What happened

Shares of surf-and-skate-themed apparel retailer Zumiez Inc. (NASDAQ:ZUMZ) were biting the dust last month after a disappointing first-quarter earnings report. According to data from S&P Global Market Intelligence, the stock finished the month down 13%.

A Zumiez poster for a music video

Image source: Zumiez.

As the chart below shows, most of those losses came toward the beginning of the month when the earnings report came out.

ZUMZ Chart

ZUMZ data by YCharts

So what 

Zumiez actually beat estimates on the top and bottom lines, but investors were turned off by weak guidance. The company said comparable sales increased 1.8% in the first quarter, a solid improvement from a 7.5% drop in the quarter the year before. However, its per-share loss expanded from -$0.08 a year ago to -$0.18 as gross margin fell by 20 basis points and SG&A expenses increased by 100 basis points. That still topped estimates calling for a loss of 20 cents per share.

CEO Rick Brooks said the company was doing a good job of executing, adding, "I am confident we are on the right course to grow both sales and earnings to generate value for our shareholders." The market seemed to disagree, however.

Now what 

For the current quarter, management called for a comparable sales increase of 1-3%, revenue of $185-$189 million, and a loss between six and 11 cents per share. Analysts had been expecting a profit of a penny per share. 

Zumiez shares have slumped significantly along with much of the apparel retail industry -- the stock has fallen two thirds over the last five years and hit a five-year low last month. The company's June sales report should be out shortly, which will offer further insight into its direction. While the comparable sales growth is a positive sign, the retailer will have to take steps toward profitability in order for the stock to recover.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.