Zumiez NASDAQ: ZUMZ reported higher first-quarter sales and improved margins for fiscal 2026, but executives said consumer discretionary spending pressure intensified late in the quarter and continued into May, prompting a cautious outlook for the second quarter.
Chief Executive Officer Rick Brooks said comparable sales increased 4% in the first quarter, marking the company’s eighth consecutive quarter of positive comparable sales growth. North America comparable sales rose 4.4%, while Brooks said Europe posted a 5.5% comparable sales gain as initiatives introduced last year continued to gain traction.
“Our first quarter results were largely in line with our expectations, even as the operating environment became more dynamic as the quarter progressed,” Brooks said. He added that the company observed “increasing pressure on consumers during the latter part of the quarter.”
Sales rise as margins improve
Chief Financial Officer Chris Work said net sales for the first quarter increased 4.9% to $193.3 million, compared with $184.3 million in the first quarter of fiscal 2025. North America net sales were $155.6 million, up 3.9% from a year earlier. Other international net sales, consisting of Europe and Australia, rose 9.1% to $37.8 million, although Work said they were down 0.1% excluding foreign currency translation.
By category, men’s was the largest positive comparable sales contributor, followed by hardgoods, women’s and accessories. Footwear was the only negative comparable category. Work said the consolidated comparable sales increase was driven by higher dollars per transaction, reflecting increases in average unit retail and units per transaction, partly offset by fewer transactions.
Gross profit increased to $61.3 million from $55.3 million a year earlier. Gross margin expanded 170 basis points to 31.7% of sales, driven by higher product margin, leverage on store occupancy costs, benefits from web shipping costs and lower inventory shrinkage.
Selling, general and administrative expenses were $76.5 million, or 39.6% of net sales, compared with $75.2 million, or 40.8% of net sales, in the prior-year period. Work said the improvement as a percentage of sales was helped by the absence of a one-time $2.9 million litigation settlement recorded in the first quarter of fiscal 2025, along with efficiencies in store wages and store operating costs.
Zumiez reported an operating loss of $15.2 million, or 7.9% of sales, compared with an operating loss of $19.9 million, or 10.8% of sales, a year earlier. Net loss was $13.3 million, or $0.82 per share, compared with a net loss of $14.3 million, or $0.79 per share, in the prior-year quarter. Work noted that share repurchases reduced the company’s share count by about 11% over the past year, which benefits full-year earnings per share but is a headwind in quarters with a loss.
Private label remains a key driver
Brooks said Zumiez continues to focus on three strategic priorities: revenue growth through consumer-focused initiatives, profitability optimization across its geographic footprint and using its balance sheet to manage volatility while funding expansion.
Private label remained a standout area. Brooks said private label accounted for 34% of sales in the quarter, maintaining the highest penetration levels in company history. He said the business gives Zumiez flexibility while helping margins and allowing the retailer to offer distinctive products.
During the question-and-answer session, Work said Zumiez will let consumer demand guide private label penetration and does not expect private label to take over the entire business. Brooks added that the company has needed to take a larger role in cut-and-sew categories because brand cycles have accelerated, while some categories remain heavily brand-driven.
May trends soften in North America
Work said net sales for the four-week period ended May 30 increased 0.1% from the comparable period a year earlier, while comparable sales decreased 0.1%. North America net sales fell 1.9%, or 2% excluding foreign currency translation, while other international net sales rose 10.7%, or 5.3% excluding currency effects.
Comparable sales in North America decreased 1.5% during the May period, while other international comparable sales increased 7.2%. Men’s again led positive comparable category performance, followed by accessories, women’s and hardgoods. Footwear remained the only negative comparable category.
Work said the company is taking a measured approach because of pressure on discretionary spending. For the second quarter, Zumiez expects total sales of $210 million to $215 million, representing growth of negative 2% to positive 0.5% from the prior year. Comparable sales are expected to be consistent with the overall sales trend. The company expects consolidated operating income to range from negative 1.5% of sales to breakeven, and earnings per share to range between a loss of $0.23 and $0.08, compared with a loss of $0.06 a year earlier.
Back-to-school season seen as important
In response to a question from Seaport analyst Mitch Kummetz, Work said the company expects North America trends to improve from May and be roughly flat for the rest of the quarter, while Europe is expected to remain positive though decelerating from May. He noted that the final weeks of the quarter are significant, with 40% of U.S. quarterly sales occurring in the last four weeks of the period.
Brooks said the company’s strong financial position gives it flexibility. Zumiez ended the quarter with cash and current marketable securities of $124.2 million, up from $101 million a year earlier, and no debt. The company also had its full $25 million credit facility unused. During the quarter, Zumiez repurchased 0.3 million shares for $6.2 million under a repurchase authorization approved in March.
Zumiez ended the quarter with $153.2 million in inventory, up 2.2% from the prior year, or 0.7% on a constant-currency basis. In response to B. Riley Securities analyst Jeff Van Sinderen, Brooks said the company feels “pretty good” about its inventory position heading into back-to-school and has flexibility built into its planning.
Full-year outlook remains directional
Zumiez did not provide specific full-year earnings guidance. Work said the company still believes it can grow total sales for fiscal 2026, including the negative impact of closed stores, which he said represent about $12 million in sales. He said the company continues to expect product margin growth, aided by North America improvements, pricing discipline, full-price selling internationally and the private label business.
Zumiez continues to anticipate fiscal 2026 operating margin growth of 50 to 100 basis points, barring significant deterioration in the consumer environment. The company plans to open five new stores in the U.S. and close about 26 stores, including 20 in North America and six internationally. Capital expenditures are expected to be between $14 million and $16 million.
About Zumiez NASDAQ: ZUMZ
Zumiez, Inc NASDAQ: ZUMZ is a specialty retailer offering apparel, footwear, accessories and hardgoods targeted at the action-sports lifestyle market. With a focus on skateboarding, snowboarding, BMX and streetwear, the company stocks a mix of leading third-party brands—such as Vans, Nike SB, DC Shoes and The North Face—alongside proprietary private-label merchandise. In addition to traditional fashion items, Zumiez stores carry hardware and equipment tailored to board sports, supporting both amateur and enthusiast consumers.
Originally founded in 1978 in Seattle, Washington, by Tom Campion, Gary Haakenson and Steve Brosvik, Zumiez opened its first branded retail location in 1988.
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