Zumiez Posts Strong February Comps

Zumiez Inc. (ZUMZ - Analyst Report), a U.S. Specialty retailer selling action sports related apparel, footwear, equipment and accessories, reported comparable store sales (comps) and sales results for the four-week period ended February 25, 2012.

Zumiez’s comps for the month of February 2012 rose 14.2%, above the February 2011 comps increase of 12.8% on account of higher prices realized during the period. Net sales for the period marked an increase of 23.0% to $40.2 million from $32.7 million reported in the four weeks ended February 26, 2011.

Quarterly results of the mall-based specialty retailer have been consistently outperforming the Zacks Consensus Estimate over the last year. The company’s Zacks average surprise for the last four quarters was 68.5%. Zumiez posted solid results in the last quarter (third quarter 2011) on the back of strong merchandising, new store opening and e-commerce strategies along with improved margins. Quarterly earnings of 45 cents per share beat the Zacks Consensus Estimate of 41 cents and surged 12.5% from the prior-period level of 40 cents.

Net sales for the quarter climbed 13.3% to $154 million from $135.9 million a year ago, surpassing the Zacks Consensus Estimate of $153 million. Comparable store sales rose 6.0% in the quarter compared with an increase of 14.4% in third-quarter 2010.

Everett, Washington-based Zumiez targets young men and women in the age group of 12 to 24 years, who seek popular brands that represent a lifestyle centered on extreme sports activities. The company competes head-to-head with Hot Topic Inc. (HOTT) and Pacific Sunwear of California Inc. (PSUN - Snapshot Report).

Zumiez's stores span across 2,900 square feet on an average, and feature couches and video game stations to entice customers to shop for extended periods. These stores are strategically located near busy areas of the mall, such as food courts, movie theatres, music/game stores and other popular teenage hang-out destinations. As of February 25, 2012, the company operated 434 stores in the United States and 10 stores in Canada.

Moreover, Zumiez’s niche focus on teenage action-sport based merchandise, commitment toward store expansion and a healthy balance sheet augur well for future operating performance.

Currently, Zumiez holds a Zacks #2 Rank, implying a short-term ‘Buy’ rating on the stock. However, we retain our long-term ‘Neutral’ recommendation on the stock.