Can Zumiez's (ZUMZ) Growth Efforts Turn Around Comps?

Zumiez Inc. (NASDAQ:ZUMZ) has been struggling with dismal comparable-store sales (comps) performance for fifteen straight months now. Consequently, this mall-based specialty retailer is on the investors’ list of stocks to avoid. The Zacks Rank #5 (Strong Sell) stock has lost about 43% in the past one year.

The primary reason for the continued sales decline is the slowdown in traffic and the absence of defined fashion trends. Additionally, the company is battling headwinds like foreign exchange volatility that has been affecting its business in borders and tourist spots. The company also continues to bear the brunt of a tough retail environment and overall softness in consumer demand.

As a result, Zumiez recently reported a 4.5% decline in June comps compared to a 3.3% fall in the year-ago period. The company’s net sales for Jun 2016 dipped 0.6% to $66.6 million from $67 million recorded in the prior-year period.

Looking back, Zumiez posted a loss in the first quarter, making a sharp contrast with earnings recorded in the year-ago quarter. Moreover, the top line fell year over year. A drab quarter, along with the general retail hurdles, caused management to issue a bleak outlook for the second quarter. These factors also led to a downtrend in estimates. Over the past 60 days, the Zacks Consensus Estimate of 75 cents and 97 cents for fiscal 2016 and fiscal 2017 decreased 26 cents and 25 cents, respectively.

Nonetheless, Zumiez remains on track with its expansion strategies, aimed at placing the company on the growth track and generating near-term profit. The company keeps up with the strategy of optimizing its store base through expansion in the underpenetrated markets and by either repositioning or closing underperforming stores through constant evaluation, aimed at maximizing long-term productivity. Also, the company’s investments in global expansion, enhancing omni-channel capacities and customer-centric approach bode well.

In fiscal 2016, Zumiez intends to introduce nearly 29 new stores, which include around 7 stores in Europe and up to 6 stores in Canada, further underscoring its focus on expansion.

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Zacks Rank

Better-ranked stocks in the apparel/shoe industry include The Children’s Place Inc. (NASDAQ:PLCE) , Christopher & Banks Corp. (NYSE:CBK) , each with a Zacks Rank #1 (Strong Buy), and American Eagle Outfitters Inc. (NYSE:AEO) , holding a Zacks Rank #2 (Buy).