Put Some Style in Your Portfolio With Zumiez (Nasdaq: ZUMZ)
Clint Eastwood’s daughter, Francesca Eastwood, recently hit the headlines when she took to Twitter and Facebook with an unusual “artistic” ploy. Accompanied by her photographer boyfriend, the reality TV star took a $100,000 Hermes Birkin handbag and completely trashed it.
Photographs are now circulating the web of Ms. Eastwood biting the bag, right before taking a chainsaw to the extremely expensive accessory and ultimately setting it on fire. All in the name of art. And publicity.
Fortunately, we here at Investment U have a much better way to combine money and fashion. And it has absolutely nothing to do with blowing $100,000 in the space of a minute.
Quite the opposite, actually.
Now the average, intelligent investor is probably about as familiar with niche retailer Zumiez, Inc. (Nasdaq: ZUMZ) as they are with the hoity toity Hermes Birkin, which Eastwood apparently thought so little of. And any average, intelligent investor who is might wonder how a company with as grungy a face as Zumiez could make enough money to stay afloat – much less reap any decent investment rewards.
But judging by Zumiez’s most recent quarterly results, grungy, head-scratching and downright dangerous can be an extremely profitable combination when managed properly.
“Hang Ten” With Zumiez and Make Some “Sick” Profits Along the Way
If Zumiez sounds like a crazy name, it’s largely because it appeals to an oftentimes irrational base: Adolescents who want to express themselves as individuals… just like all the rest of their peers.
A leading specialty retailer, it sells just about everything a teenager could want towards achieving that goal, from apparel to footwear to accessories. According to its company profile, Zumiez caters “to young men and women between the ages of 12 and 24 who seek popular brands representing a lifestyle centered on activities that include skateboarding, surfing, snowboarding, BMX and motocross.”
Or, translated into teenage speak: It attracts the skater-punk/extreme-sports crowd.
That faction of adolescent expression seems to be doing quite well for itself these days, even in the middle of a tough economy. Either that or mommy and daddy are doing quite well and don’t mind throwing some serious cash at their kids.
One way or the other though, Zumiez concluded an excellent first quarter on April 28.
Total net sales during the 13-week period increased 22.7% over the same time in 2011, jumping from $105.9 million to $129.9 million. But that’s nothing compared to the 140% leap its net income made over the same time…
For its first quarter in 2011, Zumiez recorded a net income of $1.9 million. This year, that number is up to $4.5 million.
With that said, CEO Rich Brooks clearly had every right to brag that he is “pleased to start the year off wish such strong performance.” Going forward, he says his “teams are energized and focused on carrying our current momentum into summer and position the company for a successful back half of the year.”
Zumiez Looks “Clean” Going Forward
There’s a reason that Zumiez has seen such positive growth over time, raking in a gross profit of $133 million from 2009 to 2010, over $167 million the following fiscal year, and $201-plus million this past cycle. Net income has, incidentally, seen similarly impressive advances.
So what’s the key to success?
Zumiez sets itself apart from the competition by not only selling what teenagers want, but offering an atmosphere that makes them literally feel at home.
Most of its 455 stores across the U.S. and Canada are equipped with couches and video game stations meant to lure youngsters in and keep them there, interacting with the staff, their friends and – obviously – the merchandise. And they’re easy to find considering the prime mall locations Zumiez actively seeks out: Right next to the food courts, movie theaters, and entertainment shops.
Set up so specifically, it’s difficult for the company’s targeted demographic not to take notice… exactly as planned.
That’s why it seems extremely probable that Zumiez has a lot more to offer in the future… Unlike Francesca Eastwood’s $100,000 bag.
Jeannette Di Louie