Zumiez Inc (ZUMZ) Q4 2026 Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to ZoomEd Inc. Fourth Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference. Before we begin, I'd like to remind everyone of the company's safe harbor language. Today's conference call includes comments concerning ZoomEd Inc. business outlook and contains forward-looking statements. These FOILCAN statements and all of the statements that may be made on this call are not based on historical facts, are subject to risk and uncertainty. Actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available in the MES filings with the SEC. At this time, I would like to turn the call over to Rick Brooks, Chief Executive Officer. You may begin.

Hello, and thank you everyone for joining us on today's call. With me today is Chris Work, our Chief Financial Officer. I'll begin with remarks about our fourth core performance and the successful holiday season we just completed before reflecting on our strong full year 2025 results and discussing our strategic priorities. Chris will then take you through the financials and our outlook for fiscal 2026. After that, we're welcome to call to your questions. We're pleased with our fourth quarter results, which capped off a second consecutive year of important progress for Zoomies. The Q4 results were highlighted by robust full-price selling in North America during the important holiday season, which fueled mid-single-digit comparable sales growth in the region and meaningful growth margin expansion. In addition, the work we've done focused on assortment and full price selling in our European business drove 660 basis points of year-over-year product margin improvement. This coupled with discipline expense management resulted in 380 basis points of operating margin growth despite sales being down high single digits year-over-year in local currency. Our performance in both regions reflects the continued effectiveness of our full-price selling and cost-saving strategies, even as we faced regional headwinds. From a category perspective, men's lead are positive and comparable sales growth during the holiday period, followed by women's, accessories, and hard goods. This broad-based strength across multiple categories validates our merchandising approach and the investments we've made in product newness and private-level expansion throughout the year. Reflecting on Disco 2025, we took important steps towards returning to historical levels of sales and earnings. Our merchandise assortments and customer experience initiatives generate positive content every quarter, ranging from low single digits to high single digits, and a 4.3% comparable sales scheme for the year, on top of a 4% increase in 2024. Our North American businesses demonstrate consistent momentum, registering eight consecutive quarters of comparable sales growth. Our strategic shift in Europe, implemented just one year ago, gained momentum as we move through the year. This consists of bringing newness, strong inventory management, full-price selling, and expense management that we believe will drive the business to better results in the near term. The combined impact of our initiatives helped to improve full-year earnings per share to $0.78 from a loss of $0.09 last year. These results validate the strategic initiatives we've been executing and positioned as well for continued success in 2026. As we look ahead, we remain focused on the same three strategic priorities that have driven our success throughout 2025, having revenue growth through consumer-focused strategic initiatives. Our commitment to refreshing our product mix with innovative, distinctive offerings has proven to be a cornerstone of our success. In 2025, we launched over 150 new and emerging brands across our banners, and this newness continues to generate exceptional customer response. Private level penetration reached its highest level in company history in 2025, at approximately 30% of sales, up from 12% five years ago. This sustained expansion demonstrates our organization's ability to identify emerging trends and create compelling products that resonate with our customers, while simultaneously enhancing our margin profile. Our investors in delivering exceptional customer experiences across both physical and digital touchpoints continue to yield strong results. Enhanced staff development programs and technological capabilities we've implemented allows to engage with customers where they want, when they want, and in more personalized ways, strengthening the relations we have that have long served as another cornerstone of. Second, sustaining our rigorous commitment to profitability optimization across our geographic footprint. Within North America, our premium pricing strategies continue to support both margin expansion and market share growth. while the operational improvements we've executed throughout 2025 are keeping sales growth well ahead of our expense growth. Our continued focus in this area has established a more efficient and profitable framework that positions the business for a strong closure on incremental sales to fuel operating margin gains. Regarding our international operations, while Europe continues to face challenging market conditions, our disciplined approach to new assortments, full price selling, and expense management is starting to show results the significant product market improvements we achieved in the fourth quarter and full year demonstrate effectiveness of our strategy and we remain committed to our long-term vision for the countries in which we operate we continue to see tremendous value in our ability to identify trends locally in each market before they expand internationally capitalize on our solid financial foundation to manage volatility while funding strategic our finance position remains exceptionally strong providing us with the flexibility to get investing in our strategic objectives while delivering value to shareholders this financial stability enables us to navigate ongoing uncertainties in the macro environment by simultaneously positioning the company for long-term growth and continued market share gains despite operating environments characterized by economic volatility and involving global dynamics i'm increasingly confident in our ability to generate value for the fundamental strategies that have powered our performance throughout 2025 continue to demonstrate their relevance and our team's proven adaptability and execution capabilities fuel my optimism about our trajectory in the fiscal 2026. our direction remains clear and consistent became our dedication delivering distinctive fashion forward merchandise through the customer connection strategies that have driven our growth but preserving the operational discipline that has strengthened our financial performance we've demonstrated our resilience and ability to execute through various market cycles and I'm confident we're strategically positioned to continue building on this momentum before turning things over to Chris I want to express my appreciation to our entire organization for the continued commitment and exceptional execution throughout 2025. The dedication to our values and our customers remains a foundation for all of our achievements and positions as well for continued success in the year ahead. For that, let me hand things over to Chris for our financial review.

Thanks Rick and good afternoon everyone. I'm going to start with the review of our fourth quarter and full year 2025 results. I'll then provide an update on our first quarter-to-date sales trend before providing some perspective on the full year. Net sales for the fourth quarter of 2025 increased 4.4% to $291.3 million, compared to $279.2 million in the fourth quarter of 2024. Comparable sales were up 2.2% for the quarter. As Rick mentioned, the primary driver was our North America business, which showed outside strength, even as macroeconomic uncertainty spurred by global trade policy continues. For the fourth quarter, North America net sales were $224.4 million, an increase of 4.8% from 2024. Other international net sales, which consist of Europe and Australia, were $66.9 million, up 3% from last year. Excluding the impact of foreign currency translation, North American net sales increased 4.6%, and other international net sales decreased 7.1% year-over-year. comparable sales for north america were up 5.5 percent marking the eighth consecutive quarter of comparable sales growth in this region other international comparable sales declined 7.5 percent in the fourth quarter from a category perspective men's was our largest positive comping category followed by women's accessories and hard goods footwear was our only negative comping category the consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transaction. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. Fourth quarter gross profit was $111.4 million, compared to $101 million in the fourth quarter of last year. Gross margin was 38.2% of sales for the quarter, compared to the 200 basis point increase in gross margin was primarily driven by 180 basis points of improvement in product margin, and 50 basis points of leverage in store-off, $0.78. Here a result, $0.29.1 million in 2024. Transaction partially offset by a decrease in trend average unit retail and an increase in units per trend. From a category perspective, for the full year, women's was our largest positive comping category, but our only negative comping category. From a regional perspective, North American net sales were $757 million, an increase of 5.1% from 2024. Other international net sales were $172 million, up 1.7% from last year. Excluding the impact of foreign currency translation, North American net sales, 2025 gross margin was 35.8% of sales, compared to 34.1% in 2024. The 170 basis point increase was primarily driven by 90 basis points, $1.1 million, or 33.9% of net sales in 2020. 40 basis points related to wage and hour of litigation sales, leverage in non-wage store and 30 basis went to leverage in store wages on increased sales and hours management. Fiscal 2025 operating income was $17 million or 1.8% of net sales compared to operating income of $2 million or 0.2% of net sales in the prior year. Net income in fiscal 2025 was $13.4 million or 78 cents per share compared to a net loss of fiscal 2025 was negatively impacted by approximately 5 wage and hour litigation. So, during the balance sheet, $5 million, a $2.9 million benefit from foreign currency fluctuation, $3 million in region $3 million, and capital expenditures of $11.1 million. As of January 31st, 2026, we have no debt on the balance sheet and continue to maintain our full unused credit facility. The company repurchased 2.7 million shares during this March 11th, 2026. The Board of Directors approved the repurchase of up to an aggregate of $40 million in common stock. The repurchase program is expected at the end of the year with $147 million in inventory, compared to since our inventory levels were down 3.8% quarter-to-day results. Total sales for the four-week North America net sales for February 28, 2020. North America net sales for other international categories, followed by only negative companies. A consolidated increase in comparable sales is driven to an average unit retail and an increase in units per transaction. In respect to our outlook for the first, I'm going to remind everyone that our comparable sales results in early fiscal 2026, and we are often bottom-line improvements in the first significant economic impact on the business from the current global conflict of $93 million for the 13-weeks ending, and the state operating loss and negative for our year, like margin expansion in North America and Europe, as well as the wage and hour litigation sales, 140 to 270 basis points. We expect this margin expansion and 10 to 70 basis points. I'd like to point out that our loss was negatively impacted by favorable foreign exchange valuation and interest income items in the first quarter of 2025. This did not repeat impacting our loss per share of negative 70%. As we consider that outlook for the full executive quarters of macroenvironment, from giving specific top-line strength continues in North America, and we have lapped the promotional period in our European business last year of our trending positive in the first quarter today. In macroenvironment, we believe we can grow total sales of $12 million in sales in North America and continued pricing discipline in our international entity. Private label business will continue to see the overall result with sales growth, operating margin expansion. As you mentioned assumptions, we anticipate an operating margin growth in the 50 to 100 basis point. Tax rates will fluctuate by quarter. We anticipate that our full-year effective tax rate will be roughly 35 to 40 percent to an effective tax rate of 44 points. We are planning to open five new stores in 2026, all of America. We expect our capital expenditures for 2026 to be between $14 million and $16 million, compared to $11.1 million in fiscal 20 depreciation and amortization, including non-cash leasing expense, will be approximately $18.9 million, $3 million in 2025. We are currently projecting our diluted share count for the full year to be approximately 17.1 million shares, and not include the impact of any future share repurchase.

Thank you. Ladies and gentlemen, to ask the question, please press start 1-1 on your telephone, then wait for your name to be announced. To withdraw your question, please press start 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Mitch Komet with Seaport. Your line is open.

Yes, thanks for taking my questions. Let me begin with Europe. I just want to better understand what's going on there. you know, in the fourth quarter, other international was, I think it was a negative seven, five comp. And I know that you guys shifted your focus to more full price selling in the quarter. And now I think, Chris, you said you're running up a 13-2 quarter to date for other international. So did something change in terms of the full price selling focus or was it just not, Were you not lapping that issue in, like, quarter to date? You know, help me understand why we're seeing such a big swing in the comp performance from fourth quarter to Q1 to date and other international. And I assume it's Europe that's driving that.

Yeah, thanks, Mitch. And you are right in your assumption, this is Europe that's driving it. I think, as you know, Mitch, following as closely as you have, I mean, we started this kind of change in strategy in late 2024, really trying to kind of reimagine what was happening in Europe as we were growing at quite a cliff, but not getting to where we wanted to be from a profitability and cash flow perspective. So our determination at that time was really to slow growth and focus on growing the core business, you know, and driving to profitability and cash flow. As you know, things don't move as quickly as you like sometimes, but the team put a plan together. It included some, you know, change of people within the entity, and that took some time to kind of gain traction. So as we moved across 2025, you know, we saw that business shrink from about $135 million to just under 135 million euros, I should say. You know, this included across 2025 product margin growth at 250 basis points with Q4 up 660 basis points. A big win for us as we really reimagined the product portfolio and how we were buying inventory was even though sales were down pretty meaningfully in Q4, high single digit, we still saw $1.8 million of operating profit growth on the back of really strong full price selling and expense control. And this is really despite a pretty soft winter overall for Q4, so also really focused on inventory management, you know, more relevant products. And I think it put us in a spot to start 2026, just in a way better position than we were a year earlier. As you mentioned, you know, we have just under 90 stores now operating in nine countries. 2026 is off to a really strong start. The 13.2% international comp is really all driven by Europe. You know, we're not immune to the macro forces here, but we are just really laser focused on operating profit and cash flow. And that, you know, includes really trying to drive a high concentration of sales out of our existing units and online where possible, rationalizing the business. So it's really most core tasks around just how do we bring great product into the business and serve the customer, improving product margin, managing and reducing expenses where possible, and just laser focused on inventory levels. So I think all of that has really led to what we see now is really four months in a row of much better results, but we have a long way to go. So we're encouraged by what we've seen over the last four months, but like I said, there's still a lot of work to be done, and hopefully we've laid a good framework for that to be done in 2026. I think, you know, at the end of the day, it's our best way to definitely encourage.

And then as far as the comp guide for the quarter, I think you said a two to four comp. Quarter to date, you're running plus seven, five. I know February is a fairly small month. But why are you anticipating, you know, worse comp performance over the balance of the quarter? And then, you know, maybe as you address that question, can you also maybe speak to what you're seeing in terms of, like, tax refunds so far? And then how are you thinking about, you know, higher gas prices potentially, you know, impacting your consumers?

Yeah, all good questions. Let me start with kind of the guide, but I think these are going to sort of blend together. Obviously, we had a great February, really, across the business international we just spoke about. But North America was very strong, too, up six comp across the four weeks of February. I'll tell you, as we started to see the global conflict unfold, we did see some softness in week five and have kind of guided the business into what we saw as a slowdown. from where we were in February, and so while still positive, we just saw some softness in the business, and that's how we planned the quarter to come out. Now, whether that's tied to rising fuel prices and a little bit of uncertainty in the macro environment, I think that's to be determined, and we just need more time to figure it out. But in relation to putting the guide together and how we saw our comp guide, This is really about kind of looking at what's our current run rate sort of post-February and drawing that out across the rest of the quarter.

All right. That's helpful.

Thank you. Our next question comes from the line of Richard Magnuson with B. Riley. Your line is open.

Hi. Thank you for taking our call. So, first off, it looks like your private label penetration was strong in Q4, probably around 30%. But during the holiday season, did you notice any change in certain categories regarding the performance of private label versus, you know, the branded products? Or was it pretty much the same trends or different categories that you saw throughout the year?

I'll think we saw any major changes. There are certain categories that are really, really, really dominated by our clients. Sometimes it's hard to compare. And so I think you have to think of each of them as a target a bit different. So I don't think trend direction changes from a private label predictive that I can think of in terms of the category performance for the brands that they perform well. But we also have some new brands that have performed. So I think it's a combination of both, and the new brands tend to be more focused on the T-shirts and fleas and hats and the more screenable portion of the business. So I think the private level is more dominated by the... So they're kind of a bit...

Okay, and then my last second question is Easter looks like just over three weeks away. What can you tell us about your expectations of timing regarding your spring assortments and any observed consumer preferences and the impact of recent weather in different parts of the U.S. and the cadence of promo around Easter weekend?

I'll kind of take a crack at it. This kind of falls into our planning arena and let Rick talk. Obviously, Easter has pulled up, so we have kind of started putting our product out in a way that will take advantage of that, obviously, and planning the business to have a little higher bump in the middle part of the quarter versus a little bit later in the quarter. So we're certainly planning on that. You know, Richard, from a promotional perspective, This is just not really our game. We try to stay really full price and full margin. I think you see that within our product margin results here across 2025 and really the last few years as we've really been able to grow product margin, and that's not just our private label business. That's our branded business as well, really working with our partners to refine this. So I don't see anything specific there. We do have a variety of what I will call sort of, you know, spring season initiatives that, as you would imagine, would play into the gift giving that happens around Easter. Top 20 brands really continue to gain traction this year as a percent of the total business, which we view as a good thing. I mean, we go through these cycles where, you know, our biggest brands will kind of disaggregate and we bring on a lot of new brands and other times they aggregate. And hopefully that leads to, you know, really strong results as they grow in breadth and depth, right? So I think all those things are playing into the business. You see it really across all of our categories, whether we're talking about the stuff with the exception to be the one area of challenge for us.

Thank you. As a reminder, ladies and gentlemen, that's star 1-1 to ask the question. Please stand by for our next question. Our next question comes from the line of Marcus Belanger with Wim Blair. Your line is open.

Hi, you guys got me?

We got you.

Awesome, awesome.

I'm on for Dylan Cardin.

Just wanted to ask a follow-up to an earlier question about international. Obviously, you've seen a lot of volatility in that area. Can you tell me what you guys are doing to stabilize the area and have greater visibility into future growth? And then I have a follow-up.

Yeah, I'll kind of add on to my earlier comment and let Rick jump in if he has anything to add. I mean, I think like all of our business, it really does start with product. So as we thought about reimagining the business at the end of 24, you know, part of it was slowing growth just to make sure the focus was really laser focused. just looking at products and saying, how do we see trends, see where that customer's at, see who that customer is, and bring it to them in a way that they will adapt to and they'll be excited about. And of course, we can sell it at full price. So this was really about rethinking that, really starting to look at our assortments and who we are carrying and how we are carrying them and what they were saying to the customer and starting to push that into the business in a different way than we've been doing. Obviously, as you can imagine, that takes time when you buy seasons ahead of time. So, you know, for us, we knew in the turnover at the end of late 2024 that it would be sort of a, you know, back to school holiday time period where we start to see this take shape. And we were pretty encouraged by some of the early areas we reimagined and bet and what those mint going into Q4, and then, you know, some of those same items that we were dropping even late into Q4 that we're, you know, driving into the 2026. So it's really about product. I mean, there's a huge part of execution beyond that of, you know, your store environment and the people in stores and how they bring the product to life. We continue to invest in that. We continue to invest in our teams there just like we do here in North America. I mean, this is really about driving a human-to-human relationship, right? How you connect with your customer and how you talk with them. And so that's been part of what we've driven as well. And we think, you know, when you have the right product and you can bring it to them in a way that you really connect with them, I think that drives a different experience and hopefully one that brings that customer back again and again.

I'd just add that we have looked deeply at every area of our business in Europe. And as Chris said earlier, we've made some personnel changes in terms of some of the leadership in Europe. And now we're leading particularly in some really key areas. And we're just giving no stone unturned as we revisit every aspect of what we're doing. And, again, I really encourage you to have that again that that was against a very, one of our worst snow years ever in Europe. And we have a very dominant retailing business in Europe. So despite the proof, the bottom line results, we're really encouraged. I think we're heading the right way.

Thank you. For stores, where are you guys in terms of how many more years maybe do you guys think about closing stores? And then for the new stores that you are opening for this year, it looks like you're going to open up five. How are, you know, over the last couple of years, how have those new stores been performing? Are they at a higher, you know, mature? Or do you think that they're going to hit a higher sales per store maturity curve than your other stores? Just any comments on basic productivity for the first year or two years for your new stores? Thank you.

Yeah, sure. And let me, you know, I'll talk about new stores real quickly, and then we can talk about closures. I think, you know, this is really, I would say, post-pandemic. You've seen our store openings slow from historical levels, which we kind of knew was going to be part of it. Obviously, with North America more built out and international being our area of further growth over the last few years, as we've talked about here on the call today, you know, we have slowed international just from a standpoint of really focusing on profitability and cash flow. So the store opening cadence is much less. I think when you think about opening approximately five stores a year in North America, the last few classes of stores have been really good. We've been able to be selective in where we're opening and really try to fill markets or fill opportunities we've wanted to get into for a long time. You know, there's still a lot of – a fair amount of good assets in the country that we want to get in. We just have to find that right fit, right, that right location within the mall, that's the right economics that makes sense for us to be able to invest. And I'm quite happy with how the real estate team and our store operations team has performed here in the last few years in our openings and, you know, each class having, you know, more winners than tougher situations. So that's a really good thing. Over this year, although I'll tell you these are forecasts nationally, and our closure process is, as you would expect, it's a diligent process, right? It's looking at each trade area we're in, each market we're in, are there underperformers, are there opportunities for consolidation, and trying to figure out where those opportunities are. We look at everything from sales and profitability, what the store's impact on that trade area is in regards to how it helps fulfill product and even kind of leverage with the conditions of the centers, who the landlords are, how they're investing in the center. You know, we try to really manage the peak before we do those things in 2026. We're really just trying to consolidate. We've given ourselves a challenge for quite some time, but, you know, we don't want to have one more store than we need in any given trade area, right? We're really trying to be intentional about it. Internationally, this will be a few more closures than we've had historically in 2026 as expected, and that's really just kind of trimming that portfolio as well, right? These ones are definitely working. They're great locations. There's maybe a mid-class we're happy with. And there's not making the traction we need and there are closures to make the overall business better.

I'll just add in that, again, what we're seeing in the U.S. is actually, finally, it should be able to make some money, but now they've just got to the point where they're just not working. Most of all, we're often one of the last retailers to leave in some of these centers. But it's not about, per se, sales declining, how customers are moving to the better.

Thank you. Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to work for closing remarks.

All right. Thank you again for all of your questions today. And we always appreciate your great interest in what we're doing and the progress we're making towards building back towards our historical profitability levels. And as I said earlier, I really want to thank everyone on our team and our partners and our brand partners and the support as we really drive better results. So much appreciated from everybody.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.