Updated Research Report on Zumiez - Analyst Blog

On Apr 17, 2014, we issued an updated research report on Zumiez Inc. ZUMZ. The company recently posted comparable-store sales (comps) for the five weeks ended Apr 5, 2014. Although comps declined 2.9% on a year-over-year basis, they bettered analyst expectations.

Also, despite a highly discounted promotional holiday season coupled with unfavorable weather conditions in January, Zumiez posted better-than-expected fourth-quarter fiscal 2013 bottom-line results. With a positive surprise of 6.6% in the fourth quarter, the company has now surpassed the Zacks Consensus Estimate in 20 of the past 21 quarters.

The results benefited from the company's successful execution of long-term growth strategies and the strength of its distinguished and varied assortments. We expect the company to maintain 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.

Zumiez's plan to increase its network to 600-700 stores in the long run seems to be on track as in fiscal 2013, the company successfully completed the target of opening 59 stores. It now intends to further increase its store count by 55 stores in fiscal 2014.

Further, the company is striving to expand its e-Commerce and omni-channel platforms to give consumers quick and easy access to its products and brands. We believe that the company's well-balanced store expansion and e-Commerce strategies will drive its top-line growth.

Finally, Zumiez's acquisition of Blue Tomato is likely to be accretive to the company, as it strengthens the company's international base and provides a solid platform to capitalize on the emerging opportunities.

The aforementioned factors provide investors an encouraging outlook and instill confidence about the company. However, we are not very constructive on the stock due to intense competition from rival specialty retailers, the seasonal nature of the business and risks related to sourcing merchandise from foreign countries, which may undermine the company's results.

Zumiez currently carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Other stocks worth considering in the apparel-shoe sector include Bebe Stores, Inc. BEBE, American Apparel, Inc. APP and Foot Locker, Inc. FL. All these stocks carry a Zacks Rank #2 (Buy).