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Zumiez Inc. (ZUMZ): These Retailers Channel the West Coast Lifestyle

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The days of summer bring about the love for the outdoors and an active lifestyle. California is known for its warm weather and beach lifestyle. Companies that sell surfboards, skateboards, swimwear and apparel that emphasize this lifestyle are particularly busy.

The action-sports clothier

Zumiez Inc. (NASDAQ:ZUMZ) sells gear and clothing for the skater, motocross rider, snowboarder and the surfer. The retailer appeals to teenagers and young men by offering couches and video games at its stores. The company operates approximately 500 stores primarily in the United States, but it’s expanding into Canada and Europe.

Zumiez Inc. (NASDAQ:ZUMZ)

For the first quarter of this year, net sales were $148 million and earnings per share were $0.08, both better than expected. Net sales increased 14.3% from the prior year. Comparable-store sales were down 0.7% as the cold winter kept customers away. Comparable e-commerce sales increased 13.1%. Net income was down from $4.5 million last year to $2.5 million this year. The company ended the quarter with $97.6 million in cash and only $2.1 million in debt.

Going forward, Zumiez Inc. (NASDAQ:ZUMZ) plans to open 58 new stores this year, including nine in Canada and six in Europe. Where I see growth for the company and where I would like to see it focused is on growing its Blue Tomato stores in Europe. There’s only six stores right now and it plans on adding another six this year. That’s 100% growth. Even thou the European economy remains weak, Blue Tomato is a niche retailer targeting the action-sports market. Blue Tomato also has a strong online presence. I see the potential for Blue Tomato to grow and have several hundred stores in Europe.

Another action-sports retailer

Tilly’s sells primarily apparel for the surf, skate, and motocross industries. The retailer has approximately 175 stores in 20 states, half of which are in California. The company also sells its wares online.

In the first quarter of this year, comparable-stores sales rose 1.1%, which was better than expected. E-commerce sales grew 16% year-over-year and represented 11.5% of total sales. Overall net sales increased 13% to $109.1 million. Net income for the quarter was $2.3 million and that was down from last year’s $5.9 million. The company ended the quarter with $48.6 million in cash and no debt.

The growth for Tilly’s lies in expansion and I see plenty of opportunities for this retailer. Two-thirds of its stores are in three states – California, Arizona and Florida. The company’s goal is to grow to 500 stores and I see that happening as it expands into new states and new markets. The company’s return on investment justifies this growth. A new store costs $500,000 to $550,000 to open and first-year sales have been coming in at $2.2 million. Payback on new stores is 18 months and the company can fund expansion from existing cash flow and its clean balance sheet.

The sun might be finally shining on Pacific Sun

Pacific Sunwear of California, Inc. (NASDAQ:PSUN) sells apparel that epitomizes the California lifestyle. The company operates approximately 638 stores across the country that are primarily located in malls. The retailer’s target market is teens and young adults.

In the first quarter of this year, total sales were $170 million compared to $162 million last year. Sales were driven by a 2% increase in comparable sales and an 11% increase in e-commerce transactions. Women’s apparel was the strongest segment with an increase of 7% in comparable sales. The company lost $9 million compared to a loss last year of $14 million. The company is in the midst of a turnaround and working to close non-performing stores and return to profitability.

Going forward, Pacific Sunwear of California, Inc. (NASDAQ:PSUN) just got an upgrade in an analyst report from Wedbush Securities. In the report, the analyst cites the growth the company is seeing in selling the Brandy Melville line of clothes for women. The line is currently in about 100 stores and will be in another 100 stores by the end of August. Pacific Sunwear is also seeing increased sales in the Kendall & Kylie line from the Jenner/Kardashian family. As a result, the analyst sees women’s comparable sales rising 8% for this quarter.

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