Zumiez (ZUMZ) Q4 2025 Earnings Call Transcript

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DATE

Thursday, March 12, 2026, at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Richard Brooks
• Chief Financial Officer — Christopher Work

TAKEAWAYS

• Net Sales -- $291.3 million for the quarter, up 4.4% from $279.2 million in the prior year.
• Comparable Sales -- Up 2.2% company-wide; North America comp sales rose 5.5%, while other international declined 7.5%.
• Gross Margin -- 38.2% of sales, a 200 basis point improvement primarily from 180 basis points of product margin expansion and 50 basis points of occupancy leverage, partly offset by 20 basis points from incentive costs.
• Operating Income -- $25 million, representing 8.6% of net sales versus $20.1 million or 7.2% a year ago.
• Net Income -- $19.6 million, or $1.16 per share, compared to $14.8 million, or $0.78 per share, in the previous year.
• SG&A Expense -- $86.4 million (29.6% of sales), with a 60 basis point change driven by higher incentive and corporate wage costs, partly offset by store wage and other operating cost leverage.
• Category Performance -- Men's led comparable sales growth, followed by women's, accessories, and hardgoods; footwear was the only negative comping category.
• Inventory -- $147 million at quarter end, a 0.2% year-over-year increase; on a constant currency basis, inventory decreased 3.8%.
• Cash and Marketable Securities -- $160.6 million at quarter end, up from $147.6 million last year, primarily due to operating cash flow, foreign currency benefit, and restricted cash release offset by share repurchases and capital expenditures.
• Share Repurchases -- 2.7 million shares bought back in fiscal year at an average price of $14.18 per share, totaling $38.3 million; new $40 million authorization approved to run through January 29, 2028.
• Full Year EPS -- $0.78, versus last year’s net loss of $0.09 per share; 2025 was negatively impacted by $0.15 per share related to California wage-and-hour litigation settlement.
• Full Year Comparable Sales -- Increased 4.3%, driven by higher dollars per transaction and strong private label penetration at 30% of sales, up from 12% five years ago.
• First Quarter-to-Date Sales -- Up 9.8% year over year; North America increased 5.6% and other international regions up 27.6%; comparable sales up 7.5% overall, led by 13.2% international comp growth.
• Full Year Operating Income -- $17 million (1.8% of sales), up from $2 million (0.2% of sales) in the prior year.
• Fiscal 2026 Guidance -- First quarter sales forecasted at $189 million to $193 million (3%-5% growth); comparable sales projected between 2% and 4%.
• Operating Loss Guidance -- First quarter operating loss expected between $15.6 million and $17.8 million, improved from last year’s $19.9 million loss; projected improvement of 140-270 basis points as a percentage of sales.
• Tax Rate Outlook -- Effective tax rate anticipated in the 35%-40% range for fiscal 2026, compared to 44.4% in 2025.
• Store Openings and Closures -- Plan to open 5 new stores (all in the U.S.) and close approximately 25 stores (20 North America, 5 international) in 2026; closed 17 stores in 2025.
• Capital Expenditures -- Expected at $14 million to $16 million for 2026, versus $11.1 million in 2025.

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RISKS

• Christopher Work stated, "as we started to see the global conflict unfold, we did see some softness in week 5 and have kind of guided the business into what we saw as a slowdown from where we were in February."
• Fiscal 2025 EPS was negatively impacted by $0.15 per diluted share due to a wage-and-hour litigation settlement in California, which management referenced in outlook considerations.
• Christopher Work said, "caution is warranted, given the ongoing volatility in the macro environment," indicating management's explicit acknowledgement of external uncertainty affecting future outlook.

SUMMARY

The call revealed that Zumiez (NASDAQ:ZUMZ) drove margin expansion and profitability gains in both North America and Europe despite sales pressure internationally. Management noted that private label sales reached 30% of total, supporting improved product margins. The company achieved eight consecutive quarters of North America comparable sales growth. February comps and early first-quarter trends were positive, especially in Europe, but management highlighted recent softness and macro volatility as caution flags. Management authorized a new $40 million share repurchase program extending to January 2028.

• Quarter-to-date comp gains in other international markets were driven almost entirely by improved European performance following a multi-quarter product and focus reset.
• Guidance for Q1 2026 loss per share is between $0.77 and $0.87, with the outlook tempered by non-recurring prior year income items and the impact of share count reduction.
• Store footprint rationalization is progressing, with increased closures targeting underperformers, especially in lower-tier U.S. malls, as part of ongoing strategic network optimization.
• No balance sheet debt remains; cash balances rose from operating inflows, despite significant share repurchases and increased capital expenditures.

INDUSTRY GLOSSARY

• Product Margin: The profit margin percentage derived specifically from product sales, excluding other income and cost components such as occupancy and payroll.
• Comparable Sales (Comp Sales): Same-store sales growth, measuring revenue changes in stores open at least one year, used to assess organic growth separate from expansion or closures.
• Private Label: Merchandise produced and sold under the retailer's own brands, as opposed to third-party national or designer brands, often yielding higher margins.

Full Conference Call Transcript

Richard Brooks: Hello, and thank you, everyone, for joining us on today's call. With me today is Chris Work, our Chief Financial Officer. I'll begin with remarks about our fourth quarter performance and the successful holiday season we just completed before reflecting on our strong full year 2025 results and discussing our strategic priorities. Chris will then take you through the financials and our outlook for fiscal 2026. After that, we'll open the call to your questions. We're pleased with our fourth quarter results, which capped off a second consecutive year of important progress for Zumiez.

Q4 results were highlighted by robust full price selling in North America during the important holiday season, which fueled mid-single-digit comparable sales growth in the region and meaningful gross margin expansion. In addition, the work we've done focused on assortment and full price selling in our European business drove 660 basis points of year-over-year product margin improvement. This, coupled with disciplined expense management, resulted in 380 basis points of operating margin growth despite sales being down high single digits year-over-year in local currency for the quarter. Our performance in both regions reflect the continued effectiveness of our full price selling and cost saving strategies even as we faced regional headwinds.

From a category perspective, men's led our positive comparable sales growth during the holiday period, followed by women's, accessories and hardgoods. This broad-based strength across multiple categories validates our merchandising approach and the investments we've made in product newness and private label expansion throughout the year. Reflecting on fiscal 2025, we took important steps towards returning to historical levels of sales and earnings. Our merchandising assortments and customer experience initiatives generated positive content every quarter, means from low single digits to high single digits and a 4.3% comparable sales gain for the year on top of a 4% increase in 2024. Our North American businesses demonstrated consistent momentum, registering 8 consecutive quarters of comparable sales growth.

Our strategic shift in Europe, implemented just 1 year ago, gained momentum as we moved through the year. This consists of bringing newness, strong inventory management, full price selling and expense management that we believe will drive the business to better results in the near term. The combined impact of our initiatives helped to improve full year earnings per share to $0.78 from a loss of $0.09 last year. These results validate the strategic initiatives we've been executing and position us well for continued success in 2026. As we look ahead, we remain focused on the same 3 strategic priorities that have driven our success throughout 2025. First, driving revenue growth through consumer-focused strategic initiatives.

Our commitment to refreshing our product mix with innovative distinctive offerings has proven to be a cornerstone of our success. In 2025, we launched over 150 new and emerging brands across our banners, and this newness continues to generate exceptional customer response. Private label penetration reached its highest level in company history in 2025 at approximately 30% of sales, up from 12% 5 years ago. This sustained expansion demonstrates our organization's ability to identify emerging trends and create compelling products that resonate with our customers while simultaneously enhancing our margin profile. Our investments in delivering exceptional customer experiences across both physical and digital touch points continue to yield strong results.

Enhanced staff development programs and technological capabilities we've implemented allow us to engage with customers where they want, when they want and in more personalized ways, strengthening the relations we have that have long served as another cornerstone of our success. Second, sustaining our rigorous commitment to profitability optimization across our geographic footprint. Within North America, our premium pricing strategies continue to support both margin expansion and market share growth, while the operational improvements we've executed throughout 2025 are keeping sales growth well ahead of our expense growth. Our continued focus in this area has established a more efficient and profitable framework that positions the business for a strong flow-through on incremental sales to fuel operating margin gains.

Regarding our international operations, while Europe continues to face challenging market conditions, our disciplined approach to new assortments, full price selling and expense management is starting to show results. The significant product margin improvements we achieved in the fourth quarter and full year demonstrate the effectiveness of our strategy, and we remain committed to our long-term vision for the countries in which we operate. We continue to see tremendous value in our ability to identify trends locally in each market before they expand internationally. Third, capitalize on our solid financial foundation to manage volatility by funding strategic expansion.

Our financial position remains exceptionally strong, providing us with the flexibility to continue investing in our strategic objectives while delivering value to shareholders. This financial stability enables us to navigate ongoing uncertainties in the macro environment by simultaneously positioning the company for long-term growth and continued market share gains. Despite operating environment characterized by economic volatility and evolving global dynamics, I'm increasingly confident in our ability to generate value for all of our stakeholders. The fundamental strategies that have powered our performance throughout 2025 continue to demonstrate their relevance and our team's proven adaptability and execution capabilities fuel my optimism about our trajectory into fiscal 2026.

Our direction remains clear and consistent: maintain our dedication to delivering distinctive fashion-forward merchandise through the customer connection strategies that have driven our growth while preserving the operational discipline that has strengthened our financial performance. We've demonstrated our resilience and ability to execute through various market cycles, and I'm confident we're strategically positioned to continue building on this momentum. Before turning things over to Chris, I want to express my appreciation to our entire organization for their continued commitment and exceptional execution throughout 2025. Their dedication to our values and our customers remains the foundation for all of our achievements and positions us well for continued success in the year ahead.

With that, let me hand things over to Chris for our financial review.

Christopher Work: Thanks, Rick, and good afternoon, everyone. I'm going to start with a review of our fourth quarter and full year 2025 results. I'll then provide an update on our first quarter to date sales trends before providing some perspective on the full year. Net sales for the fourth quarter of 2025 increased 4.4% to $291.3 million compared with $279.2 million in the fourth quarter of 2024. Comparable sales were up 2.2% for the quarter. As Rick mentioned, the primary driver was our North America business, which showed outsized strength even as macroeconomic uncertainties spurred by global trade policy continues. For the fourth quarter, North America net sales were $224.4 million, an increase of 4.8% from 2024.

Other international net sales, which consists of Europe and Australia, were $66.9 million, up 3% from last year. Excluding the impact of foreign currency translation, North America net sales increased 4.6% and other international net sales decreased 7.1% year-over-year. Comparable sales for North America were up 5.5%, marking the eighth consecutive quarter of comparable sales growth in this region. Other international comparable sales declined 7.5% in the fourth quarter. From a category perspective, men's was our largest positive comping category, followed by women's, accessories and hardgoods. Footwear was our only negative comping category. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions.

Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. Fourth quarter gross profit was $111.4 million compared to $101 million in the fourth quarter of last year. Gross margin was 38.2% of sales for the quarter compared with 36.2% in the fourth quarter of 2024. The 200 basis point increase in gross margin was primarily driven by 180 basis points of improvement in product margin and 50 basis points of leverage in store occupancy costs on higher sales and the closure of underperforming stores. These benefits were partially offset by 20 basis points related to increased incentive costs on improved results.

SG&A expense in the fourth quarter of 2025 was $86.4 million or 29.6% of net sales compared to $80.9 million or 29% of net sales in 2024. The 60 basis point improvement in SG&A expenses as a percentage of net sales was driven by 100 basis points of increased incentive costs on improved results and 20 basis points related to corporate wage costs. These cost increases were partially offset by 50 basis points of leverage in store wages related to increased sales and hours management and 20 basis points of leverage in other store operating costs.

Operating income in the fourth quarter was $25 million or 8.6% of net sales compared to prior year operating income of $20.1 million or 7.2% of net sales. Net income for the fourth quarter was $19.6 million or $1.16 per share. In the year ago period, we reported net income of $14.8 million or $0.78 per share. Our effective tax rate for the current quarter was 26.3% versus 26.1% a year ago. Looking at our full year results, net sales for fiscal 2025 were $929.1 million, an increase of 4.5% from $889.2 million for 2024. Comparable sales for the full year were up 4.3%.

The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transaction. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. From a category perspective, for the full year, women's was our largest positive comping category, followed by men's, hardgoods and accessories. Footwear was our only negative comping category. From a regional perspective, North America net sales were $757 million, an increase of 5.1% from 2024. Other international net sales were $172 million, up 1.7% from last year.

Excluding the impact of foreign currency translation, North America net sales increased 5.2% and other international net sales decreased 4.2% compared to 2024. Comparable sales for North America were up 6.7% and comparable sales for international were down 5.4% for the full year. 2025 gross margin was 35.8% of sales compared to 34.1% in 2024. The 170 basis point increase was primarily driven by 90 basis points of product -- of improvement in product margin and 70 basis points of leverage in store occupancy costs on higher sales and the closure of underperforming stores. SG&A expense was $315.5 million or 34% of net sales for fiscal 2025 compared with $301.1 million or 33.9% of net sales in 2024.

The 10 basis point increase as a percentage of net sales was driven by 50 basis points of increased incentive costs on improved results and 40 basis points related to wage-and-hour litigation settlements in California. These benefits were partially offset by 60 basis points of leverage in non-wage store operating costs and 30 basis points of leverage in store wages on increased sales and hours management. Fiscal 2025 operating income was $17 million or 1.8% of net sales compared to operating income of $2 million or 0.2% of net sales in the prior year.

Net income in fiscal 2025 was $13.4 million or $0.78 per share compared to a net loss of $1.7 million or $0.09 per share in the prior year. Fiscal 2025 was negatively impacted by approximately $0.15 per diluted share related to a wage-and-hour litigation settlement in California. Turning to the balance sheet. The business ended the year in a strong financial position. We had cash and current marketable securities of $160.6 million as of January 31, 2026, up from $147.6 million as of February 1, 2025.

The increase in cash and current marketable securities over the last year was primarily driven by cash flow from operations of $53.5 million, a $2.9 million benefit from foreign currency fluctuation and our release of $2.7 million in restricted cash, partially offset by common stock repurchases of $38.3 million and capital expenditures of $11.1 million. As of January 31, 2026, we have no debt on the balance sheet and continue to maintain our full unused credit facility. The company repurchased 2.7 million shares during fiscal 2025 at an average cost of $14.18 per share and a total cost of $38.3 million.

On March 11, 2026, the Board of Directors approved the repurchase of up to an aggregate of $40 million of common stock. The repurchase program is expected to continue through January 29, 2028, unless the time period is extended or shortened by the Board of Directors. This repurchase program supersedes the prior authorized approval approved by the Board of Directors on June 4, 2025, that was set to expire on June 30, 2026. We ended the year with $147 million in inventory compared to $146.6 million last year, a growth of 0.2% year-over-year. On a constant currency basis, our inventory levels were down 3.8% from last year. We feel good about our current inventory position.

Now to our first quarter to date results. Total sales for the 4-week fiscal period ended February 28, 2026, increased 9.8% compared to the 4-week fiscal period ended March 1, 2025. Comparable sales over the same period increased 7.5%. From a regional perspective, North America net sales for the 4-week period ended February 28, 2026, increased 5.6% over the 4-week period ended March 1, 2025, while our other international business increased 27.6%. Excluding the impact of foreign currency translation, North America net sales increased 5.3% and other international net sales increased 12% compared with 2025.

Comparable sales for our North America business increased 6% for the 4-week period ended February 28, 2026, compared to the same week in the prior year, while comparable sales in our other international business increased 13.2%. From a category perspective, quarter-to-date, hardgoods is our largest positive comping category, followed by men's, women's and accessories. Footwear was our only negative comping category. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction.

With respect to our outlook for the first quarter of fiscal 2026, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity in estimating sales, product margin and earnings growth, given the variety of internal and external factors that impact our performance. Our comparable sales results in early fiscal 2026 have maintained positive momentum, and we are cautiously optimistic that we'll continue to deliver top and bottom line improvements in the first quarter, assuming no significant economic impact on the business from the current global conflicts or tariff changes.

For the first quarter, we are anticipating total sales to be between $189 million and $193 million for the 13 weeks ending May 2, 2026, representing growth of 3% to 5%. Comparable sales for the same time period are expected to be between 2% and 4%. Consolidated operating loss for the first quarter is expected to be between negative $15.6 million and negative $17.8 million compared to a loss of $19.9 million in the prior year. Included in this reduction of our operating loss is continued product margin expansion in North America and Europe as well as a benefit related to a $2.9 million onetime wage-and-hour litigation settlement incurred in the first quarter of 2025.

This is an improvement of between 140 to 270 basis points as a percentage of sales. We expect this improvement to be driven by 130 to 200 basis points of gross margin expansion and 10 to 70 basis points of SG&A leverage. Before providing our first quarter EPS guidance, I'd like to point out that our loss per share comparison to the prior year is negatively impacted by favorable foreign exchange valuation and interest income items in the first quarter of 2025 that did not repeat in the first quarter of 2026.

Also, due to share buybacks in fiscal 2025, we have reduced our basic shares outstanding by approximately 10%, negatively impacting our loss per share guidance by an additional $0.07 per share. With that, we anticipate that our loss per share will be between negative $0.77 and negative $0.87 compared to a loss of negative $0.79 in the prior year. As we consider the outlook for the full fiscal year 2026, with 7 consecutive quarters of positive comparable sales behind us and momentum into the new year, we are confident in our strategy and execution. However, caution is warranted, given the ongoing volatility in the macro environment.

We will refrain from giving specific annual guidance, but we will provide some context around how we see the business trending throughout the year. Top line strength continues in North America, and we have lapped a promotional period in our European business last year that, along with a difficult snow season, contributed to the fourth quarter sales decline in the region. Both North America and Europe are trending positive in the first quarter to date. With relative stability in the macro environment, we believe we can grow total sales in the low single digits for the year, inclusive of the negative impact of closed stores worth approximately $12 million in sales.

From a product margin perspective, 2025 was at a high point, excluding the stimulus-driven 2021 results. We believe that we will continue to grow product margin year-over-year in 2026 through steady improvements in North America and continued pricing discipline in our international entities. We believe that our private label business will continue to grow, helping drive the overall results, including potential tariff benefits, should the current situation hold throughout the year. In addition to product margin growth, we believe further leverage exists in our occupancy costs and other components that will drive gross margin expansion. With sales growth discussed, we would anticipate leverage of our SG&A costs, further contributing to operating margin expansion.

With the previously mentioned assumptions, we anticipate operating margin growth in the 50 to 100 basis point range in fiscal 2026. While effective tax rates will fluctuate by quarter, we anticipate that our full year effective tax rate will be roughly 35% to 40% in fiscal '26 compared to an effective tax rate of 44.4% in 2025. We are planning to open 5 new stores in 2026, all within the U.S. This compares to 6 total stores opened in 2025 and 7 stores in 2024. We plan to close approximately 25 stores during fiscal 2026, including 20 in North America and 5 internationally, and we closed 17 stores during fiscal 2025.

We expect our capital expenditures for 2026 to be between $14 million and $16 million compared to $11.1 million in fiscal 2025 and $15 million in 2024. We expect that depreciation and amortization, excluding noncash lease expense, will be approximately $18.9 million, down from $21.3 million in 2025. And we are currently projecting our diluted share count for the full year to be approximately 17.1 million shares. This share count does not include the impact of any future share repurchases, including those under the repurchase agreement announced today. And with that, operator, we'd like to open the call up for questions.

Operator: [Operator Instructions] Our first question comes from the line of Mitch Kummetz with Seaport.

Mitchel Kummetz: Let me begin with Europe. I just want to better understand what's going on there. In the fourth quarter, other international was -- I think it was a negative 7.5% comp. And I know that you guys shifted your focus to more full price selling in the quarter. And now I think, Chris, you said you're running up 13.2% quarter-to-date for other international. So did something change in terms of the full price selling focus? Or was it just not -- were you not lapping that issue in, like, quarter-to-date? Help me understand why we're seeing such a big swing in the comp performance from fourth quarter to Q1 to date in other international.

I assume it's Europe that's driving that.

Christopher Work: Yes. Thanks, Mitch. And you are right in your assumption. This is Europe that's driving it. I think as you know, Mitch, following as closely as you have, I mean, we started this kind of change in strategy in late 2024, really trying to kind of reimagine what was happening in Europe as we were growing at quite a clip, but not getting to where we wanted to be from a profitability and cash flow perspective. So our determination at that time was really to slow growth and focus on growing the core business and driving to profitability and cash flow. As you know, things don't move as quickly as you like sometimes, but the team put a plan together.

It included some change of people within the entity, and that took some time to kind of gain traction. So as we moved across 2025, we saw that business shrink from about $135 million to just under EUR 135 million, I should say. This included, across 2025, product margin growth of 250 basis points with Q4 up 660 basis points. I think a big win for us as we really reimagine the product portfolio and how we are buying inventory. Even though sales were down pretty meaningfully in Q4, high single digits, we still saw $1.8 million of operating profit growth on the back of really strong full price selling and expense control.

And this is really despite a pretty soft winter overall for Q4. So -- also really focused on inventory management, more relevant product. And I think it put us in a spot to start 2026 just in a way better position than we were a year earlier. As you mentioned, we have just under 90 stores now operating in 9 countries. 2026 is off to a really strong start. The 13.2% international comp is really all driven by Europe. We're not immune to the macro forces here, but we are just really laser-focused on operating profit and cash flow.

And that includes really trying to drive a high concentration of sales out of our existing units and online, where possible, rationalizing the business to its really most core tasks around just how do we bring great product into the business and serve the customer, improving product margin, managing and reducing expenses where possible and just laser-focused on inventory levels. So I think all of that has really led to what we see now is really 4 months in a row of much better results, but we have a long way to go. So we're encouraged by what we've seen over the last 4 months. But like I said, there's still a lot of work to be done.

And hopefully, we've laid a good framework for that to be done in 2026. I think at the end of the day, we continue to believe that this international growth is a positive thing for us, and it really is our best way to serve our customers, which exists all around the world and our brands, and how we bring brands around the world. And then just as importantly, how we identify trends because trends do emerge locally and grow globally. And if we are in more locations, it allows us to see those trends and help them move around the world.

So we're definitely encouraged with the last 4 months, in February for sure, and we're hoping to build some continued momentum into 2026.

Mitchel Kummetz: And then as far as the comp guide for the quarter, I think you said a 2% to 4% comp. Quarter-to-date, you're running plus 7.5%. I know February is a fairly small month. But why are you anticipating worse comp performance over the balance of the quarter? And then, maybe as you address that question, can you also maybe speak to what you're seeing in terms of like tax refunds so far? And then, how are you thinking about higher gas prices potentially impacting your consumers?

Christopher Work: Yes. All good questions. Let me start with kind of the guide, but I think these are going to sort of blend together. Obviously, we had a great February really across the business. International, we just spoke about. But North America was very strong, too, up 6% comp across the 4 weeks of February. I'll tell you, as we started to see the global conflict unfold, we did see some softness in week 5 and have kind of guided the business into what we saw as a slowdown from where we were in February. And so, while still positive, we just saw some softness in the business, and that's how we plan the quarter to come out.

Now whether that's tied to rising fuel prices and a little bit of uncertainty in the macro environment, I think that's to be determined, and we just need more time to figure it out. But in relation to putting the guide together and how we saw our comp guide, this is really about kind of looking at what's our current run rate sort of post-February and drawing that out across the rest of the quarter.

Operator: Our next question comes from the line of Richard Magnusen with B. Riley.

Richard Magnusen: So first off, it looks like your private label penetration was strong in Q4 at around 30%. But during the holiday season, did you notice any change in certain categories regarding the performance of private label versus the branded products? Or was it pretty much the same trends in different categories that you saw throughout the year?

Richard Brooks: I'll start, Richard, and then Chris can add in, but -- to give you some context, but I don't think we saw any major changes. There are certain categories that are really, really, really dominated by our private label or own brands. And so sometimes it's hard to compare the branded portfolio versus our private label brands. And so I think each of them are targeting a different segment of our business. And so I don't think I would call out any significant trend direction changes from a private label perspective that I can think of in terms of the category performance for the brands that they performed well.

But we also had some new brands that have performed really well, too, on the branded side. So I think it's a combination of both. And the new brands tend to be more focused on the T-shirts and fleece and hats in the more screenable portion of the business. So I think the private label is more dominated by the pants departments within the business. So they're kind of a bit separated in that sense, but both, I think, have done well, contributed positively in Q4.

Richard Magnusen: Okay. And then my last -- second question is that Easter looks like just over 3 weeks away. Can you -- what can you tell us about your expectations of timing regarding your spring assortment and any observed consumer preferences and the impact of recent weather in different parts of the U.S. and the cadence of promo around Easter weekend?

Christopher Work: Sure. I'll kind of take a crack at it as this kind of falls into our planning arena and let Rick talk. Obviously, Easter has pulled up. So we are -- have started our -- putting our product out in a way that will take advantage of that, obviously, and planning the business to have a little higher bump in the middle part of the quarter versus a little bit later in the quarter. So we're certainly planning on that. Richard, from a promotional perspective, this is just not really our game. We try to stay really full price and full margin.

I think you see that within our product margin results here across 2025 and really the last few years as we've really been able to grow product margin, and that's not just our private label business, that's our branded business as well, really working with our partners to refine this. So I don't see anything specific there. We do have a variety of, what I would call, sort of spring season initiatives that, as you would imagine, would play into the gift giving that happens around Easter, but also just into what you would expect from a seasonal floor set. So I'm not going to go into those in detail either.

That's kind of part of our product and secret sauce, but we're always trying to bring new in. I think that's what the customer wants. That's what we're really happy we've been able to provide within private label. And it kind of add on to your last question, too, of what we're going to do in our branded portfolio. I mean our branded -- our top 20 brands really continue to gain traction this year as a percent of the total business, which we view as a good thing. I mean we go through these cycles where our biggest brands will kind of ebb and flow.

And sometimes they disaggregate and we bring on a lot of new brands and other times they aggregate and hopefully, that leads to really strong results as they grow in breadth and depth, right? So I think all those things are playing into the business. You see it really across all of our categories, whether we're talking about Q4 or whether we're talking about February, we're up with the exception of footwear. Footwear continues to be the one area of challenge for us, but that's our model. So we're really excited to be running a total comp and obviously running a big portion of the business positive.

Operator: [Operator Instructions] Our next question comes from the line of Marcus Belanger with William Blair.

Marcus Belanger: I'm on for Dylan Carden. I just wanted to ask a follow-up to an earlier question about international. Obviously, you've seen a lot of volatility in that area. Can you tell me what you guys are doing to stabilize the area and have greater visibility into future growth? And then I have a follow-up.

Christopher Work: Yes. I'll just -- I'll kind of add on to my earlier comment and let Rick jump in if he has anything to add. I mean I think, like all of our business, it really does start with product. So as we thought about reimagining the business at the end of '24, part of it was slowing growth just to make sure the focus was really laser-focused. But it was about looking at products and saying, how do we see trends, see where that customer is at, see who that customer is and bring it to them in a way that they will adapt to and they'll be excited about. And of course, we can sell it at full price.

So this was really about rethinking that, really starting to look at our assortments and who we are carrying and how we are carrying them and what they were saying to the customer and starting to push that into the business in a different way than we've been doing. Obviously, as you can imagine, that takes time when you buy seasons ahead of time. So for us, we knew in the turnover at the end of late 2024 that it would be sort of a back-to-school holiday time period where we start to see this take shape.

And we were pretty encouraged by some of the early areas we reimagined in that and what those meant going into Q4 and then some of those same items that we were dropping even late into Q4 that we're driving into the 2026. So it's really about product. I mean there's a huge part of execution beyond that of your store environment and the people in stores and how they bring the product to life. We continue to invest in that. We continue to invest in our teams there, just like we do here in North America.

I mean this is really about driving a human-to-human relationship, right, of how you connect with your customer and how you talk with them. And so that's been part of what we've driven as well. And we think when you have the right product and you can bring it to them in a way that you really connect with them, I think that drives a different experience and hopefully one that brings that customer back again and again.

Richard Brooks: I'd just add that -- again, just for context, I think we have looked deeply at every other -- every area of our business in Europe. And as Chris said earlier, that we made some personnel changes in terms of some of the leadership in Europe and now we're leading particularly in some really key areas. And we're just leaving no stone unturned as we revisit every aspect of what we're doing. And again, I'm really encouraged, as Chris has laid out, with the Q4 performance. I'd just highlight again that, that was against a very -- one of our worst snow years ever in Europe, and we have a very dominant position in the snow retailing business in Europe.

So despite the difficult snow year, we still were able to improve the bottom line results by a pretty good amount. So we're really encouraged. I think we're heading in the right way. But as Chris said, we have a long ways to go and a lot of work to do and more work to come. And we're very, very focused on making sure that we are continuing to improve the assortments, bring newness into the business, make sure that we're really delivering great experience for customers and commercializing our offering as we think about delivering to customers across all channels.

Marcus Belanger: For stores, where are you guys in terms of how many more years maybe do you guys think about closing stores? And then, for the new stores that you are opening for this year, it looks like you're going to open up 5, how are -- over the last couple of years, how have those new stores been performing? Are they at a higher -- mature? Do you think that they're going to hit a higher sales per store maturity curve than your other stores? Just any comments on basic productivity for the first year or 2 years for your new stores?

Christopher Work: Yes, sure. And let me -- I'll talk about new stores real quickly and then we can talk about closures. I think this is really -- I would say, post-pandemic, you've seen our store openings slow from historical levels, which we kind of knew was going to be part of it, obviously, with North America more built out and international being our area of further growth over the last few years. As we've talked about here on the call today, we have slowed international just from a standpoint of really focusing on profitability and cash flow. So the store opening cadence is much less.

I think when you think about opening approximately 5 stores a year in North America, the last few classes of stores have been really good. We've been able to be selective in where we're opening and really try to fill markets or fill opportunities we wanted to get into for a long time. There's still a lot of -- a fair amount of good assets in the country that we want to get in. We just have to find that right fit, right, that right location within the mall at the right economics that makes sense for us to be able to invest.

And I'm quite happy with how the real estate team and our store operations team has performed here in the last few years in our openings and each class having more winners than tougher situations. So that's a really good thing. From a closure perspective, we started more significantly closing stores in 2023. And then in 2024, a few more. And last year was around 17. We are forecasting we'll be ahead of that 17 number this year, although, I'll tell you, these are forecasts. You're never quite sure what's going to happen in those markets and how malls will move or economics can change. But we are expecting to close approximately 20 stores in North America and 5 internationally.

And our closure process is -- as you would expect, it's a diligent process, right? It's looking at each trade area we're in, each market we're in. Are there underperformers, are there opportunities for consolidation and trying to figure out where those opportunities are. I mean we look at everything from sales and profitability, what the store's impact on that trade area is in regards to how it helps to fill product and even kind of leverage with the A centers in the market, obviously, the conditions of the centers, who the landlords are, how they're investing in the center. We try to really manage the peak performance.

And if that peak performance was 10-plus years ago, sometimes it speaks to where that center is headed, right? And then obviously, we try to do whatever we can around store economics before we walk away. But all those things combined, it's about sales growth. And I think that's why when we talk about 2026, we talk about growing sales in the low single digits despite closing some stores that are about $12 million impact. So at the end of the day, I mean, we're really just trying to consolidate and we've given ourselves a challenge for quite some time, but we don't want to have one more store than we need in any given trade area, right?

That's just extra capital and inventory you've got tied up. So we're really trying to be intentional about it. Internationally, this will be a few more closures than we've had historically -- in 2026 is expected, and that's really just kind of, I would say, trimming that portfolio as well, right? We're trying to look at stores and say, okay, these ones are definitely working. They're great locations. There's maybe a mid-class that is -- that we're happy with, but we think we can still do better. And there's a third class that's kind of the lower class of stores that we are like, all right, we really have to make movement here or we will see consolidation.

And that's where we're kind of at, at this point is kind of going, okay, some of these are not making the traction we need and they're closures to make the overall business better.

Richard Brooks: I'd just add in that -- again, with a little bit longer context, as Chris said, 10, 15 years out. What we're seeing in the U.S. is actually finally the end of, I think, the final leg on a bunch of mall locations at the lower end C- and D-volume mall locations, where we had traditionally been able to make some money, but now they've just got to the point where they're just not working anymore. But the important point in this is that, as you saw in our results in '24 and '25, where we closed units, total sales grew in North America.

So what we're really talking about is how customer behavior has changed and moved to different centers within the trade areas. And I think that's -- this is kind of a long-term tail of playing out of -- that our malls are winning and the lesser malls are finally really losing to the point of closure. And we're often one of the last retailers to leave in some of these centers. And -- but it's not about per se sales declining; it's about how customers are moving to the better retail experiences in the stronger and better malls.

Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Rick for closing remarks.

Richard Brooks: All right. Thank you again for all of your questions today, and we always appreciate your great interest in what we're doing and the progress we're making towards building back towards our historical profitability levels. And as I said earlier, I really want to thank everyone on our team and our partners and our brand partners and the support as we really drive better results. So much appreciated from everybody, and we'll talk to you again in June. Thank you.

Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

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