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Zumiez Stock Surges 48% in Six Months: Lock in Gains or Invest More?
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Shares of Zumiez Inc. (ZUMZ - Free Report) have experienced a remarkable surge over the past six months. The stock has rallied 47.7% against the Zacks Retail-Apparel and Shoes industry’s sharp 5.2% decline. The company’s strong second-quarter performance, strategic initiatives and focus on cost management have positioned it for continued success.
Its customer-centric approach, investments in private label brands and operational efficiency have enabled it to outperform both the broader Retail-Wholesale sector and the S&P 500 index, which grew 4% and 7%, respectively, during the same period.
Image Source: Zacks Investment Research
Technical indicators are supportive of Zumiez’s strong performance. The stock is trading above both its 100-day and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in its financial health and prospects.
ZUMZ Drives Growth on Customer Focus, Operational Efficiency
Zumiez’s strategic focus on a customer-centric business model, emphasis on strong brands and prudent cost management have been pivotal in driving positive results in the second quarter of fiscal 2024. The company’s investment in advanced technology has enhanced the shopping experience across channels while improvements in logistics and omnichannel capabilities have further strengthened its competitive advantage.
Total sales increased 8.1% year over year to $210.2 million in the second quarter, driven by the strength of the North American market, where sales rose 10.4% compared from previous year. Additionally, comparable sales improved 3.6%, fueled by an increase in dollars per transaction due to higher average unit retail and a greater number of units sold per transaction. The early start of the back-to-school season also contributed to this growth, adding approximately 530 basis points to net sales.
The company’s private label brands, which represented 23% of sales in fiscal 2023, continue to capture market share among trend and value-conscious consumers. With plans to introduce more private-label brands in 2024, Zumiez is well-positioned to continue its revenue growth.
The company also reported significant improvements in profitability during the second quarter. Gross profit increased to $71.8 million, translating to a gross margin of 34.2%, up 250 basis points from the previous year. Key contributors to this margin expansion included reductions in store occupancy, shipping and distribution center costs. Additionally, Zumiez’s operating loss narrowed significantly, highlighting its ability to improve operational efficiency and capitalize on sales growth.
In Europe, Zumiez has shifted its strategy from rapid store expansion to productivity optimization of existing stores. This strategic pivot toward full-price selling is already yielding results, with merchandising margins in Europe increasing during the second quarter. Despite a slight decline in international sales, the focus on maintaining pricing discipline and improving operational efficiency positions Zumiez well for long-term success in the region.
Zumiez is also optimizing its store footprint and enhancing cost efficiency. The company closed 20 underperforming stores in North America in 2023 and plans to close an additional 25 in 2024 while opening new stores in key markets like North America, Europe and Australia. These efforts are complemented by labor optimization initiatives and structural changes to reduce shipping and logistics costs, which are expected to further enhance profitability.
Zumiez Projects Strong Outlook for Q3 & Beyond
Zumiez maintains a positive outlook for the third quarter and beyond. The company projects third-quarter sales to be between $221 million and $225 million, representing an increase in the band of 2-4% year over year, with comparable sales up 12.1% through Sep. 2. Despite uncertainties in the macroeconomic environment, Zumiez expects low single-digit sales growth for the fiscal 2024 and positive operating margins supported by stable sales growth and continued cost efficiencies.
Does ZUMZ Stock Still Seem Attractive?
From a valuation perspective, the stock presents an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-sales ratio of 0.50, below the five-year median of 0.59 and the industry’s average of 1.08, the stock offers value for investors seeking exposure to the sector. It currently has a Value Score of A, which further validates its appeal.
Image Source: Zacks Investment Research
Conclusion
Investors should consider Zumiez stock due to its strong financial performance and strategic initiatives. It has demonstrated impressive growth through a customer-centric approach, successful investments in private-label brands and effective cost management. Its focus on enhancing operational efficiency and optimizing store productivity, especially in key markets, positions it well for sustained profitability.
With a positive outlook for the upcoming quarters and continued improvement in key financial metrics, Zumiez represents a compelling investment opportunity for those seeking exposure to a well-managed and growth-oriented retailer. The company currently sports a Zacks Rank #3 (Hold).
Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn’s fiscal 2025 earnings and sales indicates growth of 8.9% and 10.7%, respectively, from the fiscal 2023 figures. BOOT has a trailing four-quarter average earnings surprise of 7.1%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 61% and 12.6%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 6.9% and 12.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.5%.
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Zumiez Stock Surges 48% in Six Months: Lock in Gains or Invest More?
Shares of Zumiez Inc. (ZUMZ - Free Report) have experienced a remarkable surge over the past six months. The stock has rallied 47.7% against the Zacks Retail-Apparel and Shoes industry’s sharp 5.2% decline. The company’s strong second-quarter performance, strategic initiatives and focus on cost management have positioned it for continued success.
Its customer-centric approach, investments in private label brands and operational efficiency have enabled it to outperform both the broader Retail-Wholesale sector and the S&P 500 index, which grew 4% and 7%, respectively, during the same period.
Image Source: Zacks Investment Research
Technical indicators are supportive of Zumiez’s strong performance. The stock is trading above both its 100-day and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in its financial health and prospects.
ZUMZ Drives Growth on Customer Focus, Operational Efficiency
Zumiez’s strategic focus on a customer-centric business model, emphasis on strong brands and prudent cost management have been pivotal in driving positive results in the second quarter of fiscal 2024. The company’s investment in advanced technology has enhanced the shopping experience across channels while improvements in logistics and omnichannel capabilities have further strengthened its competitive advantage.
Total sales increased 8.1% year over year to $210.2 million in the second quarter, driven by the strength of the North American market, where sales rose 10.4% compared from previous year. Additionally, comparable sales improved 3.6%, fueled by an increase in dollars per transaction due to higher average unit retail and a greater number of units sold per transaction. The early start of the back-to-school season also contributed to this growth, adding approximately 530 basis points to net sales.
The company’s private label brands, which represented 23% of sales in fiscal 2023, continue to capture market share among trend and value-conscious consumers. With plans to introduce more private-label brands in 2024, Zumiez is well-positioned to continue its revenue growth.
The company also reported significant improvements in profitability during the second quarter. Gross profit increased to $71.8 million, translating to a gross margin of 34.2%, up 250 basis points from the previous year. Key contributors to this margin expansion included reductions in store occupancy, shipping and distribution center costs. Additionally, Zumiez’s operating loss narrowed significantly, highlighting its ability to improve operational efficiency and capitalize on sales growth.
In Europe, Zumiez has shifted its strategy from rapid store expansion to productivity optimization of existing stores. This strategic pivot toward full-price selling is already yielding results, with merchandising margins in Europe increasing during the second quarter. Despite a slight decline in international sales, the focus on maintaining pricing discipline and improving operational efficiency positions Zumiez well for long-term success in the region.
Zumiez is also optimizing its store footprint and enhancing cost efficiency. The company closed 20 underperforming stores in North America in 2023 and plans to close an additional 25 in 2024 while opening new stores in key markets like North America, Europe and Australia. These efforts are complemented by labor optimization initiatives and structural changes to reduce shipping and logistics costs, which are expected to further enhance profitability.
Zumiez Projects Strong Outlook for Q3 & Beyond
Zumiez maintains a positive outlook for the third quarter and beyond. The company projects third-quarter sales to be between $221 million and $225 million, representing an increase in the band of 2-4% year over year, with comparable sales up 12.1% through Sep. 2. Despite uncertainties in the macroeconomic environment, Zumiez expects low single-digit sales growth for the fiscal 2024 and positive operating margins supported by stable sales growth and continued cost efficiencies.
Does ZUMZ Stock Still Seem Attractive?
From a valuation perspective, the stock presents an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-sales ratio of 0.50, below the five-year median of 0.59 and the industry’s average of 1.08, the stock offers value for investors seeking exposure to the sector. It currently has a Value Score of A, which further validates its appeal.
Image Source: Zacks Investment Research
Conclusion
Investors should consider Zumiez stock due to its strong financial performance and strategic initiatives. It has demonstrated impressive growth through a customer-centric approach, successful investments in private-label brands and effective cost management. Its focus on enhancing operational efficiency and optimizing store productivity, especially in key markets, positions it well for sustained profitability.
With a positive outlook for the upcoming quarters and continued improvement in key financial metrics, Zumiez represents a compelling investment opportunity for those seeking exposure to a well-managed and growth-oriented retailer. The company currently sports a Zacks Rank #3 (Hold).
Key Picks
Some better-ranked stocks are Boot Barn Holdings, Inc. (BOOT - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Steven Madden, Ltd. (SHOO - Free Report) .
Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn’s fiscal 2025 earnings and sales indicates growth of 8.9% and 10.7%, respectively, from the fiscal 2023 figures. BOOT has a trailing four-quarter average earnings surprise of 7.1%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 61% and 12.6%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 6.9% and 12.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.5%.