Brean Upgrades Zumiez, Positive On Execution Of Product Initiatives

• Zumiez Inc. ZUMZ shares have lost 29 percent since August 4.
• Brean Capital’s Liz Pierce upgraded the rating for the company from Hold to Buy, while establishing a price target of $24.
• Zumiez’s product initiatives seem to be working and the company appears to be better positioned today than last year, Pierce stated.

Zumiez reported January sales of $43.2 million, representing a 2.2 percent y/y decline, with same store sales down 4.6 percent y/y. This was once again ahead of the Brean estimate of a decline of 10-20 percent and the consensus expectation of a decline of 11.3 percent.

Junior’s posted positive comps. Although Junior’s represents only a small percentage of total sales, this may be seen as a “positive sign” and highlights “the strength of the buying team and its ability to move quickly to address product issues,” analyst Liz Pierce mentioned.

Although weather continues to be a factor affecting the performance of the other categories, Pierce said, “Positive comp in Junior’s gives us confidence that product initiatives are working and will lead to positive comps in other categories sooner versus later.”

The analyst added that once the seasonal inventory has been liquidated and new merchandise becomes available, the men’s and accessories categories would move into positive territory. Although the footwear category had launched a number of new styles, it could continue to be under pressure as “fashion trends are still largely out of sync with their sweet spot.”

Although the sector challenges continue, Zumiez appears to be “better positioned than it was a year ago due to its omni-channel and product initiatives,” Pierce commented, while adding that the stock valuation is currently “compelling.”