lower once again today after the apparel retailer posted weak guidance in its fourth-quarter earnings report. As of 12:41 p.m. EST, the stock was down 14.4%.

So what

Zumiez actually topped estimates during the key holiday quarter, as comparable sales increased 5.1%, following a 9.5% drop in sales at established stores in the year-ago quarter.

A Zumiez store inside a mall

Image source: The Motley Fool.

Overall sales increased 8.7% to $263.6 million, beating expectations at $261.7 million, while earnings per share improved from an adjusted $0.53 a year ago to $0.74, ahead of the consensus at $0.66.

CEO Rick Brooks said that "performance exceeded expectations driven by efficiencies in omnichannel and localization efforts," and that the tax rate fell from 37.3% to 35.3%, which also boosted earnings.

Now what

Despite the strong fourth-quarter performance, Zumiez guidance was lacking as Brooks noted headwinds in the industry. Comparable sales turned negative in February, slipping 3.1%, but the company projected comparable-sales growth of 0% to 2% in the first quarter, and called for total revenue of $178 million to $182 million. However, that was short of estimates at $184.6 million.

On the bottom line, management said it expected a loss per share of $0.21 to $0.17, much worse than expectations of a loss of $0.03.

Considering the struggles of the overall apparel retail industry and Zumiez's inability to deliver consistent comparable-sales growth, investors are probably best off avoiding this stock.

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3/24/2017 4:00 PM
ZUMZ $17.20 Down -0.10 -0.58%
Zumiez CAPS Rating: **