Why Zumiez Might Be Your Next Value Pick: Key Insights for Investors

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Zumiez Inc. ZUMZ is currently trading at a low price-to-sales (P/S) multiple, which is below the averages of both the Zacks Retail-Apparel and Shoes industry and the broader Retail-Wholesale sector. With a forward 12-month P/S of 0.44, ZUMZ is priced lower than the industry's average of 1.08 and the sector's average of 1.46.

This makes ZUMZ stock undervalued relative to its industry peers, presenting an attractive opportunity for investors seeking exposure to the retail apparel sector. Furthermore, Zumiez’s  Value Score of A underscores its appeal as a potential investment.

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The stock has gained 16.8%, outperforming the industry’s 3% decline in the past six months. Closing at $21.28 yesterday, Zumiez’s stock is currently trading 32.2% below its 52-week high of $31.37, reached on Sept. 6, 2024.

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Zumiez Drives Growth With Customer-Centricity & Brand Focus

Zumiez's strategic endeavors center around a customer-centric business model, emphasizing strong brands and prudent cost management. The company's focus on providing differentiated assortments and localized merchandising has yielded positive results. By leveraging advanced technology, Zumiez enhances the shopping experience across channels. 

Total sales in the second quarter rose 8.1% year over year to $210.2 million, primarily fueled by 10.4% growth in North America’s sales. Comparable sales increased 3.6%, supported by higher average unit retail prices and a greater number of units sold per transaction. 

Zumiez’s private-label brands, which accounted for 23% of sales in fiscal 2023, continue to resonate with value-conscious consumers. With plans to expand its private-label offerings in 2024, the company is positioned for sustained revenue growth.

In Europe, Zumiez has shifted focus from rapid store expansion to improving the productivity of existing locations, emphasizing full-price selling. This strategy has already boosted merchandising margins. Alongside, the company has been closing underperforming stores in North America while expanding in key global markets and implementing cost-optimization initiatives, including labor and logistics improvements, to enhance long-term profitability.

Zumiez’s Q3 & Fiscal 2024 Outlook

Zumiez remains confident about its third-quarter and full-year outlook. The company expects third-quarter sales to be between $221 million and $225 million, indicating a year-over-year increase of 2-4%, with comparable sales up 12.1% as of Sept. 2, 2024. 

For fiscal 2024, the company guided low single-digit sales growth. Zumiez also anticipated positive operating margins for fiscal 2024, supported by stable sales growth and continued cost efficiencies.

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