), a mall-based specialty retailer of action sports apparel,
footwear, equipment and accessories, remains on our Neutral list
with a target price of $28.
Why the Reiteration?
Zumiez has carved a distinct niche for itself in the specialty
retail market, driven by its strategy that is based on offering
action-sports merchandise focused on young men and women in the
age of group of 12 to 24 years. 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
first-quarter fiscal 2013, marking its 18th consecutive quarterly
beat. The average surprise for the trailing 18 quarters stands at
33.1%. 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 Zumiez's store expansion policy, along
with enhancement of e-Commerce will help boost its top and bottom
line. 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 the company's future comps
performance due to the fall in comparable store transactions in
recent times. Analyzing the trailing 5 months performance, we
note that the company's comps have been increasing at a declining
rate every month, with the exception of April, when it rose 4.6%
and February, when the company posted negative 8.9% comps.
Additionally, Zumiez is projecting comparable-store sales to
range from flat to a 2% increase in the second quarter of fiscal
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 Worth Considering
Zumiez currently holds a Zacks Rank #3 (Hold). Other stocks worth
considering among apparel/shoe retailers are
Stein Mart Inc.
Pacific Sunwear of California Inc.
), all of which carry a Zacks Rank #2 (Buy).
GAP INC (GPS): Free Stock Analysis Report
PAC SUNWEAR CAL (PSUN): Free Stock Analysis
STEIN MART INC (SMRT): Free Stock Analysis
ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
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