Zumiez Inc. (ZUMZ) reports solid same store sales, guides estimates higher.
Company Description
Zumiez Inc. is a mall-based specialty retailer of action sports related apparel, footwear, equipment and accessories operating under the Zumiez brand name. The company operates 434 stores primarily located in shopping malls, giving it a presence in at least 37 states and Canada.
Same Store Sales
Zumiez reported strong same store sales for the month of December, up 10% compared to the 4-6% estimates made by analysts. The sales in the five week period ending 12/31/11 were $104 million, up 18% from the $88.5 million posted in the year ago period.
The solid performance comes after strong growth in the year ago period. The company reported same store sales growth of 9.2% last year. Beating a high comparable number is a good indication of strong growth.
Guidance moves higher
Following the strong same store sales, the company moved sales guidance to $180 to $181 million. Management also increased its earnings guidance from $0.52 to $0.54 up to $0.57 to $0.58 per share. Analysts followed suit the following morning and the stock jumped in early trading.
Brokers move target prices higher
Following the release of the same store sales data, two brokerages were quick to increase target prices to $26 and $32. A day prior to the release of the data, one brokerage downgraded its rating on the stock and established a $27 price target. This reminds us of the importance of the Zacks #1 Rank (Strong Buy) and how its focuses on earnings, not recommendations to lead investors to make better investing decisions. While price targets and recommendations do play a role in the world of investing, earnings are what drive stock prices and higher earnings drive higher share prices.
ZUMZ trades at a slight premium to the industry on trailing twelve months earnings multiple, and carries a much larger premium to forward twelve months earnings multiple. Metrics that rely on backward looking data carried the similar premium to the market, such as price to book and EV/EBITDA.
The Chart
The chart shows some pretty big moves over the last twelve months, including a sizeable gain at the beginning of December when earnings were released. The next release earnings release is likely to be in March of 2012, but the same store sales numbers give us confidence about where this stock will be in the future.
Brian Bolan is an Aggressive Growth Stock Strategist for Zacks.com.
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