Comparable-store sales (comps) for sports-related teen apparel retailer, Zumiez Inc. , edged down 1.0% for the five-weeks ended December 29, 2012. However, the company’s comps fared better than analysts’ expectations and November’s comps decline of 4.2% but fell sharply from an increase of 10.0% recorded for the five-week period ended December 31, 2011.
Net sales for the month surged 15.0% to $120.3 million from $104.6 million reported in the year-ago period.
On the other hand, the company’s primary competitor, Hot Topic Inc. posted healthy results for the holiday season, combining November and December months. Hot Topic recorded comps increase of 2.2% for the nine weeks ended December 29, 2012, compared with the year-ago period. The company’s net holiday sales increased 4.0% year over year to $177.3 million.
Looking ahead, the Washington-based retailer, Zumiez retained its previously forecasted fourth-quarter fiscal 2012 sales guidance of $218–$221 million, whereas projected comps decline of 3%–4%. Based on sales outlook for the quarter, the company expects earnings per share in the band of 59–62 cents. The earnings expectation also includes estimated costs and expenses of 8 cents related to the Blue Tomato acquisition. The current Zacks Consensus Estimate for the fourth quarter stands at 67 cents per share, which is above the higher end of the company’s forecasted guidance range.
Zumiez’s core strategy is based on offering action-sports merchandise focused on young men and women in the age of group of 12 – 24 years, which has enabled the company to carve a distinct niche for itself. Moreover, the company’s stores are strategically located in busy areas of the mall, such as food courts, movie theatres and music/game stores, which are typically frequented by its target customers.
Further, the company is currently in the early phase of its store expansion program and plans to augment its network to 600–700 stores in the long run. In fiscal 2012, the company intends to add 50 new stores, including 10 new stores in Canada. The recent acquisition of Blue Tomato facilitates Zumiez to tap the European market. These initiatives provide the company with a solid platform to effectively capitalize on the emerging opportunities.
Though the company’s overall performance and store expansion strategies are well appreciated, there is slight apprehension surrounding the company’s future comparable store sales performances citing the recent weak comp growth.
Based on such mixed prospects, Zumiez currently carries a Zacks #3 Rank, implying a short-term Strong Hold rating. Moreover, we are maintaining a long-term ‘Neutral’ recommendation on the stock.