Zumiez (ZUMZ) Q2 2026 Earnings Call Transcript

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DATE

Thursday, Sept. 10, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Richard Brooks Jr.
• Chief Financial Officer - Christopher Codington Work

TAKEAWAYS

• Net Sales -- $209.0 million, declining 2.5% year over year due to market softness in the U.S. and lower transaction counts.
• Comparable Sales -- Decreased 2.1% during the quarter, reflecting a 2.9% decline in North America partially offset by a 2.1% increase in other international regions.
• North America Net Sales -- $174.0 million, representing a 3.4% decrease compared to the second quarter of the prior fiscal year.
• Other International Net Sales -- $35.1 million, growing 2.5% year over year or 0.8% when excluding the impact of foreign currency translation.
• Category Performance -- Accessories and men's reported positive comparable sales growth, whereas footwear, hardgoods, and women's experienced declines during the quarter.
• Footwear Impact -- The category accounted for 70% of the total sales decline in the U.S. business through the Labor Day period.
• Transaction Metrics -- Consolidated comparable sales were impacted by a decrease in transactions, which was partially offset by an increase in dollars per transaction driven by higher units per transaction.
• Average Unit Retail -- Decreased during the quarter, partially offsetting the benefit of higher units per transaction.
• Gross Profit -- $73.9 million, down from $76.1 million in the second quarter of the previous year.
• Gross Margin -- 35.3% of sales, a 20-basis-point decrease driven by 60 basis points of deleverage in store occupancy costs, partially offset by a 50-basis-point benefit from tariff refunds.
• SG&A Expense -- $75.2 million or 35.9% of sales, compared with $75.9 million or 35.4% of sales in the prior year, reflecting deleverage on lower sales volumes.
• Operating Loss -- $1.3 million, representing 0.6% of net sales compared to operating income of $100,000 in the prior year.
• Net Loss -- $2.7 million or $0.17 per share, compared to a net loss of $1.0 million or $0.06 per share in the year-ago period.
• Cash Position -- $97.3 million in cash and current marketable securities as of Aug. 1, 2026, compared to $106.7 million as of Aug. 2, 2025.
• Share Repurchases -- 1.2 million shares repurchased during the second quarter for $23.2 million, bringing the fiscal year-to-date total to 1.5 million shares for $29.5 million.
• Inventory -- $157.3 million, remaining flat compared to the prior year on a constant currency basis.
• Q3-to-Date Sales -- $106.4 million for the 37-day period ended Sept. 7, 2026, representing a 4.3% decrease compared to the prior year period.
• Q3 Sales Guidance -- $222 million to $226 million, reflecting a projected decline of 5.5% to 7% compared to the prior year.
• Q3 EPS Guidance -- $0.00 to $0.10 per share, compared to $0.55 per share in the third quarter of the previous year.
• Q3 Product Margin -- Expected to decline 20 to 40 basis points due to U.S. softness and a higher penetration of lower-margin international sales.
• Full Year Sales Outlook -- Expected to be down low single digits, which includes a $12 million negative impact from store closures.
• Full Year Operating Margin -- Anticipated to be down slightly in fiscal 2026, a reduction from the previously communicated growth target of 50 to 100 basis points.
• Capital Expenditures -- Projected between $13 million and $15 million for the full fiscal year.
• Store Openings and Closures -- The company plans to open five new stores in the U.S. while closing approximately 16 stores globally, including 10 in North America and six internationally.
• Share Count Projection -- Approximately 15.8 million shares for the full year, incorporating the completion of the $40 million repurchase program in early September.

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RISKS

• Brooks stated, "Footwear has been the most significant headwind accounting for 70% of the total US sales decline from the prior year through that time frame," highlighting the specific impact of the category on domestic performance.
• Work stated, "Given the softness in back to school results, we believe it is prudent to look forward with an appropriate level of conservatism," regarding the downward revision of third quarter and full year expectations.
• Work noted that the company is expecting the back half of the third quarter to perform worse than the back-to-school period, which follows a historical pattern of slower activity when there is less reason to shop.

SUMMARY

Zumiez Inc. (NASDAQ:ZUMZ) reported a decrease in second quarter net sales as domestic market softness, particularly in footwear, offset growth in international segments. Management indicated that North American performance was challenged by lower transaction counts, while the international business saw positive comparable sales growth across Canada, Europe, and Australia. The company stated it is adjusting merchandise assortments and private label offerings to respond to evolving apparel trends. Strategic focus remains on optimizing profitability in international markets and maintaining a debt-free balance sheet to navigate market volatility.

• Brooks stated, "Footwear has been the most significant headwind accounting for 70% of the total US sales decline from the prior year through that time frame."
• Brooks noted that while some products are performing well, they are currently unable to offset the downward trend of major brands in the lifestyle athletic footwear segment.
• Management expects footwear comparisons to become easier in the fourth quarter as the company anniversaries the start of the current downward cycle.
• The company is utilizing data initiatives to enhance customer communication and evaluate operational changes needed to improve the effectiveness of marketing.
• International growth is being supported by a premium pricing strategy and the expansion of private label products to enhance margin profiles.
• Work indicated that the $40 million share repurchase program authorized in March 2026 was officially completed in early September 2026.
• Management reported a sense of urgency in working with brand partners and private labels to introduce newness into apparel assortments following two years of positive trend performance.

INDUSTRY GLOSSARY

• Hardgoods: Equipment such as skateboards, snowboards, bindings, and related components.
• Comparable Sales: A metric measuring the sales growth of stores that have been open for at least one year, excluding the impact of new store openings and closures.
• Basis Points: A unit of measure for interest rates and other percentages in finance, where one basis point is equal to 0.01%.
• Average Unit Retail (AUR): The average price at which an item is sold during a specific period.
• Units Per Transaction (UPT): An operational metric measuring the average number of items purchased by a customer in a single transaction.

Full Conference Call Transcript

Operator: Good afternoon, ladies and gentlemen. And welcome to the Zumiez Inc. Second Quarter Fiscal 26 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 would like to remind everyone of the company's Safe Harbor language. Today's conference call includes comments concerning Zumiez Inc. Business outlook and contains forward-looking statements. These forward-looking statements and all other statements that may be made on this call that are not based on historical facts are subject to risks and uncertainties. Actual results may differ materially.

Additional information concerning a number of these factors that could cause actual results to differ materially from the information that will be disclosed is available in Zumie's filings with the SEC. At this time, I would like to turn the call over to Rick Brooks, Chief Executive Officer. Mr. Brooks?

Richard Brooks Jr.: Call. With me today is Christopher Codington Work, our Chief Financial Officer. The trends we are seeing so far in the third quarter before providing an update on our strategic priorities for the remainder of the year. Christopher will then take you through our financial results and along with our outlook for the third quarter. After that, we will open the call to your questions. Our second quarter sales decreased 2.5% from the prior year, While we are disappointed that results are short of expectations, due to softness in the US, encouraged by diversification of our global business where our international energy provided positive sales growth for the quarter.

Our current quarter to date trends through Labor Day have shown similar results to the second quarter. The U.S. is trending down after very strong performance over the similar period in the 2 prior years, growing 14.1% in 2024 and 13.2% in 2025, while our international AEs have seen low single digit positive comparable sales in the same time frame this year, Current overall sales results have been meaningfully impacted by our U. S. Sales deceleration driven by softness in footwear, and an overall drop in transactions.

We know from experience that these-- that these down cycles are generally temporary, and we are actively working to refine our merchandise assortments and further lean into our customer experience initiatives to improve the trajectory. As we move forward, we are executing on both our domestic and international strategies to continue advancing the business. First, domestically, we are evaluating all areas of the business to positively impact the customer through the important holiday cycle and into 2027. As we reflect on the U.S. business second quarter and back to school results, through Labor Day, the footwear category has been the most significant headwind accounting for 70% of the total US sales decline from the prior year through that time frame.

Footwear has been challenged since the second quarter of 25, and the year over year comparisons get easier as we head into the fourth quarter of this year. We have also seen evolution in apparel trends that have positively driven the business for over 2 years. These changes created a sense of urgency to work with our brand partners as well as our own private label brands to bring newness and changes to our assortment. On the service front, we continue to invest in our-- with training focused on capturing every sale.

We are learning-- we are learning more about our customers through our data initiatives, which are enhancing our ability to communicate with them in relevant ways to improve the effectiveness of marketing initiatives and evaluate where operational changes are needed in the business to enhance the customer experience. As we have said for some time, our job is to meet consumers where they are and continue to move with them in this important stage of their life. Identifying and leading on trends has been at the core of Zumiez's success throughout our history, and we have confidence that our teams will deliver as we move through this transitional period.

Second, internationally, we remain focused on the key strategic priorities that have helped us improve the business dating back to the fourth quarter last year. This includes driving revenue through refreshing our product mix with innovative distinctive offerings, continued growth of private label that supplemented our branded product and resonate with our customers, while enhancing our margin profile, maintaining a rigorous commitment to profitability optimization in each market, This includes executing a premium pricing strategy to drive margin expansion, while managing expenses to grow at the bottom line. With the positive inflection in our sales, we are making traction on this initiative in each of the international markets. Lastly, we continue to maintain our solid financial foundation.

Is the backbone of our ability to manage volatility funding initiatives aimed at serving our customer. Our financial position remains a source of real strength, giving us the flexibility to continue investing our strategic objectives while also delivering value to shareholders through our share repurchase program. Financial flexibility matters more than ever in a consumer environment where the speed of trend cycles has never been faster. And it underpins confidence in our ability to navigate whatever comes next while continuing to build long term shareholder value. Let me be clear, I am disappointed with our current results, and our people are working hard to improve the business.

I have confidence in our team to make the changes needed to positively impact the fourth quarter and into 2027. Closing, I want to thank our entire organization for the continued hard work and dedication to our customers. It remains the foundation of everything we do. With that, let me hand things over to Christopher for the financial review.

Christopher Codington Work: Thanks, Rick, and good afternoon, everyone. I am going to start with a review of our second quarter fiscal 26 results. I will then provide an update on our quarter to date sales trends before providing an outlook for the third quarter. Net sales for the second quarter of fiscal 26 decreased 2.5% to $209 million compared with $214 million in the second quarter of fiscal 25. Comparable sales were down 2.1% for the quarter. With Canada, Europe and Australia all having positive comparable sales growth for the quarter. The negative comp was driven by softness in the U.S., as Rick previously covered. The second quarter, North America net sales were $174 million a decrease of 3.4% from fiscal 25.

Other international net sales, which consists of Europe and Australia, were $35.1 million up 2.5% from last year. Excluding the impact of foreign currency translation, North American net sales decreased 3.3%, other international net sales were up 0.8% year-over-year. Comparable sales for North America were down 2.9% while other international comparable sales increased 2.1% in the second quarter. From a category perspective, accessories was our largest positive comping category. Followed by men's. Footwear was our largest negative comping category followed by hard goods and women's. The consolidated decrease in comparable sales was driven by a decrease in transactions. Partially offset by an increase in dollars per transaction.

Dollars per transaction were up for the quarter driven by an increase in units per transaction. Offset by a decrease in average unit retail. The second quarter gross profit decreased to $73.9 million compared to $76.1 million in the second quarter of last year. Gross margin was 35.3% of sales for the quarter compared with 35.5% in the second quarter of fiscal 25. The 20-basis-point decrease in gross margin was primarily driven by 60-basis-points of deleverage in store occupancy costs due to lower sales, partially offset by 50-basis-points of benefit from tariff refunds.

SG&A expense for the second quarter of fiscal 26 was $75.2 million or 35.9% of net sales, compared with $75.9 million or 35.4% of net sales in fiscal 25. The 50-basis-point increase in SG&A as a percentage of net sales was driven by a 50-basis-point increase in non wage store operating costs, 40-basis-points of deleverage in store wages, on lower sales, 40-basis-points of deleverage related to nonstore wages, and 20-basis-points of deleverage in other corporate costs. This was partially offset by 70-basis-points of benefit related to lower annual incentive compensation, and 30-basis-points benefit related to a litigation settlement recorded in the second quarter of last year.

Operating loss in the second quarter was $1.3 million or 0.6% of net sales, compared to a prior year operating income of $100 thousand or 0.1% of net sales. Net loss for the second quarter was $2.7 million or $0.17 per share. In the year ago period, we reported a net loss of $1 million or $0.06 per share. Our effective tax rate for the current quarter was -91.5% versus 210% a year ago. The unusual tax rates in the second quarter this year and last year were primarily due to the allocation of losses across the jurisdictions in which we operate.

Lastly, due to our repurchase activity over the past 12 months, our share count is down approximately 6% since the second quarter last year. Which will positively benefit full year EPS, is a headwind in the quarters where we record a loss. Turning to the balance sheet. The business ended the quarter in a strong financial position. We had cash and current marketable securities of $97.3 million as of August 1, 2026, compared with a $107 million as of August 2, 2025. The decrease in cash and current marketable securities from the second quarter of last year was primarily driven by $34.5 million in share repurchase and $10.6 million of capital expenditures.

Partially offset by $35.7 million in cash flow from operations. As of 08/01/2026, we have no debt on the balance sheet, and we continue to maintain our full $25 million unused credit facility. During the second quarter, we repurchased 1.2 million shares at a total cost of $23.2 million under the authorization provided by the Board of Directors on March 11, 2026. Year to date through the second quarter, we have repurchased a total of 1.5 million shares at a total cost of $29.5 million and ended the quarter with $157 million in inventory, compared with $158 million in inventory last year. On a constant currency basis, our inventory levels were down 0% from last year.

We feel good about our current inventory position and the quality of our inventory on hand. Now to our third quarter to date results through Labor Day. Net sales for the 37-day period ended September 7th, 2030 decreased 4.3% compared to the 37-day period in the prior year ended September 8, 2030. Comparable sales for the 37-day period ended September 7th, 2030, were down 3.5% from the comparable period in the prior year. This was on top of a 2-year stack of positive 21.8%. From a regional perspective, net sales for North America business for the 37-day period ended September 7th, 2030, decreased 4.7% compared to the 37-day period ended September 8, 2030. While our other international business decreased 0.9%.

Excluding the impact of foreign currency translation, North American net sales for the 37-day period ended September 7th, 2030, decreased 4.7% from the prior year,. While international net sales decreased 2% compared with 2025. Sales for North America decreased 3.9% for the 37-day period ended September 7th, 2030. Compared to the same weeks in the prior year. While comparable sales for our other international business increased 0.5%. From a category perspective, accessories was our only positive comping category, Footwear was our largest negative comping category, followed by women's, men's, and hardgoods. The consolidated decrease in comparable sales was driven by a decrease in transactions. Partially offset by an increase in dollars per transaction.

Dollars per transaction were up for the period driven by an increase in units per transaction, partially offset by a decrease in average unit retail. With respect to our outlook for the third quarter of fiscal 26, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity in estimated sales, product margin and earnings growth given a variety of internal and external factors that impact our performance. Given the softness in back to school results, we believe it is prudent to look forward with an appropriate level of conservatism.

We are anticipating total sales to be between $222 million and $226 million for the 13 weeks ended October 31, 2026, Representing a decline in sales of 5.5% to 7%, compared to the prior year. Comparable sales are expected to be between -5% and -6.5%. For the third quarter, we are expecting product margin to be down 20- to 40-basis-points due to decline in our U. S. Business and a higher penetration of international sales that operate at a lower margin.

Consolidated operating income for the third quarter is expected to be between 1% and 1.7% of sales, and we anticipate earnings per share will be between $0.00 and $0.10, compared to earnings per share of $0.55 in the prior year. Regarding our full fiscal 26, with the slowdown in our business and the increased consumer pressures we are observing, we believe caution is warranted when constraining our outlook for the full year. Given this, we will refrain from providing specific full year earnings guidance at this time, but we will provide some high level context around how we see the business.

Aside from sales, we are currently seeing stronger results in our international business and softer results in our domestic business. Considering these trend lines in the business and inclusive of our third quarter guidance, we now believe sales will be down low single digits to the prior year. Which includes the $12 million of negative impact of closed stores. We believe consolidated product margin will be roughly flat to the prior year with growth internationally. While our domestic business will be down slightly. With the anticipated product margin, we believe gross margin will be roughly flat to the prior year as a percent of sales.

SG&A is expected to be down slightly in total dollars on lower levels of incentive compensation and deleverage with sales down to the prior year. Operating margin with the previously mentioned assumptions and barring significant deterioration in the consumer environment, we now believe operating margin will be down slightly in fiscal 26. Compared to previously communicated levels of 50 to 100 basis points of growth. While effective tax rates will fluctuate by quarter, we anticipate that our full year effective tax rate will be roughly 55% in fiscal 26. Compared to an effective tax rate of 44% in fiscal 25. We are planning to open 5 new stores in fiscal 26 all within the US.

We plan to close approximately 16 stores during fiscal 26, including 10 in North America and 6 internationally. We expect our capital expenditures for fiscal 26 to be between $13 million and $15 million. We expect the depreciation and amortization, excluding noncash lease expense, will be approximately $19.2 million down from $21.3 million in fiscal 25. And we are currently projecting our diluted share count for the full year to be approximately 15.8 million shares. This share count does contemplate full execution of the $40 million repurchase program, approved by the board on March 11, 2026 which was officially completed in early September.

Our strong financial position, and proven ability to execute gives us confidence in our ability to navigate the current environment, while continuing to invest in our long term strategic priorities. With that, operator, we would like to open the call up for questions.

Operator: Certainly. Ladies and gentlemen, if you do have a question at this time, please press 1-1 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press 1-1. Our first question comes from the line of Mitchel Kummetz from Seaport. Your question, please.

Mitchel Kummetz: Yes. Thanks for taking my questions. Rick, I was hoping to just get your take on what is happening in footwear. Number of retailers have already reported. Not necessarily maybe the most direct competitors of yours, there is been talk about weakness in legacy silhouettes. there is also been some talk about maybe a shift away from athletic to nonathletic. I do not know to what extent you are seeing some of that, and how are you sort of planning to kind of pivot the assortment so that you are bedroom better aligned with any sort of strength that might be in footwear right now?

Richard Brooks Jr.: Yeah. I mean, thank you, Mitchel. I think we are clearly seeing that it is been a challenge for us for quite a number of quarters now as we said. And it is I think we are aligned around the idea that we are selling lifestyle athletic footwear. So it is been, I think, we are in a kind of sweet spot. it is really been struggling. In terms of just, again, what our mix of products has always said. So as we look at this niche, as we look forward, we are certainly trying a lot of different things.

We have some things that are working, to offset, but it is not working at a level that is able to deal with the big brands that are trending down. So our goal looking forward as you look into the back half this year and the next year is to continue to try and work with our partners continue to drive uniqueness into the footwear into our footwear business. that is where we really see that we can have-- we can have success.

Now that is going to be easier for us to see, Mitchel, because we are gonna I really feel we are gonna find the bottom of this cycle here as we anniversary these big negative comps In Q4. So I think it is as usual for us. it is going to be about uniqueness of product and then finding that next trend brand that is really going to drive us forward.

Mitchel Kummetz: Yeah. And there is also been a lot of talk amongst some of these retailers that this has been a particularly promotional back to school season around footwear, and I am just wondering how are you guys addressing that And to what extent is that putting pressure on your margins? If to the extent that you have to compete with some of those promotions?

Richard Brooks Jr.: Yeah. Good question, Mitchel. And first, let me say I think we feel pretty good about our position, our inventory position in footwear. We have been working closely because this has been with our partners over the last few quarters really to manage what our inventory exposure is here. So again, appreciate our partners support here. And I think I do not think we have a lot of risk around our inventory position mix So we have not been as promotional as I think some of our competitors have been on price point. That said, we are, as you can see on our website, we are certainly trying to clear some footwear out.

And it is, impacted margins some in within these quarters. So I think we do not have a major inventory problem. We are having to deal with some of the issues left in terms of margin impact.

Mitchel Kummetz: Okay. And then maybe last 1 for me. As far as the third quarter, comp outlook is concerned, the range that you have provided is I guess, I would say worse than what you are seeing quarter to date. Maybe 2 questions. How much of the quarter is essentially in the books through September 7th? And the expectation for that comp to deteriorate over the balance of the quarter How much of that is just sort of conservatism that you have baked into your guide versus just the thought that the pattern that we have been in for a while, the consumer of disappears in between events.

And once we get through back to school, there is not a whole lot that might be, you know, com compelling reason to shop over the balance of the quarter?

Christopher Codington Work: Yeah. Thanks, Mitchel. I will go ahead and take that. You know, I think you kind of hit on the 2 points we tried to factor into the guide. We are just over 50% of the way through from a sales in perspective. And as you can tell with the guide that is worse than where we are trending, we are expecting the back half of the quarter to be worse than what we experienced through back to school. That would be consistent with what we have seen the last at least the last couple years, but actually for number of years. Where we have just performed much stronger in the back to school time period.

And then when there is less of a reason to shop, it is slow, And we are also baked some conservatism in. The-- the second quarter, as you as you noted, was a miss. Where we thought the second quarter was going to come in. And we have identified that some of the trends that have really been driving this business, have moved pretty quickly. And so we are-- we are really focused on how to impact the fourth quarter and into 2027. And in those cycles, what we have learned in the past is when trends move, they move. And so we are trying to be cautious in how we are planning the rest of the quarter.

And, you know, hopefully, we can come back to you here in early December and talk about how we were able to outperform this.

Mitchel Kummetz: Thank you, and best of luck.

Richard Brooks Jr.: Thanks. Thanks, Mitchel.

Operator: Thank you. Once again, if you have a question. This does conclude the question-and-answer session of today's program. I would like to hand the program back to Rick Brooks for any further remarks.

Richard Brooks Jr.: All right. As always, I just want to thank everyone for their interest in Zumiez, and we will look forward to talking to you in December with our third quarter results. Thank you, everybody.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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