Is Zumiez Ready to Zoom in 2014?

With the holiday quarter not being the breakout most people hoped it would be, now is the time to look into which companies will do well in 2014. While Zumiez (NASDAQ: ZUMZ  ) felt a bit of the macro pain, the retailer looks more promising going forward than Wet Seal (NASDAQ: WTSL  ) and Pacific Sunwear of California (NASDAQ: PSUN  ) . Zumiez continues to be a solid earner as it prepares itself for better times.

Zumiez results
Zumiez reported fiscal third-quarter results on Dec. 5. Net sales jumped 6.2% to $191.1 million. Same-store sales rose 1.5%. Net income was $11.9 million or $0.39 per share. For November, sales leaped 16.3% while same-store sales hopped up 1.7%.

CEO Rick Brooks pointed out that the gains came despite softer traffic trends. He believes Zumiez's investments in people and merchandise have allowed the company to gain market share. Zumiez guided for the holiday quarter to show a 2.5%-5.6% gain in sales to between $230 million-237 million along with earnings per share of $0.60-$0.67.

Zumiez announced a new stock repurchase program of $30 million. Often a stock buyback speaks louder than words in terms of a company's confidence about the future. Zumiez intends to make the repurchases over the next year, returning nearly 4% based on the current market cap.

Conference call
In the call, Brooks stated that Zumiez is focused on broadening its geographical footprint and improving the customer experience, both of which he believes will lead to greater consistent sales and profits. The company has 541 stores in North America, and it is targeting 600 to 700 stores. Additionally, Zumiez sees "tremendous, long-term opportunity in Europe." The company recently launched enhanced versions of its websites, and now e-commerce sales are up to 11% of the total for the company.

Brooks said there were "very little additional markdowns" for the month of November, and Zumiez has been "no more promotional 1 year ago than we were today overall." CFO Christopher Codington Work pointed out as well that the lack of additional promotional activity from Zumiez, unlike some other retailers this holiday season, means continued strong margins and brand equity. Analysts expect that next year Zumiez will show 10.6% growth in sales to $810.5 million and earnings-per-share growth of 16.2% to $1.72.

Wet Seal
Wet Seal is an example of a Zumiez competitor that has been getting butchered. Last quarter, Wet Seal's net sales dropped 5.8% and the company reported a net loss of $0.18 per share. CEO John Goodman offered little hope for the rest of the year for Wet Seal. He said that because of a "cautious outlook for the remainder of the year" Wet Seal is expected to show another net loss of $0.14-$0.17 per share with a 17% dive in sales. CFO Steven Benrubi warned, "November has been a very challenging retail environment from an aggressiveness level of promotional cadence throughout the mall." Clearly Wet Seal isn't doing nearly as well as Zumiez.

Pacific Sunwear of California
Meanwhile, Pacific Sunwear of California isn't exactly seeing all sunshine and lollipops either. Last quarter, sales got clipped 4.1% and net loss increased by 157%. In an attempt to stem the red ink, Pacific Sunwear of California has been closing stores; 12% of them last quarter and another 2%-3% during the holiday quarter. Even e-commerce sales offered little relief. CEO Gary H. Schoenfeld said that e-commerce sales were only up "modestly" yet at Zumiez they continue to explode.

Foolish final thoughts
Forget speculating on retailers with spiraling-down results. Companies that are managing to do well and grow when times are more challenging stand a better chance of hitting it out of the park when things turn around plus you stand less risk with them in the near-term. Unlike many of its rivals, Zumiez shows strong growth and it even has excess cash to return to shareholders through a stock buyback. Zumiez deserves a closer look by those who are looking for strong companies that are operating successfully in this difficult environment.

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