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Here's What Makes Zumiez (ZUMZ) a Promising Investment Option

Zacks Equity Research

Zumiez Inc. ZUMZ clearly appears to be a preferred pick, as it seems to have all it takes to catch investors’ attention. Notably, the company is benefiting from favorable comparable sales (comps) trend and solid bottom-line picture, along with investments in logistics and omni-channel endeavors. Also, it is on track with store remodeling and openings.

All these factors helped the company to deliver robust second-quarter fiscal 2019 results, wherein it continued positive earnings and sales surprise for the second straight time. Also, the top and bottom lines grew year over year.

Robust second-quarter fiscal 2019 performance prompted management to lift the fiscal 2019 view. Adjusted earnings per share are now anticipated to be $2.10-$2.20 versus the previously mentioned $1.84-$1.94. This has triggered an upward revision in the Zacks Consensus Estimate. The consensus mark for fiscal 2019 and 2020 has moved north by 27 cents and 26 cents to $2.16 and $2.24, respectively, in the past 30 days.

Markedly, the stock has gained approximately 19% since the announcement of its quarterly results. In the past six months, shares of this Lynnwood, WA-based company have rallied around 30% against the industry's decline of 27.9%.

All said, let’s take a closer look at the aspects driving this Zacks Rank #1 (Strong Buy) stock, which also flaunts a VGM score of A.

Factors Narrating Zumiez’s Growth Story

Zumiez’s focus on providing differentiated assortments bode well. The company has invested much resources to boost localized merchandising assortments. Additionally, the implementation of advanced technology has helped augmenting customers’ shopping experience across diverse channels. Further, it is boosting competitiveness by investments in logistics, planning and allocation along with omni-channel capabilities, which position it for growth in the long term. Management is also on track with managing costs across different verticals.

Also, the company has been benefiting from favorable comps trend, which has been steadily rising since the trailing 12 quarters. During second-quarter fiscal 2019, comps grew 3.6%, up from the company’s guided range of flat to up 2%. The metric benefited from higher transaction volume and growth in dollars per transaction. Strength in the hard goods, accessories and footwear categories aided comps. Moreover, management projects comps for the fiscal third quarter to grow 3-5%. For fiscal 2019, management now expects comps to rise 2-4% compared with the prior view of low single-digit growth.

Apart from these, the company keeps up with the strategy of optimizing its store base through expansion in the underpenetrated markets as well as through either repositioning or closing underperforming stores. Moreover, it is on track to open around 16 stores in fiscal 2019, including seven in Europe, six in North America and three in Australia. In fact, a major proportion of its capital spending in fiscal 2019 will be allocated toward store remodeling and openings.

Further, the company is 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. We believe that the company’s well-balanced store expansion and e-commerce strategies will help it keep track of the evolving patterns and drive top-line growth.

All said, we are optimistic that Zumiez’s growth plans will help keep its stellar show on.

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