Zumiez Inc. ZUMZ has been able to maintain its robust performance amid tough retail scenario. This along with the company’s solid comps performance and strategic initiatives, including new customer engagement, store expansion and e-commerce growth bode well for the stock. Notably, shares of this Zacks Rank #2 (Buy) company have rallied 79.1% in the last six months, outperforming the industry’s gain of 18.9%.
Further, the company’s VGM Score of B and an expected long-term earnings growth rate of 18%, highlight its inherent strength. Let’s analyze the factors boosting the stock’s performance.
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Positive Surprise History and Solid Comps Trend
Though the company posted in-line earnings in third-quarter fiscal 2017, it delivered a positive earnings surprise in the preceding eight quarters. Moreover, sales topped estimates for the sixth straight quarter. In third-quarter fiscal 2017 Zumiez reported positive comps for the fifth straight quarter.
In addition to comps growth, results were aided by investments in omni-channel capabilities and stringent cost controls. Further, the company’s favorable comps trend continued in November 2017, which reflected a solid start to the holiday season. This also marked the company’s eighth straight month of comps growth.
Favorable Outlook Drives Estimates
On account of the solid comps momentum carried forward in November, its merchandise strategies, and integrated sales channels, Zumiez anticipates generating robust holiday season sales and a fabulous earnings growth in the fourth quarter. Consequently, the company provided an encouraging outlook for fourth-quarter fiscal 2017.
The company expects net sales for the quarter in the $291-$297 million range, while comps is anticipated to grow 3-5%. Further, the company projects earnings of 78-84 cents per share, which is likely to witness significant growth from the year-ago quarter earnings of 74 cents.
Consequently, the Zacks Consensus Estimate for the fourth quarter and fiscal 2017 moved up 2 cents and 4 cents, respectively, to 80 cents and $1.09. Further, the estimate for fiscal 2018 also increased by 4 cents to $1.19 per share.
Customer-Focused Initiatives
Zumiez is gaining from its focus on providing differentiated assortments and a great shopping experience to customers. This is strengthening its position in the industry by significant market share gains. Further, the company is boosting competitive advantage by investments in logistics, planning and allocation along with omni-channel capabilities, which positions it for growth both in the near and long term.
Coming to initiatives, the company is on track with the roll out of new customer engagement strategies across stores in the United States. Moreover, it remains focused on finding new and unique brands across all departments. In connection with this, the company has launched more than 100 new brands in 2017, bringing the newness and localized fashion desired by customers.
Expanding Stores
The company keeps up with the strategy of optimizing its store base through expansion in the underpenetrated markets and by either repositioning or closing underperforming stores through constant evaluation, aimed at maximizing long-term productivity. Though the company has slowed down the rate of domestic store growth, it continues to see opportunities for international expansion.
The company remains on track to open a total of 19 new stores in fiscal 2017, including five in Europe, two in Australia and three in Canada. Of these, the company has opened 18 stores year to date. This leaves the company with the target of opening just one store in the fiscal fourth quarter.
E-commerce Growth
Zumiez is also striving to expand its e-commerce and omni-channel platforms to provide consumers with the facility of quick and easy access to its products and brands. In this regard, Zumiez has considerably improved customers’ experience, by integrating its physical and digital networks. This allows customers to access inventories through all channels, alongside availing facilities like buy online, pick up in store, reserve online and pay in store.
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Investors interested in the same sector may also consider stocks such as American Eagle Outfitters Inc. AEO, Shoe Carnival Inc. SCVL and Urban Outfitters Inc. URBN, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Eagle delivered an average positive earnings surprise of 2.6% in the trailing four quarters. It has a long-term earnings growth rate of 8.7%.
Shoe Carnival posted an average positive earnings surprise of 20.7% in the trailing four quarters. In addition, it has a long-term earnings growth rate of 12%.
Urban Outfitters delivered an average positive earnings surprise of 5.6% in the trailing four quarters. It has a long-term earnings growth rate of 12%.
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