Zumiez Up 22% in 3 Months: What's Aiding the Stock's Rally?

Shares of Zumiez Inc. ZUMZ have gained 22% over the past three-month time frame, thanks to its robust business strategies. The company is striving to enhance its omni-channel capabilities to provide consumers with the facility of quick and easy access to its products and brands. In addition, reopening of its stores and improving sales trends are favoring the stock's bullish run. Meanwhile, the industry rallied 13% in the aforementioned time.

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As part of its omni-channel endeavors, Zumiez has integrated its physical and digital networks to improve customers’ experience. This allows customers to access inventories through all channels, alongside availing facilities like buy online, pick up in store, and reserve online,  pay in store. For the final eight weeks of the first quarter fiscal 2020, when nearly all stores were closed, the company registered online sales growth of 75.9%. It is also focused on expanding its store base. During fiscal 2020, management intends to open nearly nine stores, including five stores in North America, three stores in Europe and one store in Australia. We believe that the company’s well-balanced store expansion and e-commerce strategies will help Zumiez keep track of the evolving patterns and drive growth.

However, coronavirus-induced stay-at-home orders, social distancing and mandatory store closures adversely impacted Zumiez’s first-quarter fiscal 2020 results. The company posted wider-than-expected loss for the quarter under review. Also, the company’s top line missed the Zacks Consensus Estimate and fell sharply from the year-ago period. Margins were also dismal in the quarter. Nevertheless, Zumiez started reopening some of its stores in the latter part of the fiscal first quarter with reduced operating hours per governmental regulations. The count increased to 493 at the end of May, with 432 Zumiez stores in North America, 49 Blue Tomato stores in Europe and 12 Fast Times stores in Australia having reopened.

Although net sales for the four-week period ended May 30, 2020 fell 8.6%, it portrays a sharp improvement from a decline of 35.3% witnessed in the fiscal first quarter. This was partly offset by greater-than-anticipated results in stores opened and e-commerce demand. Notably, comparable sales, consisting of stores opened and e-commerce traffic, increased 79.6% during the month of May. By channel, comparable store sales for locations opened in May rose 38.5% while e-commerce comparable sales soared 181.6%.

These apart, Zumiez had also taken measures to address challenges tied to the COVID-19 pandemic. The company is concentrating on improving financial flexibility, directing resources toward digital platforms and augmenting supply chain. Management at its first-quarter earnings call on Jun 4 had anticipated SG&A expenses across the business to be considerably down compared with 2019 owing to the removal of travel and training, reductions in planned capital, and removal of incentives and other areas of compensation.

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