Goodbye, preppy? Zumiez jumps on analyst upgrade

Zumiez shares jump after analyst says that California chic is in; goodbye, preppy look

Associated Press

NEW YORK (AP) -- Shares for teen retailer Zumiez rose Friday, after Wedbush Securities upgraded the stock to "Outperform" from "Neutral."

THE SPARK: Analyst Betty Chen gave a number of reasons for upgrading Zumiez, which sells niche brands of shoes and clothing aimed at teenagers, mostly boys who like skateboarding, surfing and snowboarding.

Chen cited the fashion shift to what she called "California lifestyle" and away from "traditional preppy," which she said has helped related retailers like Pacific Sunwear and Tilly's. She also noted Zumiez's emphasis on filling online orders quickly; the company recently relocated and expanded the distribution center where it fills online orders, and now lets online orders be filled through stores when the distribution center has run out.

She also said that the company is more efficiently allocating different styles of clothes and shoes at its stores in different regions of the country, which should mean that less inventory has to be marked down to clearance prices. The Lynnwood, Wash., chain operates just over 500 stores in North America and Europe.

And she said that Zumiez's purchase last year of the Blue Tomato brand of snowboarding and skating gear should give it a foothold in the European market, and predicted that Blue Tomato could eventually double the company's earning power.

THE ANALYSIS: "We believe the acquisition of highly complementary retailer Blue Tomato is a long-term positive for (Zumiez) as it nearly doubles the company's addressable market opportunity and provides a solid footing in the highly fragmented European market with an experienced management team," Chen wrote in a note to clients Friday.

The analyst lifted her earnings estimates for the second quarter, full year and fiscal 2014 and raised her price target on the stock to $36 from $30.

SHARE ACTION: Shares were up 91 cents, or 3.3 percent, to $28.86. The stock is up more than 48 percent in the year to date.

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