Zumiez Inc. seems to have entered a favorable space with return to its trend of posting positive comparable sales (comps) and sales. Zumiez reported a 3.4% increase in comps for the five week period ended Dec 31, 2016 compared with an 8.9% decline witnessed in the five-weeks ended Jan 2, 2016. This marks the company’s fourth straight month of positive comps growth.
Further, net sales for the Christmas holiday month (Dec 2016) increased 6.8% to $143.6 million from $134.5 million in the year-ago period.
While the shares of Zumiez haven’t responded much to the positive December comps, it has shown tremendous growth in the past year. The stock has surged 50.1% in 2016, significantly outperforming the Zacks categorized Retail – Apparel/Shoe industry’s decline of 12.2% in the same period. Moreover, the shares have returned about 56.5% in the last six months compared with the broader industry’s growth of 4.9%.
We attribute this growth, particularly in the last six months, to the renewed comps trend since Sep 2016. The turnaround came after the company’s 17-month long trend of posting negative comps and dismal sales results.
Backed by this revival, the company’s comps jumped 4% in third-quarter fiscal 2016. Management stated that Zumiez’s quarterly comps benefited from a robust back-to-school selling season, which improved results in September. Solid performance of the men’s, accessories and junior’s categories also contributed to comps growth.
While the enhanced top-line reflects the company’s brand strength and gives positive signals, the overall retail environment remains troubled owing to sluggish mall traffic, volatile consumer spending and macroeconomic volatility. This persuaded management to issue a conservative outlook for fourth-quarter fiscal 2016.
The company anticipates net sales for the quarter in the range of $258–$263 million, while comps growth is expected in a range of 3–5%, over the same period. Further, the company expects earnings in a band of 60–66 cents per share.
Despite these headwinds, we believe Zumiez remains on track with its expense control and expansion strategies, which are aimed at placing it on growth curve and generating profit in the near term. Further, its strategic initiatives, focus on omni-channel growth, authentic lifestyle positioning and commitment to customer service position it to gain market share in the long term.
Zumiez currently carries a Zacks Rank #3 (Hold). Investors can count on better-ranked stocks in the same industry like The Children’s Place Inc. (PLCE - Free Report) , Christopher & Banks Corporation (CBK - Free Report) and Tilly's, Inc. (TLYS - Free Report) . All three sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Children’s Place, with a long-term earnings growth rate of 10.3%, has surged a whopping 75.7% year over year.
Christopher & Banks has gained 45.2% in the last one year. Moreover, it has a long-term earnings growth rate of 15%.
Tilly's has jumped a whopping 110.8% in the past one year. The stock has a long-term earnings growth rate of 13%.
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