Zumiez Is A Mall Retailer By Another Name
Zumiez (NASDAQ:ZUMZ) is a mall-based brick&mortar retailer that is defying the pandemic. Where others of its kind are quickly falling by the wayside it has managed to weather the storm and emerge in better shape. The company’s success can be attributed to two things that promise solid results in the coming quarter and next year: demand from the target market and an eCommerce presence that is transcending the physical locations. Add to that an enviable free-cash-flow, ample liquidity, and a balance sheet with no debt and you can understand why shares are up 3.5% in the premarket session.
Zumiez Beats And Increases Buybacks
Zumiez had a great quarter despite COVID-restrained operating conditions. The company says stores were open about 95% of the time on an open-to-available hours basis. Both the 2019 and 2020 3rd quarter’s had 13 weeks so the data helps put the results into perspective. On the topline, revenue came in at $270.95 million of up 2.6% on a YOY basis. The Q3 revenue is not only up on a YOY basis but up and accelerating from the fiscal 2nd quarter. In terms of the analysts, the company was expected to post revenue near $246.2 million or 1000 basis points lower.
“Strong digital activity and robust full-price selling across all geographies highlighted our topline performance as we continued to experience solid demand for our distinct and differentiated merchandise assortments,” said CEO Rick Brooks during the conference call.
On a comp basis, this is where that 95% comes into play, sales are up 8.1% from last year. Sales were driven by a stronger than expected late back-to-school season as well as eCommerce. eCommerce sales increased 39.6% from last year. Moving down, the company’s GAAP earnings came in at $1.16 or $0.40 better than the consensus and up 55% from last year. Earnings were driven by a nice margin gain. The margin was boosted by cost-leveraging revenue gains and higher-realized selling prices in the wake of reduced market-downs.
In terms of the balance sheet, the company’s cash and liquidity positioned improved 77% YOY due to an increase in operating and free-cash-flow. FCF was aided by a reduction in inventory and deferment of some payments that will come back in later quarters. Looking forward, the company says total to-date Q4 sales are down about 4.0% but that is offset by 3% in store closures. Comparable sales are down only 1.9% and eCommerce is up 16.7% with the strongest selling period of the year still ahed.
Buybacks Will Help Drive Zumiez Higher
As for buybacks, the board of directors approved a new $100 million plan to last until 2022. The new plan supercedes any previous order and worth about 10% the current market cap. Shares are up strongly on the news and trading at a new all-time high. The move is supported by both MACD and stochastic so further upside is very likely. In term of the value, Zumiez was trading about 13X this year’s and 12X next year’s making it a bit of a bargain compared to Five Below (80X), Lululemon (90X), and Urban Outfitters (115X).
The average analysts rating is neutral but take that with a grain of salt. The analysts are woefully far behind in their revisions as only one has updated in the last two quarters. The most recent rating is bullish, it’s a buy from B. Riley, and sets a target of $40. If this stock expands to trade at only the broad market average 22X earnings this stock could hit $66 or 65% upside within the next couple of quarters.
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