Why Zumiez Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of apparel retailer Zumiez (Nasdaq: ZUMZ  ) had a gnarly wipeout today, falling by as much as 12% in intraday trading, after the company reported second-quarter results.

So what: The numbers from the past quarter actually looked pretty good. Sales for the three-month period were up 20% from last year, while adjusted earnings per share clocked in at $0.17. The latter tally was above the $0.13 that Wall Street analysts were expecting.

Now what: It was forward expectations that tanked the stock, though, as management said that August comparable-store sales rose just 3.7%, and it expects third-quarter EPS to be between $0.42 and $0.45. Analysts anticipated 4.7% comp-store sales growth for August and a per-share profit of $0.56 in the third quarter. With a price-to-earnings ratio of 24, based on fiscal 2012 (which ended in January) earnings, Zumiez shareholders obviously have the expectation of significant continued growth. The $0.56 in EPS that analysts had been expecting would have notched a 24% year-over-year growth rate for the third quarter. The company's outlook, however, suggests a modest decline.

The question that investors have to wrestle with now is whether this is a bump in the road or a sign of much slower growth ahead. The former isn't unusual for high-growth companies but, if it's the latter, Zumiez's shares may be overpriced, even after today's drop.

Want to keep up to date on Zumiez? Add it to your watchlist.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2003819, ~/Articles/ArticleHandler.aspx, 4/17/2014 7:15:54 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement