Zumiez, Inc. (ZUMZ) PT Raised to $25 at B.Riley

B.Riley analyst Jeff Van Sinderen raised the price target on Zumiez, Inc. (NASDAQ: ZUMZ) to $25.00 (from $20.00) while maintaining a Neutral rating.

The analyst commented: "Neutral-rated Zumiez Inc.reported 2Q AMC 9/5 with sales/adj. EBITDA/adj. EPS above consensus, exceeding guidance (management typically guides conservatively). Sales were up 8.1% from 2Q23. Metrics reflected performance that exceeded expectations after comps inflected positive in June and July, finishing up HSD with a strong start to BTS. ZUMZ continued expanding its private label portfolio, representing 23%, 18%, and 13% in 2023, 2022, and 2021, respectively, which is favorable to GM. North America was the primary driver of sales growth, up 10.4% (up 10.6% ex-FX) compared to 2Q23 to $176.3M, with comps up 5.9%. Other international (Europe) was down 2.6% (down 1.7% ex-FX) compared to 2Q23 to $33.9M, with comps down 7.6%. Men’s posted the largest positive comps followed by women’s, then footwear. Hardgoods was the most negative, followed by accessories. The increase in comps was driven by an increase in DPT that was partially offset by a decrease in transactions, with DPT driven by increased AUR and UPT. A 250bps GM increase was driven by 140bps of occupancy cost leverage, 90bps of improved shipping costs, 20bps of distribution center cost leverage, while product margin remained flat. SG&A dollars were flat with 280bps leverage, driven primarily by 100bps of leverage of store wages on higher sales, 80bps of non-wage corporate cost leverage, 50bps of leverage in non-wage store operating costs, 50bps from timing of employee training, 20bps of leverage of corporate wages, partially offset by 30bps of increased incentive costs. With QTD metrics reflecting continuing improvement in North America, ZUMZ provided 3Q sales/OM/EPS guidance above/below/below consensus. ZUMZ is focusing on profitability in North America and Europe while pivoting away from a growth strategy in Europe. Although headwinds in fashion trend drivers and inflationary impact on discretionary spending persist, we believe the company’s culture and merchandise content remain differentiated, and trends continue to improve sequentially. With sales having inflected and easy comparisons, continued improvement in a broader array of metrics seems probable. We are raising our estimates and PT from $20 to $25, maintaining Neutral."

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