Zumiez Inc. (ZUMZ) in Lynnwood, Wash., is a specialty retailer of apparel, footwear, accessories, and hard goods for young men and women. It reported soft fiscal fourth-quarter results, where its revenue and EPS came in at $346.68 million and $1.70, respectively, missing Wall Street estimates by 1.8% and 5.6%. The company recently provided weak first quarter fiscal 2022 earnings guidance, due primarily to government stimulus payments in the year-ago period.

The stock has declined 18.2% in price year-to-date to close yesterday’s trading session at $39.27. In addition, it is currently trading 28.7% below its 52-week high of $55.10, which it hit on Nov. 22, 2021. 

However, its board of directors repurchased 4.60 million shares, or 18%, of its common stock in fiscal 2021. And the company expects to open 34 new stores in fiscal 2022. Moreover, increasing in-store retail sales and continued online buying trends we think make the stock’s near-term prospects look bright.

Click here to checkout our Retail Industry Report for 2022

Here is what I think could influence ZUMZ’s performance in the upcoming months:

Favorable Analyst Estimates

For its fiscal year 2024, analysts expect ZUMZ’s EPS and revenue to grow 12.1% and 4.4%, respectively, year-over-year to $5.30 and $1.19 billion, respectively. In addition, its EPS is expected to grow at 15% per annum over the next five years. Furthermore, Wall Street analysts expect the stock to hit $48 in the near term, indicating a potential 22.2% upside.

Lower-Than-Industry Valuation

In terms of forward EV/EBIT, ZUMZ’s 5.83x is 49.9% lower than the 11.65x industry average. Its 4.99x forward EV/EBITDA is 42.5% lower than the 8.67x industry average.  The stock’s 0.65x and 1.63x respective forward EV/S and P/B of are lower than the 1.13x and 2.53x industry averages.

High Profitability

In terms of trailing-12-month ROTA, ZUMZ’s 13.84% is 126.2% higher than the 6.12% industry average. Its 9.69% trailing-12-month levered FCF margin is 103.4% higher than the 4.76% industry average. Furthermore, the stock’s 12.70% and 10.08% respective trailing-12-month ROTC and net income margin are higher than the 8.03% and 6.61% industry averages.

POWR Ratings Show Promise

ZUMZ has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. Among these categories, ZUMZ has an A grade for Quality, which is in sync with its higher-than-industry profitability ratios.

The stock has a B grade for Value, which is in sync with its lower-than-industry valuation ratios.

Beyond what I have stated above, we have also given ZUMZ grades for Growth, Momentum, Stability, and Sentiment. Get all the ZUMZ ratings here.

ZUMZ is ranked #29 out of 66 stocks in the B-rated Fashion & Luxury industry.

Bottom Line

ZUMZ is well-positioned to benefit from the growing online sales and the gradual revival of foot traffic in brick-and-mortar stores. So, we think it could be wise to buy the dip in the stock.

How Does Zumiez (ZUMZ) Stack Up Against its Peers?

ZUMZ has an overall POWR Rating of B. One could also check out these other stocks within the Fashion & Luxury industry with an A (Strong Buy) rating: J. Jill, Inc. (JILL), Hugo Boss AG (BOSSY), and Caleres, Inc. (CAL).

Click here to checkout our Retail Industry Report for 2022

ZUMZ shares were trading at $39.40 per share on Thursday morning, up $0.13 (+0.33%). Year-to-date, ZUMZ has declined -17.90%, versus a -6.92% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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