ZUMZ Trades Near 52-Week Low: Time to Buy, Hold or Sell the Stock?

Zumiez Inc. ZUMZ is having a tough run on the bourses. Closing at $11.91 in Friday’s trading session, the stock is nearing its 52-week low of $11.31. The stock has moved down 15.4% in the past three months, prompting investors to reassess their position. As a global lifestyle retailer, Zumiez is known for its strong market presence and customer-centric approach. However, broader market dynamics, such as tariff concerns and company-specific challenges, are likely to have hurt the stock.

Zumiez has underperformed the Retail - Apparel and Shoes industry and the S&P 500 Index, which recorded growth of 1.9% and a decline of 1.2%, respectively, during the same period. The stock also lagged the Retail-Wholesale sector’s fall of 1.4%.

ZUMZ Stock Past Three-Month Performance

What’s Hurting ZUMZ Stock?

Zumiez experienced a significant performance setback during the crucial holiday season, as an unexpected drop in demand prevented the company from meeting its internal sales expectations. While there were signs of progress in some areas, the missed targets highlighted a gap between forecasting and actual consumer behavior. This underperformance during the peak retail period raises questions about Zumiez’s ability to adapt quickly to changing market conditions and shifting shopper sentiment.

The company continues to face challenges in its international markets, particularly in Europe. Despite efforts to focus on full-price, full-margin sales, consistent profitability remains elusive. Although there was some late-year improvement, Europe continued to weigh on overall results. These persistent struggles suggest deeper structural issues within Zumiez’s global strategy, emphasizing the need for better localization and market-specific approaches to strengthen its position outside North America.

Zumiez also remains vulnerable to supply-chain risks, especially related to tariffs and sourcing. Approximately half of its North American inventory is sourced from China, exposing the company to tariff-related uncertainties. While the company plans to diversify its sourcing, this process may lead to higher costs or supply disruptions. If these supply-chain challenges are not effectively managed, they can negatively impact profitability.

How Can Zumiez’s Strategic Focus Shape Its Future in Retail?

Zumiez has demonstrated resilience and adaptability in a challenging retail environment through strong comparable sales growth, improved profitability and effective cost management in the fourth quarter of fiscal 2024. Its expanding private label business and international efforts strengthen its growth prospects. Zumiez is well-positioned to continue delivering value and achieve sustainable growth in the future.

The company has made notable progress in enhancing profitability through disciplined cost management and margin expansion efforts. Key factors include improved product margins and reduced shipping costs. Zumiez’s emphasis on full-price selling and limiting discounting has further supported its margin profile. These initiatives have helped strengthen the company’s financial resilience and set the stage for sustainable bottom-line growth.

Zumiez continues to optimize its operations by closing underperforming stores and refining staffing and logistics processes. These measures have resulted in meaningful reductions in operating costs relative to sales. The company’s ongoing focus on cost discipline is expected to support continued margin expansion and operational efficiency moving forward.

On its last reported quarter’s earnings call, Zumiez outlined a confident and strategic outlook for fiscal 2025, emphasizing expectations for continued sales momentum and further operating margin improvement. For the first quarter, the company projects total sales to increase 1-3%, with comparable sales growth of 3-5%. Management remains focused on enhancing product margins through the expansion of private-label offerings and a disciplined approach to full-price selling. These initiatives reflect Zumiez’s resilience and strategic adaptability as it aims to build on its recent progress and maintain forward momentum.

Is ZUMZ a Value Play Stock?

Zumiez is currently trading at a forward 12-month price-to-sales (P/S) multiple of 0.26X, which positions it at a discount compared with the industry’s average of 1.75X. The stock is also trading below its median P/S level of 0.43X observed over the past year. Also, Zumiez is priced lower than the sector’s average of 1.60X. This suggests that the ZUMZ stock is priced attractively relative to its peers and historical levels, positioning it as a potential bargain. Moreover, the company’s  Value Score of A underscores its appeal as a potential investment.

ZUMZ Looks Attractive From a Valuation Standpoint

Final Words on Zumiez

ZUMZ presents a mixed picture for investors, balancing promising operational improvements with lingering challenges. On the positive side, the company is executing well on margin expansion, cost control and private label growth while trading at an attractive valuation relative to peers. 

However, its struggles during the critical holiday season, ongoing international weakness and exposure to tariff-related supply-chain risks raise valid concerns about its near-term stability. Given this balance of strengths and headwinds, investors may find it prudent to hold on to the stock while monitoring for consistent execution and recovery in weaker segments. ZUMZ currently carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks are Canada Goose GOOS, Stitch Fix SFIX and Allbirds Inc. BIRD.

Canada Goose is a global outerwear brand. GOOS is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Canada Goose’s current fiscal year’s earnings and sales implies growth of 10% and 2.9%, respectively, from the year-ago actuals. Canada Goose delivered a trailing four-quarter average earnings surprise of 57.2%.

Stitch Fix delivers customized shipments of apparel, shoes and accessories for women, men and kids. It currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for SFIX’s fiscal 2025 earnings implies growth of 64.7% from the year-ago actual. SFIX delivered a trailing four-quarter average earnings surprise of 48.9%.

Allbirds is a lifestyle brand that uses naturally derived materials to make footwear and apparel products. It carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Allbirds’ current financial year’s earnings implies growth of 16.1% from the year-ago actual. The company delivered a trailing four-quarter average earnings surprise of 21.3%.

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This article originally published on Zacks Investment Research (zacks.com).

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