Zumiez downgraded by Zacks to 'strong sell' on dismal sales

Earlier this week Zacks Investment Research has downgraded Washington-based sporting goods retailer, Zumiez, Inc. to a Zacks Rank #5 (Strong Sell).

The stock analysis team has outlined a series of reasons for their downgrade, from “dismal sales data for May” to downward trending comparable quarterly sales.

Zumiez recently posted first-quarter fiscal 2016 results, reporting a loss of 8 cents per share as against adjusted earnings of 12 cents per share recorded in the prior-year quarter. Shares of the company have dropped 4.3 percent following the announcement.

“Along with the results, the company posted dismal sales data for May, which marked its 14th consecutive month of negative comparable store sales (comps). The company has been falling prey to slow traffic, fashion misses and foreign currency headwinds for a while now,” highlights the analysis team at Zacks.

In this line, it’s worth recalling that Zumiez's quarterly sales and comps also trended downward year over year due to a tough retail environment and soft consumer demand. “Moreover, management issued a subdued outlook for the second quarter of fiscal 2016, based on the current scenario,” add Zacks in a note to investors.

Other factors evaluated by Zacks analysts include the fact that the company faces intense competition from other teen-focused as well as sporting goods retailers on the basis of brand recognition, fashion, price, service, store location, and quality. “We believe that such competition might hinder Zumiez from executing and implementing new business strategies,” points out Zacks.

“We believe that all the aforementioned factors led to the downward revisions in Zumiez's estimates. Evidently, the Zacks Consensus Estimate dropped 3 percent to 96 cents per share for fiscal 2016, while it fell sharply to a loss of 11 cents per share from earnings of 7 cents for the second quarter, over the past 7 days,” the research concludes.