Zumiez, Inc. slipped to a second quarter loss on plummeting comps, but the action sports retailer still managed to exceed analysts’ expectations despite a $1.3 million lawsuit settlement late in the quarter. The Everett WA-based retailer reported a second quarter net loss of $3.1 million, or 10 cents per diluted share, as compared to net income of $2.7 million, or 9 cents per diluted share, in the year-ago period. Revenues slid 7% on an 18.8% fall in same-store sales.
The settlement of the lawsuit had a 3 cents per share impact on the net loss. In July, Zumiez reached a tentative agreement to settle a class-action lawsuit in which a former employee alleged that the company didn’t pay all overtime owed to the worker, didn’t provide meal breaks as provided by California law, didn’t provide employees with proper itemized pay stubs and didn’t pay fired employees their waiting time penalties as required by California law.
In a conference call with analysts, CFO Trevor Lang said comps in the western half of the U.S. and the South – which represent 55% and 12%, respectively, of total comp sales – saw declines of more than 20%, while stores in the Midwest and Northeast comped down about 15%. Web sales comped up about 20%.
Product margins for the quarter were flat as the company emphasized inventory management and product assortments.
Regarding outlook, Lang declined to give specific guidance, but said the company expects third quarter sales to be in the range of $104 million and $107 million with same-store sales down in the low- to mid-teens range. EPS is expected to be between 5 cents and 7 cents per diluted share while operating margins are expected to decline 1.5% to 3% due to deleveraging costs on negative sales.
