Everett, Washington-based Zumiez Inc. (ZUMZ) reported comparable-store sales growth of 17.0% for September 2010. This compares with a 0.8% decrease in the year-ago period. The growth in comparable-store sales was driven by an increase in transactions, slightly offset by lower dollars per transaction. Total sales for September improved 22.5% to $44.7 million, compared with $36.5 million in the year-earlier period.
By product category, all segments (accessories, men’s, footwear, boy’s, juniors and hardgoods) posted positive comparable-store sales in the month. Transactions increased during the month, but dollars per transaction were down. Moreover, average unit retail (AUR) dropped and units per transaction also fell, but to a lesser extent.
Region-wise, comparable-store sales were up about 22% in the South, 16% in the Midwest, 15% in the West and 9% in the Northeast. Internet sales made up for the difference in comparable-store sales performance.
These attractive numbers shaped the company for an upward revision of earnings per share. Zumiez raised its third quarter earnings guidance to $0.28–$0.30 per share from the recent upward revised guidance of $0.25–$0.27 (from $0.21–$0.24).
The company’s latest guidance is based on low double-digit comparable-store sales for the third quarter, comprising 12.4% comparable-store sales growth for the first two months of the quarter and guidance of mid single-digit comparable-store sales for the last month.
Zumiez outperformed larger teenage-focused retailers in September on a comparable-store sales basis. Abercrombie & Fitch Co. (ANF), Aeropostale Inc. (ARO) and American Eagle Outfitters Inc. (AEO) reported comparable-store sales of 13%, 3% and 4%, respectively.
We remain impressed with positive growth across all categories and the broad regional strength of Zumiez that are expected to deliver meaningful results at the year-end. Additionally, sales performance and increased earnings guidance are also appreciable considering the highly promotional teen apparel scenario in an uncertain economic environment. As of October 2, 2010, the company operated 397 stores. We have a Zacks #2 Rank (short-term Buy rating) on the company.
However, intense competition from other specialty retailers, the seasonal nature of Zumiez’s business and risks associated with sourcing merchandise from foreign countries undermine its growth prospects. This leaves limited space for above-market performance by the company. We maintain our long-term Neutral rating on Zumiez.
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