Why Zumiez Shares Wiped Out

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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 action sports retailers Zumiez (NAS: ZUMZ) wiped out this morning and fell as much as 10% after the company reported its first-quarter earnings results.

So what: For the quarter, Zumiez reported a 23% rise in sales to $129.9 million as earnings more than doubled to $0.14. Both figures surpassed Wall Street's expectations for a profit of $0.11 on sales of just $128.3 million. The wipeout occurred when Zumiez forecasted earnings of just $0.04 to $0.06 in the second quarter on sales of $128 million to $130 million. The Street had expected Zumiez to earn $0.10 on $128.5 million in revenue. Partly to blame is a $0.03 charge to move its corporate headquarters.


Now what: Today's action goes to show that even double-digit same-store-sales growth, as Zumiez has become accustomed to, isn't enough to satisfy investors. An unusually warmer winter and tight consumer spending habits are making it difficult to really get behind retailers at the moment. Still, there's really no reason to believe that Zumiez won't succeed over the long term. Its primary competitor, Pacific Sunwear (NAS: PSUN) , has closed numerous locations as it attempts to regain its footing, which has opened the door for Zumiez to continue to grow its market share. I like the company, but I'd wait for a pullback and a retail environment more conducive to spending before I took the dive into the stock.

Craving more input? Start by adding Zumiez to your free and personalized Watchlist so you can keep up on the latest news with the company.

At the time this article was published Fool contributorSean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.Motley Fool newsletter serviceshave recommended buying shares of Zumiez. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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