Zumiez Inc Q3 FY2024 earnings call

• Third quarter comparable sales increased 7.5%, driven by North American business where US and Canada sales offset international softness. • Men's category had positive momentum for fourth consecutive quarter, women's category accelerated, footwear saw pickup in sequential demand. • Strategies for 2025 include accelerating top line expansion via injecting newness (over 100 new brands in 2024), private label expansion (private label represented over 27% of total sales YTD 2024), and customer engagement. • In Europe, pivoted from store expansion to enhancing existing store productivity despite tough cycle and unfavorable weather. • In North America, closed ~31 underperforming locations, optimized store labor, reduced shipping/logistics costs, and discount selling.

Third quarter net sales were $222.5 million, up 2.9% from the prior year. Comparable sales increased 7.5%. North America net sales were $186.8 million, up 2.9% from 2023, with comparable sales up 10.4%. Other international net sales (Europe and Australia) were $35.7 million, up 2.7% from last year, but comparable sales were down 5.6%. By category, men's was the largest positive comping category, followed by women's and footwear. Hardgoods was the largest negative comping category, followed by accessories. Revenue contribution: North America contributed $186.8 million (approx. 83.9% of total sales), international contributed $35.7 million (approx. 16.1% of total sales).

• Fourth quarter total sales expected to be between $284 million and $288 million, representing growth of ~0.7% to 2.2% from prior year, negatively impacted by 53rd week and retail calendar shift. • Comparable sales growth for 13 weeks ended February 1, 2025 expected to be between 6% and 7.5%. • Fourth quarter 2024 product margins expected to increase between 180 basis points and 210 basis points from prior year. • Consolidated operating income as a percent of sales expected to be between 7.3% and 8%, earnings per share between $0.83 and $0.93. • Anticipate ending 2024 inventory could grow more than current sales trends due to potential tariff impacts on imported goods. • Plan to open 7 new stores in 2024 (3 in NA, 2 in Europe, 2 in Australia) and close ~33 stores (31 in NA). • Full year 2024 total sales expected to increase 2% to 2.5% despite 53rd week and store closures, expect positive operating margins, full year effective tax rate ~80%.

• Unfavorable weather in Europe slowed progress in enhancing store productivity. • Potential new significant tariffs in 2025 on imported goods, which could impact product inflows and operating cash flows.

Q: Chris, can you bridge the gap between Q3 comp of 7.5% and Q4 comp guide of 6%-7.5%?

A: Chris Work explained that due to calendar shifts, November may be less important, December more so, with higher sales concentration around Christmas. Black Friday weekend was good, and they see positive trends in apparel and footwear.

Q: Richard Magnusen asked about promo strategy and trends.

A: Rick Brooks stated promo strategy is consistent, focusing on private label and unique value. Chris Work mentioned apparel categories, especially private label and new brands, are performing well.

Q: Corey Tarlowe inquired about profitability in US and Europe and hardgoods trend.

A: Chris Work discussed domestic focus on growing sales, managing product margin, tight cost management, and international focus on driving sales and managing SG&A. Rick Brooks mentioned hardgoods in Australia is positive for five months, indicating potential for improvement in other regions as they approach the bottom of the cycle.