Zumiez Inc. ZUMZ, a mall-based specialty retailer of action-sports related apparel, footwear, equipment and accessories, is expected to report third-quarter fiscal 2015 results on Dec 3. Last quarter, the company's earnings came in line with expectations. Let’s see how things are shaping up for this announcement.
Factors at Play This Quarter
Zumiez has been trading in the red ever since it provided a disappointing outlook for the third quarter of fiscal 2015. Management envisions net sales for the quarter to be $202–$206 million, while comparable-store sales (comps) are anticipated to decline in the range of 7%–9% over the same period. The company expects earnings per share for the third quarter in the band of 27–31 cents.
In the second quarter, although the company managed to meet earnings estimates, the bottom line fell year over year, while its comps performance was rather dismal. The company’s comps continued to disappoint in October, marking the seventh consecutive month of negative comps.
The company has been struggling to deliver positive comps mainly because of a slowdown in domestic sales due to the absence of defined fashion trends to drive teens. Additionally, the company is battling headwinds like foreign exchange volatility that have been affecting its business in borders and tourist spots, and delays in receipts due to the West Coast port labor disruptions. Hence, we remain skeptical about the company’s performance in the third quarter.
Earnings Whispers
Our proven model does not conclusively project Zumiez as likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. But that is not the case here, as you will see below.
Zacks ESP: Zumiez has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 29 cents.
Zacks Rank: Zumiez’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise. However, we caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Casey's General Stores Inc. CASY has an Earnings ESP of +2.08% and a Zacks Rank #1 (Strong Buy).
Costco Wholesale Corporation COST has an Earnings ESP of +2.59% and a Zacks Rank #3.
Restoration Hardware Holdings Inc. RH has an Earnings ESP of +1.59% and a Zacks Rank #3.
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