Zumiez Inc. ( ZUMZ - Analyst Report ) shares have soared nearly 115.4% since October 2011. This mall-based, action-sports specialty retailer has an impressive history of positive earnings surprises and monthly comparable store sales gains. In fact, it has been beating the Zacks Consensus Estimate for EPS since the fourth quarter of fiscal 2008. Due to rising earnings estimates, Zumiez became a Zacks #1 Rank (Strong Buy) on July 18, 2012.

In addition, the company’s recently completed acquisition of Blue Tomato, a leading European action sports retail company, gives it further strength. The acquisition should provide Zumiez with broader avenues to strengthen its international base, while being accretive to its second quarter earnings.

Fabulous First Quarter

On May 17, Zumiez reported fiscal first-quarter 2012 earnings of 15 cents per share, which beat the Zacks Consensus Estimate by 36.4% and surged 150.0% from the prior-period level. This performance was attributed to improved margins, strong merchandise, store expansion and e-commerce strategies.

Net sales climbed 22.7% to $129.9 million from $105.9 million a year ago. Comparable store sales were up 12.9% compared with an increase of 12.6% in the year-ago quarter.

Cost of goods sold in the quarter increased 20.8% year over year to $87.8 million. Selling, general and administrative expenses totaled $34.8 million, up 13.7% year over year. However, as a percentage of net sales, SG&A expenses contracted 210 basis points (bps) to 26.8%. Consequently, operating income shot up 180.8% to $7.3 million from the year-ago operating income of $2.6 million. Operating margin expanded 320 bps to 5.6% from 2.4% in the prior-year period.

Following solid fiscal first-quarter results, management anticipates fiscal second quarter revenue in the range of $128 million to $130 million, on the back of a mid-single-digit growth in comparable store sales. Based on sales projections for the quarter, the company expects earnings per share between 4 cents and 6 cents.

Estimates Climb

The Zacks Consensus Estimate for fiscal 2012 has climbed 4.6% in the last 60 days to $1.60 per share, indicating an estimated annualized growth of roughly 33.7%. For fiscal 2013, the Zacks Consensus Estimate rose nearly 7.0% over the same timeframe to $1.84 per share, reflecting year-over-year growth of nearly 14.6%.

Valuation

Shares are presently trading at 22.1x 12-month forward earnings, on par with its peer group average. On a price-to-book basis, shares are currently trading at 3.96, a 112.9% premium to the peer group average of 1.86x.

Nevertheless, the stock looks attractive given a trailing 12-month ROE of 15.5%, which is substantially higher than the peer group average of 7.2%. The company’s long-term estimated earnings per share growth rate of 19.4% also compares favorably to the peer group growth rate of 19.0%.

The chart below shows a positive price movement since October 2011, registering a solid growth of 115.4%. The stock has been consistently trading above its 200-day moving average since December 2, 2011. Moreover, the year-to-date return for the stock is approximately 34.2%, compared with the S&P 500’s return of 6.7%.

Everett, Washington-based Zumiez Inc. is a mall-based specialty retailer of action-sports related apparel, footwear, equipment, and accessories. The company targets young men and women in the age group of 12 to 24 years, who seek popular brands that represent lifestyle centered on extreme sports activities. Zumiez's stores span across 2,900 square feet on average, and offer couches and video game stations to entice customers to shop for extended periods. As of May 26, 2012, the company operated 448 stores in the United States and 11 stores in Canada. The company, founded in 1978, has a market cap of 1.11 billion.