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Why Zumiez Inc. Stock Popped Today

By Jeremy Bowman – Updated Oct 6, 2016 at 11:06AM

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The apparel retailer surged as it increased third-quarter guidance and posted strong monthly sales report.

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What happened

Shares of surf-and-skate apparel retailer Zumiez Inc. (ZUMZ 3.19%) were moving higher Thursday, boosted by an improved outlook, strong September sales, and positive analyst coverage. As of 11:00 a.m. EDT, the stock was up 14.2%.

So what

After more than a year of declining comparable sales, Zumiez finally seems to be emerging from those doldrums as same-store sales jumped 6.3% in September and overall sales were up 11.5%. The strong sales growth convinced the company to boost its third-quarter guidance as it now expects revenue of $216 million to $217 million and earnings per share of $0.29 to $0.30, up from a previous range of $209 million to $213 million in revenue and $0.21 to $0.26 in EPS. A year ago the company brought in $204 million in revenue and EPS of $0.36. For the current quarter, Zumiez expects comparable sales of 2%.

Now what 

In past quarters, management complained of headwinds in the industry and poor decision-making around merchandise and inventory, but those problems seem to be fading away after such a strong acceleration in comp sales. Management did not provide any commentary on Thursday's report, but the strong acceleration in comps seems to indicate that trends have changed at the company.

The stock has been volatile over the last year, and I'd expect it to remain that way as the apparel business has struggled overall with the rise of fast fashion and's big push into an apparel. Still, Zumiez could easily exceed what appears to be conservative guidance for the current quarter.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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