ZUMZ - Zumiez stock plunges on slumping sales light guidance

Zumiez ( NASDAQ: ZUMZ ) shares slid nearly 20% at premarket lows after posting a disappointing second quarter report and well below consensus guidance on Thursday evening.

The Washington-based retailer reported an 18.1% drop in sales from the prior year alongside a decline in GAAP earnings per share for the fiscal second quarter of 2023 to $0.16 from $0.94 in the prior year quarter. Both figures missed analyst consensus by a wide margin. Gross profits also declined by 500 basis points from the prior year.

“On top of difficult sales comparison a year ago, the operating environment has become increasingly more challenging due to lingering supply chain disruptions, higher logistics costs, a tight labor market, negative foreign currency exchange impacts and most acutely high levels of inflation leading to intense competition for declining discretionary dollars,” CEO Rick Brooks told analysts on Thursday evening. “While each of these factors was incorporated into our outlook for this quarter and thoughts on the year, inflationary pressure on the consumer intensified as the quarter unfolded.”

He added that skate products did not sell well during the quarter, leading to double digit growth in inventories in the first six months of the fiscal year. Based upon these adverse trends, Brooks indicated that the company would take a "more cautious view on the remainder of 2022" that reflects an expected increased pressure on the consumer, which he noted was already apparent in diminished back to school sales.

Net sales are projected to be in the range of $220 to $228M for the October-ended quarter, below the 277.18M consensus. Meanwhile, an earnings per diluted share forecast of approximately $0.03 to $0.18 fell well short of the $1.13 anticipated by analysts.

On Wall Street, William Blair cut its rating on ZUMZ to Market Perform with steep cut made to the firm's estimates. Analyst Sharon Zackfia pointed to a lack of visibility on the duration of the challenging trends.

Shares of the retailer fell 15.67% in early premarket hours.

Read the ZUMZ earnings call transcript.

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