Why are Zumiez's Shares Marching Ahead of the Industry?

Shares of Zumiez Inc.ZUMZ have jumped nearly 20.4% in the past six months, notably outperforming the Zacks categorized Retail – Apparel/Shoe industry, which fell 14.3%. Also, this Zacks Rank #2 (Buy) stock has considerably outpaced the broader Retail – Wholesale sector’s gain of just 0.9% in the said time period. The growth came on the back of Zumiez’ strategic initiatives, unique merchandise offering and financial strength.

Let’s Delve Deeper

Despite the prevailing headwinds in the retail industry, Zumiez remains confident of gaining market share in the long term, based on its strategic initiatives. These initiatives mainly focus on omni-channel growth, authentic lifestyle positioning and commitment to customer service. Further, Zumiez’s strategy is based on offering action sports merchandise focused on young adults, which enable the company to carve a distinct niche for itself.

In addition, Zumiez’s stock performance growth can be attributed to the renewed comparable sales (comps) trend since Sep 2016. In fact, the turnaround came after the company’s 17-month long trend of posting negative comps and dismal sales results.

Recently, the company reported a 9.4% rise in comps for the four-week period ended Jan 28, 2017 as against a 4.6% decline witnessed in the four-week period ended Jan 30, 2016. This marks the company’s fifth straight month of comps growth. Moreover, net sales for the same period (Jan 2017) grew 14.3% to $49.4 million from $43.2 million in the year-ago period.

The better-than-expected net sales led management to expect its fourth-quarter earnings per share to be at or marginally exceed the upper end of it previous projection in the band of 60-66 cents. The Zacks Consensus Estimate for the said quarter is pegged at 67 cents, up from 64 cents in the past 30 days.

The stock appears compelling from the earnings perspective as well. Zumiez has outperformed the Zacks Consensus Estimate in five straight quarters, while it reported third-quarter fiscal 2016 results. In the trailing four quarters, the company has posted an average beat of 30.9%.

Additionally, Zumiez remains well on track with its store expansion plans. Additionally, management strives to improve eCommerce and omni-channel platforms in a bid to provide customers a quick, and easy access to its products. We expect that the company’s well-balanced store expansion and eCommerce strategies are likely to drive top-line growth, going forward. Alongside, Zumiez enjoys immense financial strength as evident from its ability to generate solid cash flows, along with shareholder-friendly moves.

We believe Zumiez to be a sound investment choice, as the stock has been exhibiting a bullish run on the index for quit some time now. Further, it has a long-term earnings growth rate of 15%.

Stocks You May Consider

Other favorably placed stocks in the Retail-Wholesale sector include The Children’s Place, Inc. PLCE , Genesco Inc. GCO and Dollar Tree, Inc. DLTR .

The Children’s Place, with a long-term earnings growth rate of 10.3%, has surged 50.1% in the past one year. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .

Genesco, with a long-term earnings growth rate of 9.5%, has a Zacks Rank #2. Further, the stock has posted an average beat of 31.4% in the past four quarters.

Dollar Tree, a Zacks Rank #2 stock, has a long-term earnings growth rate of 16.7%. Further, the stock has posted an average beat of 2.4% in the trailing four quarters.

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Zumiez Inc. (ZUMZ): Free Stock Analysis Report

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