The economy zigged in 2022 and zagged in 2023, but you can't take the stripes out of Zebra Technologies (ZBRA 0.45%). The asset data and workflow management expert rides out the rollercoaster of post-pandemic recovery, while providing useful signals for the broader market recovery.
In Q1 2024, Zebra's dipped 16% year-over-year to $1.2 billion. But CEO Bill Burns and his crew are spotting silver linings amid the dark clouds. With an uptick in demand from the last quarter and some belt-tightening efforts, Zebra is setting the stage for a comeback.
What most investors already heard
In the first-quarter report, Zebra outlined a stabilizing target market over the next few quarters. The recent 16% revenue drop should turn into a milder decline in the second quarter, no worse than 5%. The 2024 fiscal year as a whole should land roughly 3% below last year's revenue tally.
"Our increased 2024 outlook reflects a better-than-expected start to the year with modest recovery in demand and progress on our cost actions," CEO Bill Burns said in a prepared statement.
That's cool but I wanted to know more. So I jumped on the line for a quick phone chat with Mr. Burns.
NASDAQ: ZBRA
Key Data Points
Market analysis straight from the striped horse's mouth
"We've seen demand stabilize coming out of a challenging environment, which started in Q2 of last year," Burns told me.
Long story short, many e-commerce retailers expected the coronavirus pandemic's online shopping boom to continue for years, so they doubled down on asset management and product-tracking infrastructure. When the inflation crisis reared its ugly head in 2022, they were left unprepared with overstocked warehouses and too-robust shipping systems.
That backlog of surplus asset-tracking tools is running out now, setting Zebra up for a refreshed order flow.
"I think we're seeing early signs of recovery where that capacity is being used," Burns said. "Places like retail are seeing some real growth. You know, a lot of it has been inflationary growth. Now they're seeing real growth in retail."
Retail-sector rumblings
So the next few quarters may be volatile as e-commerce retailers change their priorities and prepare for a healthier economy. But the bottom has been reached, based on Zebra's recovering business trends and Bill Burns' astute market analysis. You can never assume that the only way is up, but I'm downright inspired by these positive signals.
"We'd like to see more of it," Burns said, "but there are early signs of recovery really in the form of large orders in retail."
That's good news for Zebra investors, but also a bullish sign for the retail sector as a whole. Burns sees this sector as a leading indicator of secular trends in the broader economy, as the consumer-facing industry tends to rise and fall quicker than the manufacturing, healthcare, and government segments.
I can't pin Zebra's business trends on any particular retailer. The company is tight-lipped about the identity of its largest customers, and only three order flows represented more than 10% of Zebra's total sales last year -- all unnamed equipment distributors.
Image source: Getty Images.
Zebra's diverse range of retail clients
That being said, Zebra sure gets around. Its case studies include Walgreen Boots Alliance (WBA +0.00%) turning to Zebra's cloud-based workflow tools on a global scale. Amazon.com (AMZN +2.02%) needs a hoof from Zebra to manage its automated warehouses. Walmart (WMT 1.83%) tags its inventory with RFID tags, tracked by Zebra's systems.
In other words, the basis of Zebra's market-projection powers is wide and deep. The tingles of an incoming quality increase felt in Zebra's headquarters should translate into a pretty broad refresh of infrastructure investment across the retail sector.
So, if you're keen on betting on the zebra in this economic jungle, it might be time to stripe up and ride the potential retail rebound with Zebra Technologies. And if not, you can ride off with Zebra CEO Bill Burns' market analysis and take action in the retail sector.
