B.Riley has adjusted its outlook on Zumiez Inc . (NASDAQ: NASDAQ:ZUMZ), increasing the price target to $25 from the previous $20, while keeping a Neutral rating on the stock.
The retailer reported second-quarter earnings after market close on Thursday, which showcased sales, adjusted EBITDA, and adjusted EPS figures surpassing consensus estimates and outperforming the company's own conservative guidance.
Sales for the quarter rose 8.1% compared to the same period in 2023, with North America being the primary contributor to this growth, recording a 10.4% increase to $176.3 million.
The figure represents a 10.6% rise when excluding foreign exchange impacts, and comparable store sales in the region went up by 5.9%. Conversely, international sales in Europe experienced a decline of 2.6% (down 1.7% ex-FX) to $33.9 million, with a 7.6% drop in comparable store sales.
The company's private label portfolio expansion was highlighted as a positive move, now representing 23% of sales compared to 18% in 2022 and 13% in 2021, which has favorably impacted gross margins.
Men's apparel led the positive comparable sales, followed by women's and then footwear, while hardgoods and accessories lagged behind. The increase in comparable sales was attributed to a rise in dollars per transaction (DPT), driven by higher average unit retail (AUR) and units per transaction (UPT), despite a decrease in the number of transactions.
Gross margin improved by 250 basis points, benefiting from occupancy cost leverage, reduced shipping costs, and distribution center cost leverage. Selling, general, and administrative (SG&A) expenses remained flat, achieving significant leverage due to higher sales.
The company's guidance for the third quarter suggests sales above consensus, but operating margin and EPS below, indicating a focus on profitability in both North America and Europe, with a strategic shift away from growth in Europe.
In other recent news, Zumiez Inc. has been demonstrating a robust performance in its financial reports. Despite a slight dip in sales from the same quarter of the previous year, the company's sales and earnings per share have consistently surpassed their own high-end guidance. Notably, the North American market has shown strength, with an increase in comparable sales in both men's and women's categories.
Analysts at Seaport Global Securities, Jefferies, and B.Riley have maintained their neutral stance on Zumiez shares, while adjusting their price targets in response to the company's strong performance. Despite the positive trends, Zumiez has projected its second-quarter earnings per share to fall below analysts' expectations.
InvestingPro Insights
As we digest the latest earnings report from Zumiez Inc. (NASDAQ: ZUMZ), the real-time data and analysis from InvestingPro offer a deeper look into the company's financial health and market performance. With a market capitalization of $520.44 million, Zumiez is navigating through challenging times, as evidenced by its negative P/E ratio of -8.14. This indicates that the company has not been profitable over the last twelve months, aligning with one of the InvestingPro Tips which points out the company's lack of profitability in the same period.
Despite this, analysts who contribute to InvestingPro predict the company will turn profitable this year, offering a glimmer of hope for investors. Furthermore, the company's liquid assets surpass its short-term obligations, suggesting financial resilience in the face of operational challenges. While Zumiez does not pay a dividend, which might be a drawback for income-focused investors, the stock has seen a large price uptick over the last six months, with a 57.29% total return, reflecting a strong market confidence in its potential for recovery.
From a valuation standpoint, the company is trading at a high EBITDA valuation multiple, which could signal that the stock is relatively expensive compared to its earnings before interest, taxes, depreciation, and amortization. However, with a solid return over the last three months of 33.01%, investors may still find the growth prospects attractive. For those interested in a comprehensive analysis, InvestingPro offers additional tips on Zumiez, providing a robust framework for making informed investment decisions.
For in-depth analysis and more InvestingPro Tips on Zumiez, investors can visit https://www.investing.com/pro/ZUMZ, where a total of 8 tips are available to help guide your investment strategy.
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