Zumiez (ZUMZ 26.90, -0.10, -0.37%), an apparel retailer, gathered momentum in
pre-market trading today (+16%) and opened to sharp new 52-week highs after
reporting strong Q1 (Apr) results and providing robust guidance for Q2 (Jul).
In case you're not familiar, Zumiez is an apparel retailer with a core target
market of young men and women between ages of 12 and 24 and a focus on customers who enjoy the
fashion, music, art, and culture of action sports, streetwear, and other unique
In addition to selling men's, women's, and children's clothing, the company also sells footwear, cold weather gear, and accessories. ZUMZ currently operates approximately 700 stores, including 608 in the US, 50 in Canada, 35 in Europe, and 7 in Australia. It also operates websites at zumiez.com, blue-tomato.com, and fasttimes.com.au.
Demographically, Zumiez targets a large population of young men and women, many of whom are attracted to the above-mentioned unique styles and lifestyles, including action sports and streetwear. They tend to express their personal independence and style through the apparel, footwear, and accessories they wear. ZUMZ feels that it has created a highly differentiated retailing concept by offering an extensive selection of relevant and current lifestyle brands, including some brands and products that are available only at ZUMZ stores.
Turning to the AprQ results, ZUMZ reported a loss of $(0.10) per share, which was actually better than market expectations. Revenue rose 13.9% year/year to $206.3 mln, which was above prior guidance of $198-202 mln. Even more impressive was the guidance for Q2 (Jul), as ZUMZ expects EPS of $0.04-0.09 whereas the market was expecting a slight loss. The company also expects Q2 revenue of $213-217 mln, which was also was above market expectations.
Same store comps are always important for retailers, and ZUMZ did very well on that front. AprQ comps came in at +8.3%, above prior guidance of +4-6%. Also, they reported May comps at a robust +7.5%, so it's clear that the momentum from AprQ is continuing into JulQ. That is probably why the JulQ revenue and EPS guidance was so strong. For JulQ, ZUMZ guided to comps of +3-5%, but with May already in the books at +7.5%, perhaps they are being conservative about June-July comps.
On the call, ZUMZ said that 2018 has gotten off to a good start as the strong sales momentum experienced during the holiday season accelerated in Q1. During the quarter, the company’s men's category was the largest positive comping category, followed by women's and footwear. Accessories was the largest negative comping category, followed by hardgoods.
On the call, speaking further about that strong Q2 (Jul) guidance, ZUMZ explained that the first several days of August, which are in the back-to-school season, are now falling into Q2 vs being in Q3 last year. This is boosting the Q2 guidance but will presumably hurt Q3 results a bit.
In terms of new store openings, ZUMZ is on track to open approximately 13 new stores in 2018, including 6 in the US, 5 in Europe and 2 in Australia, with roughly half the openings occurring ahead of the back-to-school season. Year-to-date, ZUMZ has opened three store locations, including two in North America and one in Europe.
In sum, this stock struggled during the first half of 2017, but it has been steadily climbing higher since early September 2017 following strong JulQ and OctQ reports last year. That was followed up with a good report in JanQ, and last night the Q1 (Apr) results and guidance for Q2 (Jul) were quite robust. And comps have been very strong as well. It seems ZUMZ is firing on all cylinders right now.
ZUMZ appears to be having success with fending off online competitors. ZUMZ says that it is committed to a strong brick and mortar presence, but the company has noted in the past that it has the right to exit over 85% of its North American locations within the next three years if needed. Right now, though, ZUMZ seems to be performing well. In fact, its stock price (at $31.70 in pre-mkt) has nearly tripled from its August 2017 low of $11.43.
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