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Zumiez (ZUMZ) Outpaces the Industry in Six Months: Here's Why
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Zumiez Inc.’s (ZUMZ - Free Report) customer-centric approach, brand innovation and localized merchandising have positioned it strongly in the market. With strategic investments in technology and omnichannel capabilities, the company has successfully improved customer shopping experiences and driven sales growth.
Improved gross margins in first-quarter 2024 and positive trends in North America highlight the effectiveness of its operations. Looking ahead, Zumiez's careful store expansion and focus on profitability set a promising path for sustained growth and market leadership in fiscal 2024 and beyond. Driven by these factors, the company’s shares have risen 58.2% in the past six months compared with the industry’s 2.1% growth.
Image Source: Zacks Investment Research
Let’s Delve Deeper
Zumiez is strategically focused on maintaining a customer-centric business model that emphasizes strong brand relationships and cost management, thereby allowing it to deliver differentiated assortments and localized merchandising effectively.
This approach has led to positive results as Zumiez continues to enhance the shopping experience across various channels by leveraging advanced technology. Investments in logistics, planning, allocation and omnichannel capabilities further strengthen its competitive edge, positioning the company for growth.
The company successfully launched more than 150 new brands in fiscal 2023, with similar plans for fiscal 2024. These brands have resonated with customers, contributing significantly to sales. Zumiez’s private label brands grew to represent 23% of sales in fiscal 2023, up from 18% in 2022 and 13% in 2021. The brands continue to capture market share, appealing to trend and value-conscious consumers.
Zumiez has also demonstrated improved operational efficiency, particularly in its gross margins. In the first quarter of 2024, gross profit increased 5.1% year over year to $51.9 million, with gross margins expanding 230 basis points to 29.3%.
This improvement was driven by factors such as an increase in product margins, leveraged distribution center costs and lower shipping costs. Effective inventory management and pricing strategies have been crucial in maintaining profitability, even in a challenging market.
Additionally, Zumiez’s North American segment showed positive comparable sales growth of 0.3% in the fiscal first quarter, driven by strong performances in both the men's and women's business segments. This marks the first year-over-year growth in North America since fiscal 2021, indicating recovering consumer demand and effective sales strategies.
Store-Expansion Strategy Bodes Well
Zumiez continues to optimize its store base by expanding in underpenetrated markets and repositioning or closing underperforming stores. It operates 751 stores globally, with plans to open 10 new stores and close 20-25 underperforming ones in fiscal 2024. In Europe, the company is shifting its focus to enhance productivity and profitability by prioritizing full-price selling and reducing store expansion, a strategy that has proven successful in other international markets.
Challenges
Despite positive outcomes in other areas, this Zacks Rank #3 (Hold) company’s international sales were notably troubling, with net sales in Europe and Australia falling 10.8% from the previous year's level. Comparable sales in international markets dropped 13% for the quarter.
Although the focus on full-price selling in Europe helped improve margins, it led to a decrease in overall revenues. This decline highlights the challenges Zumiez faces in penetrating international markets and raises concerns about the effectiveness of its pricing strategy in these regions.
Nevertheless, the company is actively working to build a strong foundation for sustained profitability and growth in the competitive industry.
Key Picks
Some better-ranked stocks are The Gap, Inc. , Abercrombie & Fitch Co. (ANF - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 24.5% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It has a Zacks Rank of 2 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 51.1% and 11.5%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for American Eagle Outfitters’ fiscal 2024 earnings and sales indicates growth of 17.1% and 3.3%, respectively, from the year-ago actuals. AEO has a trailing four-quarter average earnings surprise of 28.1%.
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Zumiez (ZUMZ) Outpaces the Industry in Six Months: Here's Why
Zumiez Inc.’s (ZUMZ - Free Report) customer-centric approach, brand innovation and localized merchandising have positioned it strongly in the market. With strategic investments in technology and omnichannel capabilities, the company has successfully improved customer shopping experiences and driven sales growth.
Improved gross margins in first-quarter 2024 and positive trends in North America highlight the effectiveness of its operations. Looking ahead, Zumiez's careful store expansion and focus on profitability set a promising path for sustained growth and market leadership in fiscal 2024 and beyond. Driven by these factors, the company’s shares have risen 58.2% in the past six months compared with the industry’s 2.1% growth.
Image Source: Zacks Investment Research
Let’s Delve Deeper
Zumiez is strategically focused on maintaining a customer-centric business model that emphasizes strong brand relationships and cost management, thereby allowing it to deliver differentiated assortments and localized merchandising effectively.
This approach has led to positive results as Zumiez continues to enhance the shopping experience across various channels by leveraging advanced technology. Investments in logistics, planning, allocation and omnichannel capabilities further strengthen its competitive edge, positioning the company for growth.
The company successfully launched more than 150 new brands in fiscal 2023, with similar plans for fiscal 2024. These brands have resonated with customers, contributing significantly to sales. Zumiez’s private label brands grew to represent 23% of sales in fiscal 2023, up from 18% in 2022 and 13% in 2021. The brands continue to capture market share, appealing to trend and value-conscious consumers.
Zumiez has also demonstrated improved operational efficiency, particularly in its gross margins. In the first quarter of 2024, gross profit increased 5.1% year over year to $51.9 million, with gross margins expanding 230 basis points to 29.3%.
This improvement was driven by factors such as an increase in product margins, leveraged distribution center costs and lower shipping costs. Effective inventory management and pricing strategies have been crucial in maintaining profitability, even in a challenging market.
Additionally, Zumiez’s North American segment showed positive comparable sales growth of 0.3% in the fiscal first quarter, driven by strong performances in both the men's and women's business segments. This marks the first year-over-year growth in North America since fiscal 2021, indicating recovering consumer demand and effective sales strategies.
Store-Expansion Strategy Bodes Well
Zumiez continues to optimize its store base by expanding in underpenetrated markets and repositioning or closing underperforming stores. It operates 751 stores globally, with plans to open 10 new stores and close 20-25 underperforming ones in fiscal 2024. In Europe, the company is shifting its focus to enhance productivity and profitability by prioritizing full-price selling and reducing store expansion, a strategy that has proven successful in other international markets.
Challenges
Despite positive outcomes in other areas, this Zacks Rank #3 (Hold) company’s international sales were notably troubling, with net sales in Europe and Australia falling 10.8% from the previous year's level. Comparable sales in international markets dropped 13% for the quarter.
Although the focus on full-price selling in Europe helped improve margins, it led to a decrease in overall revenues. This decline highlights the challenges Zumiez faces in penetrating international markets and raises concerns about the effectiveness of its pricing strategy in these regions.
Nevertheless, the company is actively working to build a strong foundation for sustained profitability and growth in the competitive industry.
Key Picks
Some better-ranked stocks are The Gap, Inc. , Abercrombie & Fitch Co. (ANF - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories and personal care products. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 24.5% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It has a Zacks Rank of 2 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 51.1% and 11.5%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for American Eagle Outfitters’ fiscal 2024 earnings and sales indicates growth of 17.1% and 3.3%, respectively, from the year-ago actuals. AEO has a trailing four-quarter average earnings surprise of 28.1%.