Muted consumer spending, a weak economic environment, and the burden of payroll taxes have developed a diminishing environment for the apparel retail industry in the U.S. The apparel retailers like Zumiez (ZUMZ, Financial), Wet Seal (WTSL, Financial) and Pacific Sunwear (PSUN, Financial) posted their quarterly results during the first week of December. We will see how they did in this depressing environment.
Zumiez’s Performance
Zumiez’s strong efforts of investing in the omni-channel retail strategy, increasing store count, and some inorganic growth efforts by making acquisitions in order to grow its business has boosted the top line by 6.2%, and helped Zumiez beat consensus estimates as well.
A 1.5% increase in comparable-store sales through new store openings, and 7.9% increase in comparable e-commerce sales, and a good performance of the e-commerce channel which grew to 11% of sales resulted in the top-line improvement.
Zumiez closed the quarter with 1.7% comps growth for the four-week period ended Nov. 30 in comparison to 4.2% decrease for the four-week period ended Nov. 24 last year. All this was despite a weak retail environment where even deep discounting could not help trigger a spending spree. This shows that investments in omni-channel sales initiatives and other growth drivers are yielding good results and might get better as the retail environment gets better.
Zumiez opened 57 of the 59 stores planned during the first three quarters of the year. So, the growth story is as per the expansion plans. Apart from this, the company’s board approved a new share repurchase program of $30 million, replacing its earlier share buyback program of $12.5 million. This shows the positive prospects of the company.
As the U.S. is the second-largest country in terms of digital buyers, a solid platform for e-commerce sales channel expansion is important. This shows the ongoing investment in its omni-channel sales strategy is bound to deliver results in the future.
Pacific Sunwear and Wet Seal’s Performance
On the other hand, Pacific Sunwear’s share price more than doubled this year, and the recent third quarter results were impressive too.
Comps increased by 1% for the seventh consecutive quarter of positive comps, which indicates healthy status of the company. Comps increased 6% for November on account of healthy Black Friday sales, strong emerging brands, and an exclusive range of products.
In contrast to the excellent performance of Pacific Sunwear Wet Seal slipped into the red zone with its loss widening to $0.12 per share from $0.11 in the same period last year, primarily due to flat comps and a decline in revenue to $127.7 million from $135.5 million in the prior-year period.
In addition to this, the company expects a weak performance for the fourth quarter. A net loss in the range of $0.14 to $0.17 per share on revenue in the range of $134 million to $137 million is expected by Wet Seal and comps are expected to decline in the high-single to low-double digits.
Conclusion
Both Pacific Sunwear and Wet Seal are in a tough situation and hence, Zumiez is the best-positioned of the three apparel companies here. Its strategies are sound and the focus on the omni-channel should result in strong gains in the future.
