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Zumiez's (ZUMZ) Omni-Channel Strategies Bode Well for Growth

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Renowned apparel, footwear, and accessories retailer Zumiez Inc. (ZUMZ - Free Report) is banking upon its excellent omni-channel strategies. The company has been gaining from its one-channel concept, which is effectively helping it cater to the changing consumers’ preferences. This includes the company’s in-store fulfillment capabilities such as Zumiez delivery. Its store-expansion endeavors to tap incremental sales also appear on track.

Zumiez has also been benefiting from its distinct product assortments. The accessories and apparel categories generally form the company’s highest product margin. The implementation of advanced technology has also been augmenting customers’ shopping experience across diverse channels.

Talking of store-related endeavors, Zumiez follows the strategy of optimizing its store base through expansion in the underpenetrated markets as well as closure of underperforming stores. Majority of the company’s capital spending is allocated toward store-growth initiatives. In fiscal 2021, management intends to open 25 stores — eight in North America, 12 in Europe, and five in Australia. Simultaneously, it plans to close nearly five to six outlets during the fiscal year. For fiscal 2021, management expects incurring capital expenditures in the band of $22-$24 million compared with $9.1 million in fiscal 2020.

Hence, the company is boosting competitive advantage by investments in logistics, planning, and allocation along with solid omni-channel capabilities. This positions it for growth in the long run. Encouragingly, the third quarter kicked off on a promising note backed by a more normalized back-to-school shopping season. The quarter-to-date total sales for the 37 days ended Sep 6, 2021 climbed 23.2% from the same period ended Sep 7, 2020. Total comparable sales for the 37-day period grew 10.5% year over year. Zumiez expects retaining a strong momentum heading into the holidays, given the flexibility of its business model.

Closing Remarks

The company anticipates surpassing the fiscal 2020 sales levels in the second half of fiscal 2021. For fiscal 2021, management projects net sales to increase between high teens and above 20% from the fiscal 2020 level and in low-mid teens from the fiscal 2019 reading. For both the third and the fourth quarters of fiscal 2021, management forecasts sales growth in the mid- to high-single digits from the fiscal 2020 tally. The fiscal 2021 gross margin is likely to grow year over year on leveraged occupancy costs stemming from higher sales and lower shipping costs as well as expanded product margins.

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The company’s robust strategies coupled with a healthy balance sheet, sturdy business model, and strong brand presence position it well for long-term success. This Zacks Rank #3 (Hold) stock is further backed up by higher earnings estimate revisions. The Zacks Consensus Estimate of $1.06 for the third quarter and $4.58 for fiscal 2021 has increased 1.9% and 3.4%, respectively, in the past seven days. So far this year, shares of this Lynnwood, WA-based company have jumped 7.5% compared to the industry’s 3.1% gain.

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