Zumiez Inc. (ZUMZ), the leading retailer of apparel, footwear, equipment and accessories for action sports, reported same-store sales growth of 21.5% for the four-week period ended October 30, 2010, driven by compelling products. The October results marked the eleventh consecutive month of same-store sales growth.

Results outshone a same-store sales decline of 8.9% witnessed in the year-ago period. Net sales in the reported period soared 27.3% year over year to $31.4 million.

Results for the four-week period ended October 30, 2010, also saw a marked improvement over the company’s revenue and same-store sales recorded in September 2010. Zumiez’s net sales for the five-week period ended October 2, 2010, had increased 22.5% while comparable store sales increased 17.0%.

On the back of strong sales and margins, Zumiez revisited its third quarter 2010 guidance, with earnings per share now expected in a band of approximately 36 cents to 37 cents, up from 28 cents to 30 cents earlier. The Zacks Consensus Estimate of 37 cents a share, for the third quarter, currently stands at the high end of the guided range.

Zumiez expects comparable store sales to increase in the mid-to-high, single-digit range for the third quarter of fiscal 2010.

Zumiez has outperformed larger teenage-focused retailers, in October, when compared on a same-store sales basis. Abercrombie & Fitch Co. (ANF), Aeropostale Inc. (ARO) and American Eagle Outfitters Inc. (AEO) reported same-store sales of a 2% growth, a 3% fall, and a 2% decline, respectively.

Zumiez has several strategic initiatives in place to stimulate top-line performance. These include accelerating same-store sales growth, opening of new high-return stores and increasing e-commerce revenues. Zumiez’ focus on teenage action-sports based merchandise, commitment toward expanding store network and a debt-free balance sheet augur well for future operating performance.

However, intense competition from other specialty retailers, the seasonal nature of Zumiez’ business and risks associated with sourcing merchandise from foreign countries temper the company’s growth prospects, leaving limited space for out-performance.

Zumiez’ shares maintain a Zacks #2 Rank, which translates into a short-term Buy rating. Our long-term recommendation for the stock remains Neutral.

 
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