Zumiez Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• First Quarter Performance: Comparable sales grew 5.5%, the fourth consecutive quarter of positive comparable sales growth. Exceeded high end of guidance ranges for sales and profitability (excluding one-time legal sentiment). Strong full price selling due to merchandise assortments and shopping experience.
• Strategic Priorities:
  • Accelerate top line expansion: Over 120 new brands launched in 2024; private label expanded to 30% of total sales in Q1 2025 (up from 23% in 2023).
  • Maintain profitability: Closed 31 underperforming locations, optimized staffing models, and reduced shipping/logistics costs.
  • Leverage financial strength: Robust balance sheet with $101 million in cash and current marketable securities; repurchased 1.8 million shares in Q1, and a new $15 million buyback plan authorized.
• Sourcing Diversification: Taking action to diversify sourcing base, aiming to meaningfully reduce exposure to China by the end of 2025 to offset tariff impact.

Segment Performance

• North America: Net sales were $149.7 million, up 4.9% from 2024. Comparable sales grew 7.4%, marking the fifth consecutive quarter of positive comparable sales growth. Women's was the largest positive comping category, followed by men's, footwear, and accessories; hardgoods was the only negative comping category.
• Other International (Europe and Australia): Net sales were $34.6 million, down 0.2% from the prior year. Comparable sales in the first quarter were down 2.3%. In May, other international net sales decreased 9.6% and comparable sales dropped 14.8%.

Guidance

• Second Quarter 2025: Total sales expected between $207 million and $214 million (negative 2% to positive 2% change from prior year). Comparable sales growth between negative 1% and positive 3%. Product margin expected to increase from the prior year. Consolidated operating loss between $0.7 million and $4 million. Loss per share between $0.09 and $0.24.
• Full Year 2025: Anticipate year-over-year sales growth despite store closures. Modest year-over-year product margin growth. Hold SG&A costs relatively flat as a percentage of sales. 9 new store openings, approximately 20 store closures. Capital expenditures between $14 million and $16 million. Depreciation and amortization (excluding noncash lease expense) approximately $22 million. Full effective tax rate roughly 50%-60%. Diluted share count approximately 17.5 million shares.

Risks

• Macroeconomic Uncertainty: Ongoing trade negotiations and potential tariff reinstatement could strain consumers' discretionary income and negatively affect results.
• International Performance: Challenges in other international markets, particularly Europe, with May comparable sales down 14.8%, impacting overall results.
• Foreign Currency Movements: Unfavorable foreign currency movements in other international markets can impact results.

Question and Answer

• Q: Walk us through tariffs, China exposure, and mitigation efforts. A: China exposure was 50% in Q1 2025, expecting to meaningfully reduce to 30% or lower by end of 2025. Worked with brands and manufacturers to rethink production and pricing to offset tariff costs.
• Q: Product margin outlook despite tariffs. A: Combination of working with brands, private label bundling/promotions, and some price increases to still grow product margin modestly.
• Q: Other international performance and strategy. A: Europe strategy is to slow growth and focus on profitability. May comparable sales down 14.8%, but focusing on product newness and fourth quarter volume to improve results.