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Zumiez (ZUMZ) Down to Rank #5 on Dismal Q1 & May Sales

Zacks Equity Research
Updated

On Jun 4, 2016, Zacks Investment Research downgraded Washington-based sporting goods retailer, Zumiez, Inc. ZUMZ to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Zumiez recently posted first-quarter fiscal 2016 results, reporting a loss of 8 cents per share as against adjusted earnings of 12 cents per share recorded in the prior-year quarter. Shares of the company have dropped 4.3% following the announcement.

Along with the results, the company posted dismal sales data for May, which marked its 14th consecutive month of negative comparable store sales (comps). The company has been falling prey to slow traffic, fashion misses and foreign currency headwinds for a while now.

In fact, Zumiez’s quarterly sales and comps also trended downward year over year due to a tough retail environment and soft consumer demand. Moreover, management issued a subdued outlook for the second quarter of fiscal 2016, based on the current scenario.

We believe that all the aforementioned factors led to the downward revisions in Zumiez’s estimates. Evidently, the Zacks Consensus Estimate dropped 3% to 96 cents per share for fiscal 2016, while it fell sharply to a loss of 11 cents per share from earnings of 7 cents for the second quarter, over the past 7 days.

Apart from this, the company faces intense competition from other teen-focused as well as sporting goods retailers on the basis of brand recognition, fashion, price, service, store location, and quality. We believe that such competition might hinder Zumiez from executing and implementing new business strategies.

Stocks to Consider

Better-ranked stocks in the same space include The Children's Place, Inc. PLCE and Destination XL Group, Inc. DXLG, each with a Zacks Rank #2 (Buy). Another stock worth considering in the related textile-apparel industry is Delta Apparel Inc. DLA, with a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
 
CHILDRENS PLACE (PLCE): Free Stock Analysis Report
 
DESTINATION XL (DXLG): Free Stock Analysis Report
 
DELTA APPAREL (DLA): Free Stock Analysis Report
 
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Zacks Investment Research