Release Date: March 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zumiez Inc (ZUMZ, Financial) reported a 5.9% increase in comparable sales for the fourth quarter, marking the third consecutive quarter of positive growth.
- Operating profit more than doubled to $20 million, and EPS increased by 95% to $0.78 after adjustments.
- The men's and women's categories showed strong performance, with the women's category becoming the largest growth segment for the quarter.
- The company successfully launched over 120 new brands in 2024, contributing significantly to sales.
- Zumiez Inc (ZUMZ) maintained a strong balance sheet with $147.6 million in cash and no debt, providing flexibility for future investments.
Negative Points
- Total sales for the fourth quarter were $279 million, which was $7 million below the midpoint of initial guidance.
- The North American business experienced lower than planned sales in mid to late December, impacting overall performance.
- International sales, particularly in Europe, faced challenges with a 4.1% decline in comparable sales for the year.
- Inventory levels increased by 13.8% year-over-year, partly due to sales shortfalls leading into the Christmas holiday.
- The company anticipates a consolidated operating loss for the first quarter of fiscal 2025, with a projected loss per share between $0.72 and $0.82.
Q & A Highlights
Q: Can you walk us through the impact of tariffs on your private label business and how brands are dealing with it from a pricing standpoint?
A: Christopher Work, CFO: Our sourcing strategy involves working with brands that represent over 70% of our business, with the rest being our private label. As of 2024, about 50% of our North American receipts were from China, which we aim to reduce in 2025. We've started diversifying production to mitigate tariff impacts and are prepared for immediate needs through spring.
Q: What are your leverage points on BDO versus SG&A, and what might the flow-through rate look like if you exceed those leverage points?
A: Christopher Work, CFO: We expect to grow sales and operating profit despite store closures. We see opportunities to grow product margin and leverage costs like occupancy and distribution. SG&A is expected to grow in line with sales. If sales exceed expectations, we anticipate a high flow-through rate, potentially 30% or more.
Q: Can you grow operating margin on a low single-digit comp?
A: Christopher Work, CFO: Yes, we believe we can grow operating margin even with a low single-digit comp.
Q: How are you managing SG&A expenses given inflation and wage pressures?
A: Christopher Work, CFO: We've managed SG&A by optimizing store labor, making strategic cuts, and closing underperforming stores. Despite inflation and wage pressures, we've made difficult decisions to control costs, particularly in areas with semi-fixed expenses.
Q: What is your outlook for fiscal 2025 in terms of sales and store openings?
A: Christopher Work, CFO: We expect to grow total sales in 2025 despite closing 33 stores in 2024 and planning to close 20 more in 2025. We plan to open 9 new stores, including 6 in North America, 2 in Europe, and 1 in Australia.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
