ZUMZ: A Volatile Retailer's Opportunity in a Rocky Quarter

Zumiez (ZUMZ), the action-sports apparel retailer, saw its shares plunge 10.3% on June 6 after reporting mixed first-quarter 2025 results. While the stock's volatility—marked by frequent swings of over 5%—has long made it a rollercoaster ride for investors, the recent drop presents a critical question: Is this a fleeting overreaction to near-term headwinds, or a sign of deeper trouble in the retail sector?

For contrarian investors, the answer hinges on three factors: the resilience of North American sales, the impact of supply chain shifts on margins, and the valuation of a stock now trading at just $11.54—60% below its 2023 peak.

Mixed Q1 Results: A Revenue Win, but Profit Pressures Loom

Zumiez narrowly beat revenue expectations, reporting $184.3M in sales (up 3.9% year-over-year), driven by a 5.5% rise in comparable sales. North America delivered a standout 7.4% comp growth, fueled by strong demand for women's apparel and localized marketing campaigns. However, the EPS miss—$0.79 vs. the $0.77 estimate—reflected one-time costs, including a $2.9M legal settlement and ongoing tariff pressures.

The bigger concern lies in the company's guidance: A projected Q2 loss of $0.09 to $0.24 per share signals cautious management assumptions about margin recovery. Meanwhile, international sales stumbled, with Europe and Australia dragging down results by 3.7%.

The Case for Buying the Dip: Valuation and Volatility

Despite the challenges, ZUMZ's current valuation offers a compelling entry point for long-term investors. At $11.54, the stock trades at just 10.5x its projected 2025 EPS of $1.10, a significant discount to its five-year average P/E of 17.5x.

Historical volatility data underscores the opportunity. shows the stock has swung between $11.31 and $31.37, with average weekly moves of 9.7%—a level that, while elevated, has been consistent with its niche retail peers. The recent 10.3% drop mirrors past volatility spikes, such as the 15% intra-day plunge in September 2023, which later proved a buying opportunity.

Why the Decline Might Be Overdone

1. North American Momentum: The U.S. market, which accounts for 85% of sales, is proving resilient. Comparable sales growth of 7.4% in Q1 suggests the brand's focus on streetwear and action sports remains a draw for younger consumers—a demographic often overlooked in broader retail declines.
2. Supply Chain Shifts: Zumiez aims to cut China sourcing from 50% to 30% by end-2025, a move that could reduce tariff exposure and stabilize margins. Gross margin improved to 30% in Q1, a positive sign.
3. Share Buybacks: The company's new $15M repurchase program, paired with $25M spent in 2024, signals confidence in its valuation. With $101M in cash (despite recent declines), ZUMZ has room to absorb near-term pressures.

Risks and a Strategic Entry Point

The risks are clear:
- Tariffs and Inflation: EU tariff delays have offered temporary relief, but new trade barriers or rising costs could squeeze margins further.
- International Turnaround: Europe's 3.7% sales decline must stabilize, or ZUMZ's global ambitions will falter.
- Liquidity: Cash reserves have dropped 41% year-over-year to $101M, raising questions about the sustainability of buybacks if losses persist.

For investors willing to bet on a rebound, the current price offers a margin of safety. A strategic entry at $11.50—with a stop-loss below $10—could target a $15–$18 price range if Q2 results show margin improvements and North American sales hold.

Final Take: A Niche Play for Patient Investors

ZUMZ's 10.3% drop may be overdone, given its undervalued status and the durability of its core U.S. market. While tariff risks and international struggles are real, the stock's volatility history suggests this dip could mirror past opportunities. For those willing to look past short-term noise, ZUMZ offers a speculative entry into a niche retailer with a loyal customer base—provided investors stay disciplined and focus on the long game.

Action to Take

• Buy: $11.50 with a stop-loss at $10.00.
• Target: $15.00–$18.00, based on a return to historical P/E multiples and margin stabilization.
• Wait for: Positive Q2 updates on supply chain costs and European sales recovery.

ZUMZ isn't for the faint-hearted, but its volatility creates a rare chance to own a brand with niche staying power at a deeply discounted price.