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What Makes Zumiez (ZUMZ) a Solid Investment Bet for 2018?

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Zumiez Inc. (ZUMZ - Free Report) has show immense strength in recent quarters driven by a strong earnings trend, solid comparable store sales (comps) trend and promising strategies. The company has been successful in countering unfavorable trends in the retail sector, including soft store and mall traffic and rise of e-commerce. The stock is undoubtedly one among the many investors’ favorites list, carrying a Zacks Rank #1 (Strong Buy).

Notably, shares of this mall-based specialty retailer have rallied 70.7% in the last six months, outperforming the industry’s growth of 16.7%. Furthermore, a VGM Score of A brings to light the company’s fundamental strength. That said, let’s take a peek into some other factors that are driving the stock.



Robust Comps Growth — A Key Driving Factor

Despite a tough retail backdrop, Zumiez has been successful in maintaining a positive comps trend for more than a year. Comps have been in the green zone for five straight quarters now. Moreover, December marked the 10th successive month of positive comps, implying that a robust fourth-quarter awaits the company. The company’s key sales metric continues to gain from merchandising strategies and integrated sales channels. Driven by higher-than-anticipated quarter-to-date sales and product margin performance, the company raised earnings and comps forecasts for fourth-quarter fiscal 2017.

Management now anticipates comps growth of roughly 7% compared with the previous guidance of 3-5%. Moreover, earnings are envisioned in the band of 88-90 cents per share, reflecting a considerable increase from the prior guidance of 78-84 cents per share.

Splendid Q4 View Drive Estimates

Consequently, the Zacks Consensus Estimate for the current quarter and fiscal years witnessed an uptrend in the last 30 days. Estimate for the fourth quarter and fiscal 2017 moved up by 9 cents each to 89 cents per share and $1.18, respectively. Additionally, the company’s earnings estimate for fiscal 2018 escalated by 24 cents to $1.43 per share.

Positive Surprise Trend

Though Zumiez posted in-line earnings in third-quarter fiscal 2017, it delivered a positive earnings surprise in the preceding eight quarters. Notably, the company has delivered an average earnings beat of 22.2% for the trailing four quarters. Moreover, sales have topped estimates for sixth straight quarters. Results were fueled by solid comps growth, investments in omni-channel capabilities and stringent cost controls. This in itself speaks loads of the company’s inherent strength.

Zumiez Inc. Price, Consensus and EPS Surprise

Zumiez Inc. Price, Consensus and EPS Surprise | Zumiez Inc. Quote

Strategic Initiatives — Store Expansion & E-commerce Growth

Zumiez is gaining from focus on providing differentiated assortments and a great shopping experience to customers. Additionally, the company remains focused on connecting with core customers more frequently and on a more personalized level. This is strengthening its position in the industry by significant market share gains. Further, the company is focused on boosting competitive advantage by finding new and unique brands across all departments. In 2017, the company expects to launch more than 100 new brands, bringing newness and localized fashion desired by customers.

Additionally, the company remains focused on optimizing store fleet, as well as expanding e-commerce and omni-channel capabilities. Though the company has slowed down the rate of domestic store growth, it continues to see opportunities for international expansion. Alongside, the integration of physical and digital networks, and facilities like buy online, pick up in store, reserve online and pay in store, are significantly improving customer experience.

Bottom Line

Overall, Zumiez seems a solid investment pick at the moment. We believe that the company’s well-balanced store expansion and e-commerce strategies will help Zumiez keep track of the evolving patterns, and drive top-line growth. This is well reflected in the company’s quarterly trends and stock price.

Looking for More? Check These Retail Picks

Other top-ranked stocks in the same industry are The Buckle Inc. (BKE - Free Report) , Urban Outfitters Inc. (URBN - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Buckle has delivered positive earnings surprise of 3.8% in the trailing four quarters. Further, the stock has returned 23.9% in the last three months.

Urban Outfitters has gained nearly 42.4% in three months. Moreover, it has a long-term earnings growth rate of 12%.

American Eagle has improved 36.8% in the last three months. Further, the company has a long-term EPS growth rate of 7.5%.

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