Clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) announced better-than-expected results in Q4 FY2023, with revenue flat year on year at $281.8 million. On the other hand, next quarter's revenue guidance of $169.5 million was less impressive, coming in 9% below analysts' estimates. It made a GAAP loss of $1.73 per share, down from its profit of $0.59 per share in the same quarter last year.
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Zumiez (ZUMZ) Q4 FY2023 Highlights:
- Revenue: $281.8 million vs analyst estimates of $276.7 million (1.9% beat)
- EPS: -$1.73 vs analyst estimates of $0.25 (-$1.98 miss)
- Revenue Guidance for Q1 2024 is $169.5 million at the midpoint, below analyst estimates of $186.3 million
- Gross Margin (GAAP): 34.3%, in line with the same quarter last year
- Free Cash Flow of $33.54 million, up 19.2% from the same quarter last year
- Store Locations: 753 at quarter end, decreasing by 3 over the last 12 months
- Market Capitalization: $305.4 million
With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.
Apparel RetailerApparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.
Sales GrowthZumiez is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale.
As you can see below, the company's revenue has declined over the last four years, dropping 4.1% annually despite opening new stores, indicating that its underperformance was driven by lower sales at existing, established stores.
This quarter, Zumiez reported decent year-on-year revenue growth of 0.6%, and its $281.8 million in revenue topped Wall Street's estimates by 1.9%. The company is guiding for a 7.3% year-on-year revenue decline next quarter to $169.5 million, an improvement from the 17.1% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 1.6% over the next 12 months, an acceleration from this quarter.
Same-Store SalesA company's same-store sales growth shows the year-on-year change in sales for its brick-and-mortar stores that have been open for at least a year, give or take, and e-commerce platform. This is a key performance indicator for retailers because it measures organic growth and demand.
Zumiez's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 17.8% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.
Key Takeaways from Zumiez's Q4 Results We enjoyed seeing Zumiez exceed analysts' revenue and gross margin expectations this quarter, driven by better-than-expected performance in its North American men's business. On the other hand, its EPS and European division underperformed, and as a result, the company expects to slow its store growth in the region (it expects to open 3 new stores in Europe in 2024). Because of the weakness, Zumiez shared Q1 2024 revenue and EPS guidance that missed analysts' expectations. Overall, this was a mixed quarter for Zumiez. The company is down 5.1% on the results and currently trades at $14 per share.
