Zumiez, despite reporting a Q2 loss of $8.5 million against a profit of 3.1 million and an 11.6 percent drop in revenues to $194.4 million for the period ended July 29, remains encouraged by key elements of its overall business. Those include “a good trend line” heading into Q4, a growing Europe and Australian business, and an expanding private label segment. The gross margin contracted 410 basis points to 29.4 percent from 33.5 percent. Inventory rose by 3.7 percent to $156.7 million, driven by a higher store count in markets outside the U.S.
“Our second quarter sales improved from the previous quarter’s trend line and finished ahead of our guidance. The operating environment in the U.S. remains challenging with significant multiyear inflationary impact weighing on consumer discretionary spending, continued competition from spending on travel and experiences, and higher levels of discounting to clear excess inventories,” CEO Rich Brooks told analysts last week.
Through Sep. 4, the operator of the Blue Tomato retail chain said Q3 to-date comparable sales were down 7.7 percent compared to the 11.6 percent decline in Q2 and a 17.1 percent drop in Q1. North American sales, excluding currency impact, were down by 9.9 percent, while international sales (Europe and Australia) increased by 8.5 percent year-over-year. The men’s category was positive during the period, while all other segments were negative. Dollars per transaction were up, driven by higher average unit retails (AURs) and units per transaction. The current Q3 outlook calls for total revenues of $211 to $216 million, slightly lower product margins and a consolidated operating margin forecast of -1.5 to -2.5 percent.
The group is encouraged by developments in its European and Australian businesses, including their overall growth in private labels as a percentage of revenues and strong growth by some unnamed brands in Europe. Zumiez’s overall private label business equaled 21 percent of revenues through H1, up from approximately 17 percent in the year-ago period.
“We have an international business that still has a lot of growth around it, and I think that our high-single-digit goal is achievable, and that’s really our push,” CFO Chris Work said.
Zumiez now intends to open 19 new stores during the full financial year, down from a prior forecast of 23. The number of new North American doors has been lowered to five from 8 to 10, but European store growth has been maintained at 10 locations. Four stores will also be added in Australia, down from a prior forecast of five.
