It's tough to be a retailer right now, especially when facing the market with your quarterly numbers. Zumiez
Zumiez's second-quarter profit doubled to $1.6 million, or $0.06 per share. Sales increased 41.5% to $55.8 million, and same-store sales increased 12.6%, atop a comps increase of 11.3% in the year-ago quarter. The company even increased its guidance for earnings this year to the $0.66-to-$0.67-per-share range.
However, Zumiez's impressive sales nonetheless missed analysts' expectations, and its forecast for the year only matched their predictions. Maybe that's partly why investors weren't thrilled with Zumiez's performance; one of its retail rivals, Pacific Sunwear
Tom Gardner has taken quite an interest in surf- and skateboarding-inspired retailers lately. Pacific Sunwear is a Motley Fool Stock Advisor selection, and Tom recommended both Zumiez and Volcom to Motley Fool Hidden Gems subscribers, with similar investing theses for both. (You can read about his many reasons for recommending them with a free trial to Hidden Gems.)
Although Zumiez has an annual growth goal of 30% -- which Tom didn't find unreasonable for this retailer when he recommended it -- it's also acquired a reputation as a high-flier since its IPO in the spring of 2005. Although Zumiez shares have fallen 20% in the last three months, before that, its shares always seemed to zoom upward as investors enthusiastically responded to its high rates of growth. (Indeed, Zumiez's shares have increased 77% over the last 12 months.)
Such stocks tend to fall hard when investors perceive any disappointment, as Zumiez's 10% plunge in recent trading may indicate. Although Zumiez's earnings and growth potential both seem impressive, given some of the doubts plaguing the extreme-sports industry, it appears that many investors are currently wondering whether they're paying too much for that growth. On the other hand, the long term may prove those doubters wrong.
Surf the following Foolish content:
- Seth Jayson explored PacSun's troubled waters, and decided its problem is price.
- Not too long ago, Volcom got slammed.
- Do companies like Zumiez display dangerous growth?
Alyce Lomax does not own shares of any of the companies mentioned.