Through The Fly's Eyes: Zumiez

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Zumiez: Outfitting The X-Game Generation

Should the enticements of raiment by Billabong and transport by Sector Nine longboard be too much for you to resist, there is a company in Everett, Washington that has your basics and all your accessories, too.

Zumiez Inc. (NASDAQ:ZUMZ) is a mall-based specialty retailer of sports-related apparel and equipment. Apparel offerings carry such brand names as Alpine, Burton, Hurley and Quiksilver, as well as private labels. The equipment includes skateboards, snowboards, boots, bindings, and miscellaneous novelties. Stores cater to young people, between the ages of 12 and 24. The firm operates nearly 250 outlets, in 22 states.

Zumiez pleased investors early in the month, when it announced that February same-store sales had jumped 12.4% (yr/yr). That topped the Street estimate of 7.4%. Then, last week, management announced Q4 EPS of 39 cents (36 cent consensus) and Q4 revenues of $112.4 million ($111.1 million consensus). It also guided FY08 EPS to 94-96 cents (92 cent consensus). The stock popped into a bullish "flag" formation on the same-store sales news and then jumped into another one on the earnings story. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. That happened the first time and is now expected again.

Brokers recommend the shares with five "strong buys," four "buys" and three "holds." Analysts see a 30% average annual growth rate, through the next five years. The ZUMZ Sales Growth rate (49.07%), EPS Growth rate (69.57%), Return on Assets (14.81%), Return on Investment (20.80%) and Return on Equity (23.37%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 78% of the outstanding shares. Over the past 52 weeks, the stock has traded between $20 and $40.25. A stop-loss of $34.65 looks good here.