On Jul 2, 2015, Zacks Investment Research downgraded Zumiez, Inc. ZUMZ to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Zumiez has been in troubled waters for a while now. This is evident from the fact that its shares have slumped 29.5% year to date.
The company is facing various headwinds like the absence of defined fashion trends to drive teens resulting in soft traffic; foreign exchange volatility that is affecting its business in borders and tourist spots; and delays in receipts due to the West Coast port labor disruptions.
These headwinds, coupled with the weak spring season business, weighed on Zumiez’s comparable store sales (comps) for the month of May, marking the company’s second consecutive month of negative comps. Key metrics for May and April dipped 2.2% and 4%, respectively. The company also posted its first-quarter fiscal 2015 results recently, following which management issued a conservative guidance for the second quarter.
This conservative outlook, combined with the negative comps and all aforementioned headwinds, triggered a downtrend in the Zacks Consensus Estimate as analysts became less constructive on the stock. Coming to numbers, the Zacks Consensus Estimate for fiscal 2015 and fiscal 2016 tumbled 11.8% to $1.65 and 9.5% to $1.90, respectively, over the past 30 days.
Further, Zumiez faces intense competition from other teen-focused and sporting goods retailers on the basis of brand recognition, fashion, price, service, store location, and quality, which might impact its future performance.
However, in order to overcome these challenges, Zumiez remains focused on global expansion, enhancing omni-channel capacities and maintaining a customer-centric approach.
Though these factors add some respite to the otherwise bearish picture, can these help Zumiez rise from the troubled waters?
Stocks to Consider
Better-ranked stocks in the apparel-shoe industry include American Eagle Outfitters Inc. AEO, Express Inc. EXPR, each with a Zacks Rank #1 (Strong Buy), and Citi Trends Inc. CTRN, carrying a Zacks Rank #2 (Buy).
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