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Zumiez Reports Strong May Comps

Zacks Equity Research

Zumiez Inc.(ZUMZ), a U.S. Specialty retailer with a focus on teenage action-sports based merchandise, came up with strong comparable store sales (comps) and sales results for the four-week period ended May 26, 2012, which were far better than the analysts’ expectations.

Zumiez’s May 2012 comps rose 13.7% compared with the comparable prior-year increase of 7.8%. Net sales for the period surged 23.6% to $37.4 million from $30.3 million reported in the four weeks ended May 28, 2011.

First-quarter 2012 comps at Zumiez were up 12.9% compared with an increase of 12.6% reported in the comparable quarter last year.

Quarterly results of the mall-based specialty retailer have been consistently ahead of the Zacks Consensus Estimate with the average surprise for the last four quarters standing at 27%. Zumiez posted solid results in first-quarter 2012 on account of improved margins as well as strong merchandise, store expansion and e-commerce strategies.

First-quarter earnings of 15 cents per share beat the Zacks Consensus Estimate of 11 cents and soared 150.0% from the prior-year level of 11 cents per share.

Net sales in the reported quarter climbed 22.7% to $129.9 million from $105.9 million a year ago. Total revenue was almost in line with the Zacks Consensus Estimate of $129 million.

The company anticipates second-quarter 2012 revenue in the range of $128 - $130 million, on the back of a mid-single-digit comparable store sales growth. Based on sales projections for the quarter, the company expects earnings per share to come in the band of 4 cents - 6 cents.

Everett, Washington-based Zumiez targets young men and women in the age group of 12 to 24 years, who seek popular brands that represent a lifestyle centered on extreme sports activities. The company goes head-to-head with Hot Topic Inc. (HOTT) and Pacific Sunwear of California Inc. (PSUN).

Zumiez's stores span across 2,900 square feet on average, and offer couches and video game stations to entice customers to shop for extended periods. These stores are strategically located near busy areas of the mall, such as food courts, movie theatres, music/game stores and other popular teenage hang-out destinations. As of May 26, 2012, the company operated 448 stores in the United States and 11 stores in Canada.

Currently, Zumiez carries a Zacks #1 Rank, implying a short-term ‘Strong Buy’ rating on the stock. We retain our long-term ‘Outperform’ recommendation on the stock.

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Read the Full Research Report on PSUN

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