Is Zumiez, Inc. (ZUMZ) part of your portfolio? If not, then this is the right time to add the stock as it looks very promising. Moreover, the underlying factors are capable of carrying the momentum further. The stock carries a Zacks Rank #2 (Buy) and has surged roughly 47% last year, demonstrating its inherent strength.
The company’s long-term earnings per share growth rate stands at a healthy 14.2%. We believe that it could prove to be a solid bet for investors.
The company’s primary strength is its earnings surprise history. In the trailing 10 quarters, Foot Locker has beaten the Zacks Consensus Estimate by an average of 20%, including 7.7% for the last reported quarter. Since the announcement of the company’s third-quarter fiscal 2014 results on Dec 4, Zumiez’s shares have increased 14.2%.
Zumiez posted adjusted earnings of 56 cents per share that increased 21.7% year over year and surpassed the Zacks Consensus Estimate of 52 cents per share. Net sales increased 11.6% to $213.3 million and outdid the Zacks Consensus Estimate of $211 million, driven by better-than-expected growth in comparable-store sales (comps).
After posting soft comps through fiscal 2013, Zumiez has been witnessing an uptrend in comps. This is evident from comps growth of 1.8%, 3.4% and 3.7% registered in the first, second and third quarters of fiscal 2014, respectively.
The momentum continued in the fourth quarter too, when the retailer of sports-related teen apparel reported 6.3% comps growth in November, followed by an 8% increase in December. We believe that the rebounding economy, falling unemployment rate and gasoline prices, higher consumer confidence and improving consumer spending benefited this Washington-based company. Net sales surged 12.6% and 14.4% during the months of November and December, respectively.
A closer look at the company’s combined sales performance for November and December reveals that the 2014 holiday season has been an outstanding one for Zumiez. Buoyed by an impressive performance, the company raised its sales and earnings guidance for the fourth quarter of fiscal 2014.
Management now anticipates revenues to come in the range of $255–$256 million compared with the prior forecast of $249–$251 million. Further, the company expects earnings in the band of 75–77 cents versus the previous projection of 69–72 cents per share. Meanwhile, comps are expected to grow about 7%, substantially higher than the previously guided range of 3%–4% growth.
We believe Zumiez’s constant focus on boosting productivity at existing stores, developing a leading omni-channel platform and enhancing its presence – both domestically and overseas — have led to an encouraging comps trend.
Other Stocks That Warrant a Look
Other stocks performing well in the retail industry include Shoe Carnival Inc. (SCVL), Pacific Sunwear of California Inc. (PSUN) and L Brands, Inc. (LB). While Shoe Carnival and Pacific Sunwear sport a Zacks Rank #1 (Strong Buy), L Brands carries a Zacks Rank #2.
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