What Happened?
Shares of clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) jumped 7.2% in the afternoon session after peer retailer Abercrombie & Fitch reported positive results which boosted investor sentiment across the apparel sector.
Abercrombie & Fitch raised its annual sales forecast, citing robust demand for its Hollister brand's dresses and denim jeans. This news suggests that shoppers, particularly in the younger demographic that both Zumiez and Abercrombie cater to, are continuing to spend on trendy apparel despite potential price hikes. The positive sentiment was bolstered by strong reports from other retailers as well, including a significant jump in shares for department store Kohl's after it also topped analysts' forecasts. Investors are likely interpreting these strong performances as a positive signal for the health of the retail industry, increasing optimism for Zumiez's own financial performance.
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What Is The Market Telling Us
Zumiez’s shares are extremely volatile and have had 33 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 3.6% on the news that a hotter-than-expected wholesale inflation report fueled concerns about slowing consumer spending.
The market was rattled by a Labor Department report showing the Producer Price Index (PPI), a measure of wholesale inflation, jumped 0.9% in July, significantly exceeding economists' expectations of a 0.2% rise. This was the largest monthly increase since March 2022, reigniting worries that businesses will be forced to pass higher costs on to consumers, who are already showing signs of price sensitivity. This inflation data has fanned concerns that U.S. tariffs on imported goods could start to translate into higher prices for shoppers. The inflation report landed amid growing evidence of consumer caution, with recent reports highlighting that shoppers are cutting back on non-essential spending, seeking out sales, and trading down to cheaper brands.
Zumiez is down 4% since the beginning of the year, and at $18.22 per share, it is trading 35.6% below its 52-week high of $28.30 from August 2024. Investors who bought $1,000 worth of Zumiez’s shares 5 years ago would now be looking at an investment worth $681.89.
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