Zumiez Inc.

I'll begin with remarks about our third quarter performance and the momentum we're building as we head into the holiday season before discussing our strategic priorities. Chris will then take you through the financials and our outlook for the balance of the year. After that, we'll open the call to your questions. We're very pleased with our third quarter performance delivering top and bottom line results that were up meaningfully versus last year and exceeded our expectations. Comparable sales grew 7.6 percent on top of a 7.5 percent increase in the year-ago quarter, representing our sixth consecutive quarter of positive comparable sales growth. Once again, it was our North American business fueling our performance as comps in the region accelerated to double digits, bolstering our confidence heading into the critical holiday season. After a successful back-to-school period, sales remained strong throughout the quarter, reflecting the effectiveness of our merchandise assortments in attracting customers who pay full price even during less busy seasons. Encouragingly, our third quarter comp performance was driven by contributions from multiple areas of our business, led by women's and hard goods, which were up strong double digits, along with low to mid single digit gains from both accessories and men's. High single-digit comps and robust full-price sales boosted gross margin, which combined with improved expense efficiency, raised operating income significantly year over year. Earnings per share reached $0.55 in the quarter, well above the high end of our guidance of $0.29. Looking forward, we are increasingly confident in closing out the year with strong holiday results. The fourth quarter is off to a good start with comparable sales through this past Tuesday up 6.6%, including an 8.7% comp gain over the Black Friday Cyber Monday period, which bodes well for the remainder of the holiday season. We are pleased with the momentum we have seen in our results as the year has progressed and are encouraged that we're now seeing comparable sales growth on top of comparable sales in the prior year. We believe that our strategies have the company well positioned to build on our progress over the near and long term. To do this, we remain focused on the same three strategic priorities that have driven our success. First, driving revenue growth through customer-focused strategic initiatives. Our commitment to refreshing our product mix with innovative, distinctive offerings continues to generate exceptional customer response. Momentum from introducing over 100 new and emerging brands annually has carried forward into 2025 with these new and emerging brands representing an increasingly important component of our sales mix and validating our merchandising strategy. Private label performance remains a standout success story, continuing to reach new heights and representing our highest penetration levels in company history. 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 touchpoints continue to yield results. The enhanced staff development programs and technological capabilities we've implemented allow us to engage with customers through increasingly personalized and meaningful interactions, strengthening the relationships that have been the foundation 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 the year are generating meaningful benefits, our continued focus in this area is key to establishing a more efficient and profitable business framework that positions us for sustained success. Regarding our international operations, while Europe continues to face challenging market conditions, we remain committed to our long-term strategy in these markets. We're actively working to drive revenue through our distinctive product offerings while maintaining our commitment to premium pricing and disciplined expense management. While European comparable sales are down low single digits, the trend line improved from the second quarter, and we continue to see product margin gains through disciplined full-price selling. We have confidence in the long-term potential of these markets, particularly given our ability to identify trends locally in each of the markets before they expand internationally. Third, capitalizing 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 the ongoing uncertainties in the macro environment while simultaneously positioning the company for long-term growth. Despite operating in an environment characterized by economic volatility, evolving trade relationships, and global instability in certain regions, I'm increasingly confident in our ability to generate value for all of our stakeholders. The fundamental strategies that have powered our success throughout our history continue to demonstrate their relevance, and our team's proven adaptability and execution capabilities fuel my optimism about our trajectory. Our direction remains clear and consistent. Maintain our dedication delivering distinctive fashion forward merchandise through customer connection strategies that have driven our growth, while preserving the operational discipline that has strengthened our financial performance. We've demonstrated our resilience through previous market cycles, and I'm confident we're strategically positioned to continue that tradition. Before turning things over to Chris, I want to express my appreciation to our entire organization. for the continued commitment and adaptability. Your dedication to our values and our customers remains the foundation for all of our achievements. With that, let me hand things over to Chris for our financial review.

Thanks, Rick, and good afternoon, everyone. I'm going to start with a review of our third quarter results. I'll then provide an update on our fourth quarter to date sales trends. Third quarter net sales were $239.1 million, up 7.5% from $222.5 million in the third quarter of 2024. Comparable sales were up 7.6% for the quarter. As Rick mentioned, the primary driver was our North America business, which shows outside strength, even as macroeconomic uncertainty spurred by global trade policy continues. For the third quarter, North America net sales were $202.8 million, an increase of 8.6% from 2024. Other international net sales, which consist of Europe and Australia, were $36.3 million, up 1.7% from last year. Excluding the impact of foreign currency translation, North American net sales increased 8.7%, and other international net sales increased 3.1% year over year. Comparable sales for North America were up 10%, marking the seventh consecutive quarter of comparable sales growth in the region. Other international comparable sales declined 3.9% in the third quarter, but showed sequential improvement from the second quarter. From a category perspective, women's was our largest positive comping category, followed by hard goods, men'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 and an increase in transactions. Dollars per transaction were up for the quarter, driven by an increase in average unit retail, while units per transaction were roughly flat year over year. Third quarter gross profit was $89.8 million, up 14.7% compared to $78.3 million in the third quarter of last year. Gross profit as a percentage of sales was 37.6% for the quarter compared to 35.2% in the third quarter of 2024. The 240 basis point increase in gross margin was primarily driven by 110 basis points of leverage in store occupancy costs on higher sales and the closure of underperforming stores, 100 basis points of improvement in product margin, and 30 basis points of benefit from lower inventory shrinkage. SG&A expense was $78 million, or 32.7% of net sales in the third quarter, compared to $75.9 million, or 34.1% of net sales a year ago. The 140 basis point decrease in SG&A expense was driven by 110 basis points decrease in non-wage store operating costs, and 80 basis points of leverage of store wages tied to higher sales and the closure of underperforming stores. These benefits were partially offset by 40 basis point increase related to annual incentive compensation. Operating income in the third quarter of 2025 was $11.8 million, or 4.9% of net sales, compared with operating income of $2.4 million, or 1.1% of net sales last year. Net income for the third quarter was $9.2 million, or $0.55 per share. This compares to a net income of $1.2 million, or $0.06 per share, for the third quarter of 2024. In the third quarter of fiscal 2025, we benefited from a one-time tax item, which increased diluted earnings per share by approximately $0.09. Our effective tax rate for the third quarter of 2025 is 26.1%, compared with 63.4% in the year-ago period. The year-over-year decrease in the effective tax rate was primarily driven by improved operating results, the allocation of losses across the jurisdictions in which we operate, and the previously mentioned one-time tax item. Turning to the balance sheet, the business ended the quarter in a strong financial position. We had cash and current marketable securities of $104.5 million as of November 1, 2025, compared to $99.3 million as of November 2, 2024. The increase in cash and current marketable securities over the trailing 12 periods was driven primarily by $50.5 million in cash provided by operating activities and the release of $3 million in restricted cash. This was partially offset by share repurchases and capital expenditures of $38.3 million and $12.5 million, respectively. As of November 1st, 2025, we have no debt on the balance sheet. During the third quarter, we repurchased 300,000 shares at an average cost including commission of $18.61 per share for a total cost of $5.4 million. Fiscal year to date through November 1st, 2025, the company has repurchased 2.7 million shares at an average cost including commission of $14.18 per share and a total cost of $38.3 million. As of November 1st, 2025, we had $1.7 million remaining on the $15 million repurchase authorization approved by the Board on June 4th of this year. We ended the quarter with $180.7 million in inventory, down 3.5% compared with $187.2 million last year. On a constant currency basis, our inventory levels were down 5.1% from last year. We feel good about our current inventory position. Now to our fourth quarter to date results. Net sales for the 31-day period into December 2, 2025 increased 7.5% compared to the 31-day period in the prior year ended December 3, 2024. Comparable sales for the 31-day period in December 2, 2025 were up 6.6% from the comparable period in the prior year, and we are seeing changes in foreign exchange positively increase total sales growth by approximately 1.7%. From a regional perspective, net sales for our North America business for the 31-day period into December 2nd, 2025 increased 6.7% compared to the 31-day period into December 3rd, 2024, while our other international business increased 10.6%. Excluding the impact of foreign currency translation, North America net sales increased 6.7% from the prior year, while our national net sales increased 2.5%. Comparable sales for North America increased 7.8% for the 31-day period in December 2, 2025, compared to the same weeks in the prior year, while comparable sales for our other international business increased 2.6%. From a category perspective, hard goods was our strongest comping category, followed by women's, accessories, and men's. Footwear was our only negative comping category quarter to date. The 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 period, driven by an increase in average unit retail and an increase in units per transaction. With respect to our outlook for the fourth quarter of fiscal 2025, 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. This is even more pronounced in today's environment with the current tariff situation that adds additional uncertainty and complexity to pricing and the potential to limit the ability of our customer to continue to spend. Our recent trend line in North America has been very encouraging and provides confidence as we head into the heart of the holiday selling season. That said, we think it is prudent to balance our current domestic momentum with some near-term conservatism given the general uncertainty in the macro environment and recent trends where we have seen non-peak consumer traffic soften. We are anticipating total sales will be between $291 million and $296 million for the 13 weeks into January 31st, 2026, representing sales growth of 4% to 6%. Total comparable sales are planned to be in the 2.5% to 4% range. This reflects continued strength in North America and comparable sales planned in the 4.5% to 6.5% range. Comparable sales in our international business are planned to be tougher as we anniversary promotional trends from the fourth quarter of 2024. Internationally, we expect comparable sales to be down in the low single digits with overall growth in product margin dollars year over year as we continue our efforts to drive full price selling. For the fourth quarter, we are expecting product margin to increase modestly from the fourth quarter of last year. Consolidated operating income in the fourth quarter is expected to be between 8% and 8.5% of sales, and we anticipate earnings per share will be between 97 cents and $1.07, compared to EPS of 78 cents in the prior year. We estimate that our fourth quarter diluted share count will be approximately 16.5 million shares, which excludes any stock repurchases beyond the end of the third quarter. Regarding full year 2025 results, we have performed well in North America during the important back-to-school season and start to the holiday shopping, which is generally a reasonable indicator for overall holiday performance, but continue to experience headwinds with our international business. Overall, borrowing a significant downturn in the economy for the full year, we believe that we'll see year-over-year total sales growth between 4.5% and 5%, Despite the closure of 33 stores in fiscal 2024, and approximately 21 store closures planned primarily in late 2025, which combined are estimated to have a negative impact on sales of roughly $15 million for the year. We anticipate 40 to 50 basis points of growth in product margin in 2025, on top of 70 basis points of improvement in fiscal 2024. We anticipate driving additional gross margin leverage through other expense categories such as occupancy, distribution, and logistics. And finally, we believe that we can hold our 2025 SG&A costs relatively flat as a percentage of sales with our fiscal 2024 results through continued focus on expense management while also investing in important long-term strategic initiatives. This is inclusive of the previously mentioned $3.6 million settlement of a wage and hour lawsuit in California, as well as meaningful growth in our incentive costs on stronger performance. Combined, these expectations will drive a year-over-year increase in operating margins and net profit for fiscal 2025, with anticipated earnings per share between 57 cents and 67 cents, compared to a loss of 9 cents in 2024. Included in these fiscal 2025 expectations are the following. Six new store openings during the year, including five in North America and one in Australia. We also plan to close approximately 21 stores in fiscal 2025, including up to 18 in the United States, one in Canada, and two in Europe. We expect our capital expenditures for 2025 to be between $10 million and $12 million, compared to $15 million in fiscal 2024. and $20.4 million in fiscal 2023. We expect that depreciation and amortization excluding non-cash lease expense will be approximately $22 million in line with the prior year. And while the effective tax rates have fluctuated significantly by quarter, we anticipate our full year effective tax rate will be roughly 51% to 54% in fiscal 2025. We are currently projecting our diluted share count for the full year to be approximately 17.2 million shares which excludes any stock repurchases beyond the end of the third quarter. And with that, operator, we'd like to open the call up for questions.

Thank you. And as a reminder, to ask a question, please press star 11 on your telephone and wait for a name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment for our first question.