Zumiez Inc. ZUMZ is focused on expanding its brand portfolio and private label offerings to boost customer engagement and profitability. Introducing brands has increased sales and kept the company aligned with trends, while private-label products offer higher margins.

Zumiez’s growth initiatives, including optimizing store productivity and expanding private label offerings, have resonated well with consumers in the competitive retail sector. The company’s positive outlook for the holiday season, along with proactive operational efficiencies, highlights its commitment to sustained profitability.

ZUMZ Stock Past Six-Month Performance

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Zumiez’s Brand Investments & Private Label Expansion

ZUMZ has shown a strong commitment to expanding its brand portfolio and product offerings, an initiative designed to drive growth and enhance customer engagement. The company is on track to introduce more than 100 brands in 2024, following the launch of 150 brands in 2023. This continuous addition of brands has resonated well with customers, significantly boosting sales and ensuring Zumiez remains on trend. 

Alongside new brands, Zumiez has expanded its private-label offerings. This increase is a testament to the company's ability to meet the demands of trend-conscious and value-conscious consumers. Private-label products offer higher margins than third-party brands, driving the company's profitability.

The company continues to invest in people and technology to maintain best-in-class service in stores and online. Enhancing customer engagement through personalized and relevant interactions is a key focus area for the company. These investments are aimed at strengthening customer relationships, driving loyalty and increasing sales.

ZUMZ’s Strong Financial Performance & Cost Management

Zumiez reported solid financial results for the third quarter of 2024, reflecting the effectiveness of its initiatives and operational execution. The company achieved total sales of $222.5 million, marking a 2.9% year-over-year increase. This performance was primarily driven by a 7.5% increase in comparable sales, with North America leading with low-double-digit growth. Categories like men's, women's and footwear showed significant growth, contributing to the positive financial results.

To further improve profitability, ZUMZ implemented several cost-management initiatives. The company has been optimizing its cost structure by closing approximately 31 underperforming North America locations in 2024, and executing structural changes to reduce shipping and logistics costs.

The company has also significantly reduced discount selling compared with previous levels. These efforts have resulted in a gross profit increase of 7% to $78.3 million in the third quarter from $73.2 million in the prior-year period. The gross margin improved 140 basis points to 35.2%, driven by better product margins, and efficiencies in store occupancy and web shipping costs.

Zumiez’s Positive Outlook for the Holiday Season and 2024

ZUMZ is well-positioned for a strong holiday season and has a positive outlook for 2024. The company started the fourth quarter with comparable sales for the 31 days ending Dec. 3, 2024, rising 2.9% from the previous year, and total sales for this period increasing 10% on calendar shifts. 

Zumiez expects total sales for the fourth quarter between $284 million and $288 million, indicating growth of 0.7-2.2% from the prior year. Comparable sales are projected to grow 6-7.5% for the 13 weeks ending Feb. 1, 2025, indicating strong operational momentum. Product margins will increase 180-210 basis points year over year in the fourth quarter. Earnings per share are forecast between 83 cents and 93 cents, suggesting a significant recovery from the loss of $1.73 per share reported in the year-ago quarter.

For 2024, Zumiez expects total sales growth of 2-2.5%. It projects an improvement in the product margin, driven by its full-price selling strategy in Europe and a more stable sales environment. Zumiez anticipates sales growth in 2024 and plans to leverage its SG&A costs more effectively compared to the previous year. This improvement is expected to build on the benefit of moving past the $41.1-million goodwill impairment charge recorded in the fourth quarter of 2023, supporting its operational efficiency and profitability goals.

Hurdles on ZUMZ’s Path

Zumiez has faced challenges in international markets, particularly Europe, where unfavorable weather conditions hurt the demand for snow-related apparel and hardgoods, leading to a 5.6% year-over-year decline in comparable sales in the third quarter. The company has shifted its focus in Europe from expansion to enhancing store productivity, as the region continues to struggle with slow consumer demand and weather-related issues, which could limit global growth potential. 

Apart from this, the company’s hardgoods category has been creating significant challenges, with declining sales, especially in skate-related products.

Wrapping Up

Zumiez's robust expansion in brand offerings and private label products, combined with investments in customer engagement and technology, sets a solid foundation for growth. The company's strong financial performance, effective cost management, and positive outlook for the holiday season and beyond indicate operational resilience and profitability.

However, Zumiez has faced challenges in the international markets, particularly Europe, where unfavorable weather conditions led to a decline in comparable sales for the third quarter. Despite these hurdles, the company’s overall strategy presents a compelling case for holding the ZUMZ stock for long-term value.

The Zacks Rank #3 (Hold) stock has gained 1.9% compared with the  Retail-Apparel and Shoes industry's 18.6% growth in the past six months.

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. 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 has 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 has 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% and 13.6%, respectively, from the year-ago actuals. DECK has a trailing four-quarter average earnings surprise of 41.1%.

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Zumiez Inc. (ZUMZ) : Free Stock Analysis Report

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