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Zumiez (ZUMZ) Stock Up on Solid September Comps, Ups View

Zacks Equity Research

Mall-based specialty retailer, Zumiez Inc. ZUMZ continues its positive comparable store sales (comps) trend, reporting seventh straight month of comps growth after a drop in February. Moreover, the company raised guidance for third-quarter fiscal 2017 based on solid quarter-to-date performance.

The company recorded a rise of 9.3% in comps for the five-week period ended Sep 30, 2017, compared with 6.3% increase witnessed in the five weeks ended Oct 1, 2016. Further, total net sales for September advanced 12.6% to $84.4 million from $75 million in the year-ago period.

Based on the solid quarter-to-date performance, the company raised earnings and sales forecasts for the fiscal third quarter. The company now anticipates sales in the range of $241-$243 million, compared with the previous guidance of $236-$241 million. Comps growth for the quarter is now anticipated in the 6-7% range.

Driven by higher-than-expected sales partly offset by higher operating expenses and slightly lower product margin, the company now projects earnings in the band of 45-48 cents per share. This marks a considerable increase from the prior guidance of 43-48 cents per share.

Following the news, shares of Zumiez have rallied 8.5% in the after-market trading hours yesterday. Overall, this Zacks Rank #1 (Strong Buy) stock has gained a whopping 53.1% in the last three months compared with the industry’s upside of just 1%. This outperformance can mainly be attributed to the company’s robust top and bottom-line surprise trends, alongside solid comps performance in recent months. Further, the company’s investments in omni-channel capabilities and stringent cost controls bode well.

Notably, the company is boosting competitive advantage by investments in logistics, planning and allocation along with omni-channel capabilities, which positions it for growth both in the near and long term. Additionally, it is on track with the roll out of new customer engagement strategies across stores in the United States. It is also focused on finding new and unique brands across all departments. In this connection, the company plans to launch more than 100 new brands in its stores. This will help bring freshness in its merchandise that customers are looking for.

Looking for Some More Promising Stocks? Check these

Other top-ranked stocks in the retail space include Abercrombie & Fitch Co. ANF, The Gap Inc. GPS and Canada Goose Holdings Inc. GOOS. While Abercrombie sports a Zacks Rank #1, Gap and Canada Goose carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie has improved 16.8% in the last three months. Moreover, the stock has a long-term growth rate of 14%.

Gap delivered an average positive earnings surprise of 9.3% in the trailing four quarters. Additionally, the stock has a long-term growth rate of 8% and has grown 27.7% in the last three months.

Canada Goose, with long-term earnings per share growth rate of 34.1%, has surged 20.5% year to date.

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Zumiez Inc. (ZUMZ) : Free Stock Analysis Report
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
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