Trendy clothing retailer Zumiez Inc. (ZUMZ) is falling hard today down 6% after disappointing Wall Street with the results of their Q1 07 conference call yesterday. Zumiez did hit an amazing 45.8% increase in first quarter profits, enabling it to match analysts’ expectations. It was the Street’s expectation of earnings at 6 cents a share, excluding items, on revenue of $68.5 million that caused the drop today.

Turns out that that net sales for the first quarter (13 weeks) ended May 5, 2007 increased to $68.8 million from $47.8 million reported in the first quarter (13 weeks) of the prior fiscal year. ZUMZ ended up with a Q1 net income of $1.6 million, or 6 cents a share, compared with $1.1 million, or 4 cents a share, in the year-ago period. Same store sales increased 11.3% for the first quarter of fiscal 2007 compared to a 19.7% increase in the first quarter of fiscal 2006. Still an 11% increase is outstanding considering they sell clothes to "young adults" age 12 through 24.

Have any of you walked in or seen a Zumiez store? They’ve made a $1.08 billion company selling clothes that really coin the phrase "Skate or Die" (which happened to be a killer game in the late 80′s) to the T. The cast of Jackass are the kind of people who love Zumiez’s clothes and shoes, as do the "alternative" crowd, skaters, and boarders across America.

In the last 6 months Zumiez‘s shares have increased 37% and they opened 19 new stores in the first quarter and plan to open another 50 stores in fiscal 2007. These guys are growing hand over fist, it’s just that P/E of 53 that has me concerned, because if they don’t keep up the growth, their shares are really expensive.

The analysts seem to love Zumiez despite the reaction by the Market today. Robert W Baird maintains their "outperform" rating on Zumiez Inc. with a target price is set to $49. McAdams Wright Ragen reiterated their "hold" rating today on ZUMZ and raised their target price from $42 to $46.

So shares of ZUMZ sit at $38 and change today just waiting to enter the half-pipe to see if they can hit analysts’ estimates. So will Zumiez maintain it’s growth and revenue for 2007 and pull of a sweet 900 (the holy grail of all skateboard moves made famous by Tony Hawk in 99′ – this is a must see even if you hate skateboarding) or will they crash and die?

If it makes you feel better Zumiez is rated a four-star stock in Motley Fool CAPS. Personally, I wish I could skate like Tony Hawk and as for investing in Zumiez, maybe Wall Street is overacting a tad today. With the analysts saying mid to high $40′s and Zumiez’s growth on target, who’s to say they won’t pull of the 900?

Zumiez: Skate or Die?

I choose "Skate".

Frank Lara Jr.

Frank Lara Jr. can be reached at franklara@247wallst.com; he does not own securities in the companies he covers.