Zumiez Strong Performance More Than A Passing Fad?

Shares of Zumiez Inc. ZUMZ were higher by around 15 percent Friday morning after the retailer's earnings report impressed investors, but didn't necessarily win over the Street.

BMO Capital Markets' John Morris maintains a Market Perform rating on Zumiez's stock with an unchanged $16 price target. While the fashion retail chain deserves credit for its strong execution and capitalizing on 1990s nostalgia trends, the stock isn't a screaming buy moving forward.

Zumiez's report showed strength across most line items and should be considered a high quality beat, the analyst wrote. However, the company's comparisons only get tougher moving forward. Specifically, Zumiez will be lapping last September's +6 percent comp gains versus last August's much easier -1 percent comparison. As such, investors have valid reason to be questioning how sustainable the company's strong comps will prove to be within the overall challenging retail environment.

In addition, Zumiez will likely experience wage pressure moving forward and that merchandise margin expansion comparisons from last year. As such, this could will "limit the magnitude" of continued gross margin expansion in the back half of 2017.

Finally, the analyst's $16 price target is based on a 15x multiple on his 2018 earnings per share forecast. This represents a "fair" valuation given the lack of visibility towards longer-term earnings trends.