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Zumiez rises as 2Q profit tops Street's view

NEW YORK (AP) -- Zumiez's stock rose Friday after its second-quarter profit beat Wall Street's expectations, providing investors relief after disappointing reports from several other teen retailers.

THE SPARK: Zumiez Inc., which sells clothing, shoes and equipment for surfing, skateboarding and snowboarding, reported late Thursday that its net income more than doubled in the quarter ended Aug. 2. Excluding one-time items, earnings came to 20 cents per share, beating analysts' average estimate by 3 cents. Revenue grew 17 percent to $157.9 million, roughly in line with expectations of analysts polled by FactSet.

For the current quarter, Zumiez expects an adjusted profit of 43 cents to 47 cents per share on revenue of $187 million to $191 million. That's below what Wall Street had predicted: Earnings of 54 cents per share on revenue of $199 million.

Teen retailers Aeropostale, Abercrombie & Fitch and American Eagle Outfitters have spooked investors with weak outlooks. The companies noted poor traffic and slumping sales. Teen shoppers can be fickle, with constantly changing tastes. Their purchases are often tied to how much their parents are willing to spend, and higher taxes this year have weighed on consumers.

THE ANALYSIS: Edward Yruma of KeyBanc Capital Markets said in a client note that Zumiez's results were better than other teen retailers. But its sales in stores open at least a year rose 0.9 percent, the third straight quarter when the metric rose less than 1 percent. That suggests increasing competition for action sports gear, he said.

Yruma, who has a "Hold" rating on Zumiez stock, said he does think Zumiez is making the right investments for long-term growth and could increase market share.

Jefferies' Randal Konik said Zumiez's third-quarter guidance may be a bit conservative given that sales in stores open at least a year rose 3 percent in August — a "decent" reading, he said. He trimmed his price target on the stock by $2, to $27.

A representative for Zumiez did not immediately respond to an email seeking comment.

SHARE ACTION: Zumiez's stock added $2, or 7.9 percent, to $27.29 in midday trading Friday. The Lynnwood, Wash., company's stock had gained 30 percent this year.