ZUMZ Q2 2025: Q3 Sales Guided at $221M–225M with 7%–9% Comp Growth
- Sustained Momentum: Management expects the sequential improvement seen in the back‐to-school period to carry into the holiday season, with guidance reflecting steady sales growth and improved comps, underscoring the business’s resiliency and growth potential.
- Brand Differentiation and Pricing Power: Strong performance from new brand launches and an emphasis on private label products with premium, full‐price selling demonstrate the company's ability to drive customer appeal and maintain pricing power in a competitive market.
- Operational Efficiency and Margin Enhancement: Focused cost management—through strategic store closures and optimizing labor—has minimized margin drag from underperforming locations, positioning the company for improved operating margins over the long term.
- Weakness in the European market: The executives highlighted a tougher macroeconomic environment in Europe along with a strategic pivot that could lead to short-term headwinds as they sacrifice some sales for a more curated product mix.
- Deterioration in the hardgoods category: The discussion pointed out that the skate hardgoods category is near an all-time low in penetration with uncertainty around a significant rebound, which could dampen overall performance.
- Rising labor costs and margin pressures: Increased labor costs and corresponding competitive pressures were noted, which may continue to squeeze operating margins and pose challenges in adapting to higher cost structures.
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Flow-Through Guidance
Q: Will flow-through sustain into Q3?
A: Management expects continued margin flow-through in Q3 despite the Q2 calendar shift benefit, with ongoing product margin improvements and controlled corporate expenses supporting stable profitability. -
Store Closures
Q: What is margin impact of closures?
A: Management noted that closing underperforming stores has had a modest impact on margins, as these locations delivered minimal profits. The planned closure of around 25 stores in 2024 is aimed at improving overall fleet efficiency. -
Competitor Exits
Q: Will competitors exit due to rising costs?
A: Management acknowledged that rising labor costs are pressuring all retailers, and in Europe, tougher market conditions have already prompted some competitors to close stores, suggesting a trend toward market consolidation. -
European Strategy
Q: How is Europe performing under new strategy?
A: Despite a tougher macro environment in Europe, the strategy to focus on full-price selling and a more curated product mix—especially with strong private label sales—is expected to gradually boost margins in the region. -
Q3 Momentum Guidance
Q: Will sales momentum continue after back-to-school?
A: Management is confident that momentum will persist into Q3, even with a calendar shift. They forecast total sales between $221M and $225M, which reflects an underlying comp growth of roughly 7%–9% when adjusted. -
Hardgoods Outlook
Q: What is the outlook for hardgoods?
A: Management is cautious on skate hardgoods, noting that while markets like Australia and Canada are showing early signs of recovery, the U.S. and European segments remain under pressure, potentially marking a new low before a turnaround. -
Promotional Pricing
Q: Will the holiday season be highly promotional?
A: While expecting the holiday season to be promotional, management emphasized their approach of offering value through bundling and maintaining high price points, particularly in the bottoms category, to preserve margins. -
Back-to-School Drivers
Q: What drove strong back-to-school results?
A: Management credited strong back-to-school performance to the momentum from new brand launches and private label offerings, along with effective execution by their sales teams that enhanced customer engagement.
Research analysts covering Zumiez.