), a mall-based specialty retailer of action sports apparel,
footwear, equipment and accessories, remains on our Neutral list
with a target price of $29.00.
Why the Reiteration?
Zumiez has carved a niche for itself in the specialty retail
market, driven by its strategy of offering action-sports
merchandise catering to young men and women in the age of group
of 12 to 24. Furthermore, the company's stores are strategically
located in busy areas of the mall, such as food courts, movie
theatres and music/game stores, which are frequented by the
company's target customers.
Building on its long-term growth strategies and strength in
assortments, Zumiez managed to beat earnings expectations in
second-quarter fiscal 2013, marking its 19
consecutive beat. The average surprise for the trailing 19
quarters stands at 32.3%. We expect the company to keep up this
trend of posting positive earnings surprises in the years ahead,
based on its focus on boosting productivity at existing stores,
developing a leading omni-channel platform and enhancing its
presence both domestically and overseas.
Going forward, we believe that Zumiez's store expansion
policy, along with enhancement of e-Commerce will help boost its
top and bottom lines. The company is currently in the early phase
of its store expansion program, and plans to increase its network
to 600-700 stores in the long run. The company plans to expand
its store base by opening 58 new stores in fiscal 2013,
comprising 9 stores in Canada and 6 in Europe.
We also remain impressed with the Blue Tomato acquisition,
which has provided the company a solid platform to capitalize on
However, we are skeptical about Zumiez's future comps
performance on account of a decrease in its comparable store
transactions in recent times. Analyzing the trailing 8 months'
performance, we note that the company's comps have been declining
every month, with the exception of April and August Additionally,
this Zacks Rank #4 (Sell) company is projecting comparable-store
sales in the range between flat to a 2% increase in the third
quarter of fiscal 2013.
Further, we believe that intense competition from rival
specialty retailers, the seasonal nature of the business, and
risks associated with sourcing merchandise from foreign countries
may undermine the company's results.
Other Stocks to Consider
Other stocks worth considering among apparel/shoe retailers
Citi Trends, Inc.
L Brands, Inc.
). All of these carry a Zacks Rank #2 (Buy).
CITI TRENDS INC (CTRN): Free Stock Analysis
DSW INC CL-A (DSW): Free Stock Analysis
STEIN MART INC (SMRT): Free Stock Analysis
ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
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