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Zumiez Stock Up on Revival of Comps Trend, Upbeat Q3 View

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Shares of Zumiez Inc. (ZUMZ - Free Report) rallied 13.3% in the after-hours trading session yesterday as this specialty retailer of apparel, footwear and accessories broke its 17-month long trend of posting negative comparable store sales (comps) and dismal sales results. Further, the company raised its third-quarter fiscal 2016 sales, earnings and comps outlook backed by greater-than-expected sales in the quarter-to-date period.

Zumiez’s comps for the five weeks ended Oct 1, 2016 rose 6.3% compared with a 1.8% decline witnessed in the five-week period ended Oct 3, 2015. Also, net sales for Sep 2016 increased 11.5% to $75 million from $67.3 million in the year-ago period.

This surprise to the investor community follows a long standing negative comps and sales growth trend. Evidently, the company reported a 4.9% fall in comps for second-quarter fiscal 2016 compared with a 4.5% decline registered in the year-ago quarter. Second-quarter comps bore the brunt of lower transaction volume, partially offset by a rise in dollars per transaction. Additionally, battered by the consequences of a tough retail environment, sales for the fiscal second quarter dipped 0.9% year over year to $178.3 million.

However, the company has shown resilience as evident from a strong quarter-to-date sales performance. This persuaded management to raise its otherwise drab outlook for the fiscal third quarter. The retailer now envisions net sales in the $216–$217 million range, versus its previous forecast of $209–$213 million. Earnings per share are anticipated in the range of 29–30 cents compared with 21–26 cents per share guided earlier.

Further, management indicated that the aforementioned sales and earnings growth is now expected to be backed by a 2% increase in comps for the fiscal third quarter, against the previous comps growth range of negative 2% to flat.

We believe Zumiez remains on track with its expansion strategies, which are aimed at placing it on the growth track and generating near-term profit. Further, the company’s investments in global expansion, enhancing omni-channel capacities and customer-centric approach bode well.

Zacks Rank

Currently, Zumiez carries a Zacks Rank #3 (Hold). Investors can count on better-ranked stocks like Urban Outfitters Inc. (URBN - Free Report) , holding a Zacks Rank #1 (Strong Buy), as well as American Eagle Outfitters Inc. (AEO - Free Report) and DSW Inc. (DSW - Free Report) , each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Urban Outfitters has to its credit an average beat of 6.7% in the trailing four quarters and estimates for the current fiscal year have moved north in the last 60 days.

American Eagle has a positive record of earnings surprises in the trailing four quarters, with an average beat of 9.3%. The stock has seen positive estimate revisions for the current fiscal year, over the last 60 days.

DSW Inc. has an average earnings beat of 24% in the last four quarters, and estimates for the current fiscal year moved up in the last 30 days.

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