Why Zumiez stock came out today

Actions of I buzz (ZOOM 9.76%)surf-and-skate apparel retailer, rose today after the company delivered better-than-expected results in its second-quarter earnings report.

As of 9:53 a.m. ET, the stock was up 12.2% on the news.

Image source: Getty Images.

Zumiez impresses

At a time when much of the apparel sector is struggling with weak consumer demand, Zumiez delivered strong results with comparable sales up 3.6%, leading revenue up 8.1% to $210.2 million, although the company said a change in the retail calendar boosted sales by 530. basis points. That result beat estimates at $202 million.

Gross margin also rose 250 basis points to 34.2%, helping narrow the loss from $0.44 per share in the year-ago quarter to just $0.04, which which was much better than expectations of $0.33.

CEO Rick Brooks said, “We experienced a noticeable acceleration in our sales trend as the second quarter unfolded, with North American comparable sales for July increasing by single digits.”

He also said fresh apparel and footwear assortments and improved customer engagement have helped boost business.

Momentum is building

Looking ahead to the third quarter, the company said quarter-to-date comparable sales rose 12.1% and net sales for the first 30 days of the quarter rose 6.8%, explaining the change in timing. Management also said the company had a strong back-to-school season.

For the full third quarter, revenue is expected to be $221 million-$225 million, up 2%-4%, or up 7%-9% when adjusted for the calendar shift. Bottom line, the company expects earnings per share between a loss of $0.04 and a profit of $0.06.

That forecast was better than estimates for revenue of $218.8 million, although analysts had also expected earnings per share of $0.23, but that gap can be explained by the change in timing.

Overall, the results show that company growth accelerates during the key holiday season. While Zumiez has struggled to deliver consistent profitability, it’s clear that the business is headed in the right direction.

Still, I’d wait for clearer signs of profitability before calling the stock a buy.