Zumiez Inc Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fourth Quarter Performance: Comparable sales increased 5.9%, total sales were $279 million. Operating profit doubled to $20 million, and EPS increased 95% to $0.78. The shortfall to initial guidance was due to lower sales in mid to late December in North America.
• Strategic Priorities 2025:
  • Inject assortments with newness: Launched over 120 new brands in 2024, with new brands constituting a larger portion of sales.
  • Private label expansion: Private label reached nearly 28% of total sales in 2024, up from 23% in 2023.
  • Customer engagement: Focus on best-in-class service in stores and online, with investments in training and technology.
• Cost Management: Closed 31 underperforming locations, optimized store labor, reduced shipping and logistics costs, and decreased discount selling.
• Europe Performance: Sales were challenging in 2024 but improved in Q4, with product margins improving by over 100 basis points from the prior year.

Segment Performance

• North America: Comparable sales for the 13-week period ended February 1, 2025, were up 7.2%, marking the fourth consecutive quarter of growth. Full-year 2024 comparable sales were up 6.2%. Net sales in Q4 2024 were $214.2 million, and full-year net sales were $720 million.
• Other International (Europe and Australia): Q4 2024 comparable sales were up 1.9%, while full-year 2024 comparable sales were down 4.1% but improved in Q4. Net sales in Q4 2024 were $65 million, and full-year net sales were $169.2 million.
• Categories: Men's, women's, and footwear categories showed positive comparable sales growth; accessories and hard goods were negative. Private label reached nearly 28% of total sales in 2024, up from 23% in 2023.

Guidance

• First Quarter 2025: Total sales expected to be between $179 million and $183 million (1-3% growth), comparable sales 3-5%. Product margin slightly down/flat. Operating loss预计 to be between negative $16.5 million and negative $18.5 million, and EPS预计 to be between negative $0.72 and negative $0.82.
• Full Year 2025: Expect to grow total sales despite store closures, aim to grow product margins, hold SG&A flat as a percentage of sales, plan to open 9 new stores (including 2 in Europe and 1 in Australia), and capital expenditures预计 to be between $14 million and $16 million.

Risks

• Tariffs: Impact on sourcing, particularly from China; need to diversify production to mitigate exposure.
• Macroeconomic Uncertainty: Volatile consumer purchasing patterns and uncertain macroeconomic environment posing risks to sales and profitability.

Question and Answer

• Q: Impact of tariffs on private label and brands, pricing. A: Sourcing strategy involves working with brands, with over 70% of business from brands. Currently diversifying production from China, with already moving production in 2025 to reduce reliance on China.
• Q: Leverage points and flow-through on EBITDA vs SG&A. A: Good opportunity in gross margin to grow product margin and leverage occupancy/distribution costs. SG&A expected to grow in line with sales; high flow-through (30%+) expected if sales exceed plan.
• Q: Growing operating margin with low single-digit comp. A: Yes, possible given ongoing efforts to manage costs and grow sales despite challenges.