Zumiez (ZUMZ) Still has Solid Business Model, but Much of Good News Baked into Stock - Stifel

Stifel affirms its Hold rating on Zumiez (Nasdaq: ZUMZ) following Q2 results issued Thursday night.

Analyst Richard Jaffe noted that Zumiez's Q2 adjusted EPS of $0.12 was flat with the firm's outlook. Comp sales decreased 4.5 percent due to unappealing product assortments in the US, the analyst noted.

On guidance, Jaffe commented, The company established its 3Q EPS guidance in the range of $0.27 - $0.31, well below our previous estimate and consensus of $0.53. The outlook is due to a slow start to 3Q, weak traffic, lack of key fashion trends and soft sales on seasonal product. In addition, the company has been negatively impacted by weakness in tourism spending due to foreign exchange. Management is evaluating ways to make changes to the product assortment to get back on track.

Overall, Jaffe noted, We believe that Zumiez is a well-run business with a corporate culture that is engaging for the consumer and effective in generating earnings growth. However, given the recent volatility in the business and little visibility for improvement in the near term, at the current stock price, we believe much of the good news is in the stock, therefore the reward potential is limited and risk, given the fashion content, remains significant.

For an analyst ratings summary and ratings history on Zumiez click here. For more ratings news on Zumiez click here.

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