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Zumiez posts Q1 loss, turns bearish on weak Q2 outlook

ZumiezOn Friday, Zumiez, Inc. (ZUMZ), the specialty retailer of apparel and footwear, reported a fiscal 2016 first-quarter net loss that was narrower than the estimate of analysts. Even the company’s revenue was marginally higher than the Wall Street estimates.

However, the market punished the company’s shares, which ended the day at $14.42, down 4.25% from the previous close. The stock price has lost almost 50% in a span of one year.

Still, for the reasons explained below, there seems to be little possibility of a reversal in the price at this point in time.

For the quarter ended April 2016, the Lynnwood-Washington based company reported revenue of $172.97 million that was higher than the analysts’ estimate of $172.6 million. However, on a y-o- y basis, the reported revenue was 2.6% below the fiscal 2016 first-quarter revenue of $177.61 million.

During the quarter, the company recorded a net loss of $2.137 million or $0.08 per share, compared to a net profit of $2.77 million or $0.09 per share in the corresponding period of fiscal 2015. The reported loss was lower than the Wall Street’s net loss estimates of $0.11 per share for the first quarter.

Zumiez

For the 14th month in succession, the company reported a decline in the same store sales. During May, the same store sales fell 7.6%, compared to a 2.2% decline in the year-ago similar period.

During the first-quarter, the comparable store sales dropped 7.5%, compared to a growth of 3% reported a year ago.

Most of the high-end retailers are facing headwinds and do not expect the situation to change in the current quarter. Thus, considering the tough business environment, Zumiez forecasted a weak second-quarter outlook.

For the second-quarter, Zumiez anticipates revenue between $172 million and $176 million. The company also expects a net loss in the range of $0.09 to $0.13 per share for the second-quarter. The analysts currently estimate earnings of $0.05 per share on revenue of $180.63 million. The continuing decline in the net income and unimpressive return on equity indicate that fundamentally the shares will remain range bound with bearish bias.

The stock is trading below the 50-day moving average. Furthermore, the RSI reading is below 50 and pointed downwards. The next support for the stock is only at 10. Firm resistance exists at 17 levels.

Zumiez Stock Price: June 6th 2016.

Zumiez Stock Price: June 6th 2016.

Thus, it would be better for a binary trader to place his bet on a further decline in the stock price. Selecting a one touch put option would be a smart decision as of now. A target price of $10 or higher would be probably achieved if there is at least four week time for the contract’s expiry.


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