Zumiez Reports Strong Second-Quarter Performance, North American Sales Drive Earnings Growth Projections

Second-Quarter Fiscal 2025 Financial Overview

For the quarter ended July 2025, Zumiez Inc. (ZUMZ) posted revenues of $214.28 million, an increase from $210.18 million in the prior year and surpassing the Zacks Consensus Estimate by 1.78%. The company reported a narrower-than-expected loss of $0.06 per share, beating the consensus estimate of a $0.11 loss. Comparable sales (comps) improved year-over-year, with North American comparable sales climbing 4.2%, marking the sixth consecutive quarter of positive comparable growth in the region. Gross margin expanded by 130 basis points to 35.5%, resulting in a gross profit of $76 million, up 5.9%. Operating margin turned positive at 0.1%, indicating enhanced operational efficiency. Inventory management remained disciplined at $157.7 million.

Following the announcement, shares of Zumiez increased 14.9% in after-market trading. Year-to-date, ZUMZ shares have gained 4.5%, outperforming the broader industry. Over the past three months, the stock has soared 59.3% against the industry's 5.7% growth, reflecting strong investor confidence and its Zacks Rank #1 (Strong Buy) rating.

Strategic Drivers: North America and Private Label Expansion

The continued resilience in Zumiez's North American business has been a pivotal factor in its performance. August U.S. comparable sales notably grew in the low teens, fueled by increased customer traffic and higher spending per visit. The company's private label segment reached a historic 30% of total sales, significantly boosting margins as Zumiez strategically positions itself as a premium price player.

Zumiez is actively managing its retail footprint, planning to open six new stores (five in North America, one in Australia) while strategically closing approximately 20 underperforming locations in fiscal 2025. These closures are estimated to have a negative impact of $14 million on fiscal 2025 sales, but the strategy aims to optimize the fleet, maximize profit, and leverage occupancy costs. Capital expenditure for fiscal 2025 is projected between $11 million and $13 million, a reduction from $15 million in fiscal 2024.

Despite overall strength, challenges persist in Europe, where comparable sales are negative due to economic and geopolitical headwinds, necessitating a three-year turnaround plan. The footwear category also continues to underperform, though skate hard goods show signs of recovery.

Broader Retail Context and Consumer Trends

The broader retail sector is experiencing shifts in consumer spending. The LSEG Same Store Sales (SSS) index is expected to see a 4.1% gain in Q2 2025, following a 3.1% gain in Q2 2024. The blended earnings growth estimate for Q2 2025 stands at 6.7%, with 75% of reporting companies in the Retail/Restaurant index exceeding revenue expectations.

Consumer sentiment declined by 5% at the beginning of August, indicating a more strategic approach to spending. R.J. Hottovy, head of analytical research at Placer.ai, noted,

"As we move through August, it's becoming clear that consumers are being more strategic with their store visits, prioritizing needs over wants." Categories like warehouse clubs, grocery stores, and off-price apparel are outperforming, while luxury department stores and home improvement lag. The apparel category, particularly aided by strong back-to-school traffic to off-price retailers, remains a bright spot. Mall-based and big-box department stores, such as Kohl's and Target, are projected to report Q2 2025 SSS declines of -5.0% and -3.1%, respectively.

Zumiez's strong performance contrasts with the struggles of some larger retailers, highlighting its ability to capture discretionary spending within its niche, even as other segments experience pullbacks.

Outlook and Future Considerations

For fiscal 2025, Zumiez anticipates sales growth of 3-4% year-over-year, despite the estimated $14 million negative impact from store closures. Management forecasts substantial year-over-year earnings growth of 566.7% for fiscal 2025 and 63.5% for fiscal 2026. The company also expects modest product margin growth and additional gross margin leverage through other expense categories.

For the third quarter of fiscal 2025, the company projects total sales between $232 million and $237 million, indicating year-over-year growth. Comparable sales growth is anticipated between 5.5% and 7.5%. Earnings per share are expected to range from 19 cents to 29 cents, significantly higher than the 6 cents reported in the prior-year period.

Key factors to monitor in the coming months include monthly sales updates, developments regarding potential tariffs, performance during the critical holiday season, and the ongoing progress of store rationalization. The next earnings call is anticipated in December 2025. The company's strategic focus on optimizing its store footprint and leveraging private label success positions it for continued profitability.