Stifel Upgrades Zumiez On Long-Term Path To Growth

• Zumiez, Inc. ZUMZ has seen a 61.67 percent decline in its share price, year to date.
• Stifel’s Richard E. Jaffe has upgraded the rating on the company from Hold to Buy, with a price target of $18.
• Jaffe believes that the recent sell-off in the stock was overdone and that the company’s great shopping experience and brand loyalty are likely to fuel long term growth.

Zumiez has revised its 2015 guidance downwards, although Jaffe believes that the management was being “overly cautious given the nimbleness of its merchandising effort and its ability to drive sales once the key trends turn to favor the company.”

“Our outlook has grown more positive due to our recent social media trends report which suggested Zumiez is the most favored retailer among the brands we evaluated,” Jaffe stated.

However, the company is expected to see near term weakness, driven by misses in its merchandise assortment, which Jaffe believes is already reflected in the share price. For the longer term, Zumiez appears well positioned to achieve margin expansion and drive comp sales.

According to the Stifel report, the company offers authentic and branded merchandize, which cushions it from promotional pressure that is witnessing by other teen retailers. Also, its good relationships with designers helps the company reposition merchandize quickly.

“In addition, the knowledgeable store associates create an engaging shopping experience, which has helped foster strong brand loyalty,” the Stifel report said.