We continue to maintain our long-term Outperform recommendation
on mall-based action-sports specialty retailer,
). Our recommendation is based on the company's continuous
better-than-expected quarterly performance primarily driven by its
well-balanced store expansion and e-commerce strategies.
Zumiez's recently reported first-quarter 2012 earnings of 14
cents per share not only topped the Zacks Consensus Estimate of 11
cents but also jumped more than two folds from the prior-year
earnings of 6 cents.The robust performance was driven by improved
margins as well as strong merchandise, store expansion and
Excluding the cost associated with the relocation of the
company's e-commerce fulfillment center, Zumiez's earnings came in
at 15 cents per share. With respect to earnings surprises, Zumiez
has topped the Zacks Consensus Estimate over the last four quarters
in the range of 1.7% to 60%. The average remained at 27%,
indicating that Zumiez has surpassed the Zacks Consensus Estimate
by the same measure in the trailing four quarters.
Net sales in the reported quarter climbed 22.7% from the
prior-year period, primarily due to solid comparable store sales
performance. Moreover, on the back of leveraged selling, general
and administrative expenses and improved gross margin, Zumiez's
operating margin expanded 320 basis points to 5.6%.
Moreover, we believe the company's recent agreement to acquire
one of Europe's leading action sports retailers Blue Tomatowill
provide it broader avenues to strengthen its international base
while also selectively expanding Blue Tomato's European footprint.
The transaction, which Zumiez expects to complete by July 1, will
be accretive to the company's top- and bottom line.Zumiez raised
its second-quarter sales guidance to the range of $134 - $136
million from $128 - $130 million, inclusive of nearly $2 million
sales from Blue Tomato.
Moreover,despite includingacquisition related costs and
expenses, the company maintained its pre- Blue Tomatoacquisition
earnings per share guidance range of 4 cents to 6 cents. Comparable
store sales for the second quarter are guided in the range of 8% -
10%, up from mid-single digit growth expected earlier.
Furthermore, Zumiez has a near to debt-free balance sheet with
total long-term debt of $36.1 million and shareholder's equity of
$280.4 million, reflecting debt-to-capitalization ratio of only
11.4% at the end of first quarter of fiscal 2012. Moreover, Zumiez
ended the quarter with $171.2million of cash and marketable
securities compared with $130.7 million at the end of first quarter
of fiscal 2011. This offers the company the financial flexibility
to drive future expansion.
Everett, Washington-based Zumiez targets young men and women in
the age group of 12 to 24 years, who seek popular brands that
represent lifestyle centered on extreme sports activities. We
expect Zumiez's focus on teenage action-sports based merchandise
and expanding store network to deliver solid performance in the
upcoming quarters. The company competes head-to-head with
Hot Topic Inc.
Pacific Sunwear of California Inc.
Currently, Zumiez holds a Zacks #2 Rank, which implies a
short-term Buy rating on the stock.
HOT TOPIC INC (HOTT): Free Stock Analysis
PAC SUNWEAR CAL (PSUN): Free Stock Analysis
ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
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