Zacks Analyst Blog Highlights: Zumiez, Hot Topic, Wet Seal, PetSmart and Martha Stewart Living Omnimedia

Mar 04, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 4, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Zumiez Inc. (Nasdaq: ZUMZ), Hot Topic Inc. (Nasdaq: HOTT), Wet Seal Inc. (Nasdaq: WTSLA), PetSmart Inc. (Nasdaq: PETM) and Martha Stewart Living Omnimedia Inc. (NYSE: MSO).

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Here are highlights from Thursday's Analyst Blog:

Zumiez Sales Zoom

Zumiez Inc. (Nasdaq: ZUMZ), an action sports retailer in the United States, reported better-than-expected total net sales result for the four-week period ended February 26, 2011. Total net sales for the period increased 18.3% to $32.7 million compared with $27.6 million.

For the reported period, comparable store sales increased 12.8% compared with a rise of 11.2% in the prior-year period. The February results marked the fifteenth consecutive month of comparable store sales growth. In after hour trading, the company's shares rose 5.82% to $27.45.

Hot Topic Inc. (Nasdaq: HOTT), which competes with Zumiez, reported a decline of 1.4% in February comparable stores sales, with total sales declining 1.5%. In after hour trading, the company's shares increased 0.95% to $5.33.

Prior to this, the company reported third-quarter earnings of 40 cents a share compared with 17 cents a share in the third quarter of 2009, beating the Zacks Consensus Estimate of 37 cents.  Net income from operations was $1.1 million compared with a loss of $1.8 million in the prior-year quarter.

Net sales in the third quarter increased 20.0% year over year to $135.9 million from $113.2 million a year ago. Comparable store sales increased 14.4% in the quarter compared with a decrease of 8.0% in the third quarter of 2009.

Zumiez is a mall-based specialty retailer of action-sports related apparel, footwear, equipment, and accessories. The company targets young men and women in the age group of 12 to 24 years, who seek popular brands that represent a lifestyle centered on extreme sports activities. Zumiez's stores span across 2,900 square feet on an average, and feature couches and video game stations to encourage customers to shop for extended periods. The company's stores are strategically located near busy areas of the mall, such as food courts, movie theatres, music/game stores and other popular teenage hang-out destinations.

The company will announce its fourth-quarter and fiscal 2010 year-end financial results on Thursday, March 10, 2011. Management in its third-quarter 2010 results provided earnings guidance in the range of 43 cents and 47 cents for fourth-quarter 2010. The Zacks Consensus Estimate for fourth-quarter 2010 earnings is 47 cents per share. For full-year 2010 and 2011, the Zacks Consensus Estimates are 87 cents and $1.04 per share, respectively.

Zumiez, which competes with Wet Seal Inc. (Nasdaq: WTSLA), currently holds a Zacks #3 Rank, implying a short-term Hold rating on the stock. Besides, the company retains a long-term 'Neutral' recommendation on the stock.

PetSmart Outpaces Estimate

PetSmart Inc. (Nasdaq: PETM), the specialty retailer of products, services, and solutions for pets, recently posted fourth-quarter 2010 earnings of 77 cents a share, up 26.2% from 61 cents in the year-ago quarter, outpacing the Zacks Consensus Estimate of 74 cents.

Management now expects fiscal 2011 earnings between $2.23 and $2.35 per share. The company also projects first-quarter 2011 earnings between 52 cents and 56 cents.

PetSmart delivered a top-line growth of 8.1% in the quarter to $1,520.0 million, which came ahead of the Zacks Revenue Estimate of $1,511.0 million. The company expects revenue to increase in the mid-single digits range for fiscal 2011.

Merchandise sales grew 7.6% to $1,359.6 million, whereas service sales climbed 7.2% to $151.9 million. Other revenue in the quarter came in at $8.5 million.

Favorable currency fluctuations, increased consumer transactions coupled with robust sales during the festival season facilitated the company in escalating its top and bottom lines.

The Phoenix-based pet products retailer hinted that comparable-store sales elevated 6.3% in the quarter, aided by a 4.4% growth in comparable transaction. PetSmart forecasted comparable-store sales growth between low to mid-single digits for the first quarter and 3% to 4% for fiscal 2011.

The company's innovative and differentiated products as well its sustained effort to expand its portfolio of brands and assortments have helped to deliver healthy results. PetSmart's collaboration with Martha Stewart Living Omnimedia Inc. (NYSE: MSO) has aided the company to launch different lines of pet products.

Despite a 6.6% rise in the cost of goods sold, the company posted a substantial increase of 11.7% in gross profit to $465.0 million, benefiting from the top-line growth. Consequently, gross margin expanded 100 basis points to 30.6%. Operating income surged 11.7% for the quarter to $149.8 million, whereas operating margin increased 40 basis points to 9.9%.

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