Zumiez Inc. ZUMZ is focused on strengthening its market position by diversifying the company’s brand portfolio and expanding its private-label product range. These strategies aim to enhance customer engagement, stay aligned with market trends and maximize profitability. By offering exclusive in-house products and introducing new brands, Zumiez is tapping into evolving consumer preferences, while the higher margins on private-label products contribute directly to its financial growth.

Zumiez’s continued brand expansion has been well-received, driving up sales and keeping it on trend. Simultaneously, its private-label sales have become an increasingly important contributor to Zumiez’s growth, accounting for 27% of total sales in nine months of 2024 compared with 23% in 2023 and just 18% in 2022.

ZUMZ Stock Past Three-Month Performance

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ZUMZ’s Comparable Sales Growth in Core Markets

Zumiez’s consistent growth in comparable sales highlights strong demand for its products, even in a challenging retail environment. This was evident from its third-quarter fiscal 2024 performance, when comparable sales rose 7.5%, driven by the market of North America, which saw positive growth for the third consecutive quarter. North America’s net sales totaled $186.8 million, up 2.9% year over year, while international sales, including Europe and Australia, reached $35.7 million, a 2.7% increase.

The growth was largely driven by a rise in dollars per transaction and an increase in transactions. Men’s was the leading category contributor, followed by women’s and footwear. The increase in dollars per transaction was supported by higher average unit retail prices and more units sold per transaction, helping fuel the overall growth in comparable sales.

Zumiez’s Strong Performance in Apparel & Footwear Categories

Zumiez showed significant progress across various product categories in the last reported quarter. The men's segment continued its positive momentum, achieving year-over-year growth for the fourth consecutive quarter at an accelerating pace. The women’s category, which turned positive in the first quarter, further gained traction, posting strong double-digit growth in the second quarter and maintaining that momentum into the third quarter. 

Moreover, the footwear category saw a marked increase in demand, with growth shifting from mid-single digits in the second quarter to low double digits in the third quarter.

ZUMZ’s Strategic Cost Management

In addition to growing its revenues, Zumiez is focusing on cost-optimization initiatives. These include the closure of 31 underperforming stores in North America and strategic changes to reduce shipping and logistics costs. These actions helped the company increase its gross profit by 7%, reaching $78.3 million and improve ZUMZ’s gross margin by 140 basis points to 35.2% in the third quarter. Reduced reliance on discounting has further supported profitability.

Sneak Peek Into Zumiez’s Outlook

On its last earnings call, Zumiez expected total sales for the fourth quarter between $284 million and $288 million, indicating growth of 0.7-2.2% from the previous year. The company guided comparable sales growth of 6-7.5% for the 13 weeks ending Feb. 1, 2025, demonstrating strong operational momentum. The company forecasted earnings per share between 83 cents and 93 cents, signaling a significant increase from earnings of 40 cents per share reported in the prior year’s quarter.

Zumiez anticipates sales growth in fiscal 2024 and plans to leverage its selling, general and administrative (SG&A) costs more effectively compared with the prior year, further supporting its operational efficiency. For fiscal 2024, management guided total sales growth of 2-2.5%.

Despite tailwinds, shares of this Zacks Rank #3 (Hold) company have been struggling on bourses declining 15.3% in the past three months against the  Retail-Apparel and Shoes industry's 13.9% growth. Despite a strong performance in North America, softness in international sales, particularly in Europe, remains a concern. International comparable sales dropped 5.6% in the third quarter, following a 7.6% decline in the second quarter and a 10.8% fall in the first quarter. 

Moreover, margins remain a critical area to monitor, with potential concerns stemming from any deleverage in SG&A rate. In the last reported quarter, SG&A expenses rose 20 basis points as a percentage of net sales.

Key Picks

Some better-ranked stocks are The Gap, Inc. GAP, Abercrombie & Fitch Co. ANF and Deckers Outdoor Corporation DECK.

Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Gap’s fiscal 2025 earnings and sales indicates growth of 41.3% and 0.8%, respectively, from the fiscal 2024 reported figures. GAP delivered a trailing four-quarter average earnings surprise of 101.2%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present.

The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 69.3% and 15%, respectively, from the fiscal 2024 reported levels. ANF delivered a trailing four-quarter average earnings surprise of 14.8%.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank of 2 (Buy). 

The Zacks Consensus Estimate for Deckers’ fiscal 2024 earnings and sales indicates growth of 13.8% and 13.6%, respectively, from the year-ago actuals. DECK delivered a trailing four-quarter average earnings surprise of 41.1%.

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