Why Is Zumiez (ZUMZ) Stock Soaring Today

Kayode Omotosho /
2023/12/01 1:47 pm EST

What Happened:

Shares of clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) jumped 5.1% in the mid-day session after the company reported third quarter results that blew past analysts' EPS expectations, while revenue came in slightly ahead due to "improving sales trends compared with the first and second quarters". However, the company noted that "sales trends pulled back somewhat during the second half of Q3 after the peak back-to-school season." Looking ahead, next quarter's revenue guidance came in higher than Wall Street's estimates. The company also opened more new stores than expected, which is a tailwind to revenue growth. Zooming out, we think this was a fantastic quarter that should have shareholders cheering.

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What is the market telling us:

Zumiez's shares are somewhat volatile and over the last year have had 18 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 8.8% on the news that the company reported second quarter results and guided for revenue and EPS for the next quarter to come in below Consensus estimates. 

On the other hand, revenue and EPS exceeded Wall Street's expectations during the quarter. Management called out "continued headwinds facing consumer discretionary spending combined with a heightened promotional marketplace". However, it added that there has been a moderation in some of the sales trends observed in Q2 due to the back-to-school season and higher volumes. Management noted that the trends remained below year-ago levels. The company also continued to burn cash for the second straight quarter. In response to the challenges, Zumiez is cutting back on its growth plans. The company now expects to open 19 new stores in fiscal 2023, down from the previous expectation of 23 new stores. The bulk of the cut is expected to come from the North American business, which Zumiez noted "remains under pressure." Overall, it was a weaker quarter for the company, highlighting several headwinds.

Zumiez is down 5.5% since the beginning of the year, and at $20.76 per share it is trading 26.4% below its 52-week high of $28.20 from February 2023. Investors who bought $1,000 worth of Zumiez's shares 5 years ago would now be looking at an investment worth $1,046.

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