Zumiez's Q3 2026: Contradictions in Skate Hardgoods, Private Label, Footwear, and Growth Outlook

Date of Call: December 4, 2025

Financials Results

• Revenue: $239.1M, up 7.5% YOY from $222.5M in Q3 2024
• EPS: $0.55 per diluted share, compared to $0.06 in Q3 2024; included approximately $0.09 benefit from a one-time tax item
• Gross Margin: 37.6% of sales, up 240 basis points vs 35.2% in the prior year (drivers: 110 bps occupancy leverage, 100 bps product margin, 30 bps lower shrink)
• Operating Margin: 4.9% of sales ($11.8M operating income) vs 1.1% ($2.4M) in prior year

Guidance:

• Q4 sales expected $291M–$296M for 13 weeks ended Jan 31, 2026 (+4%–6% YOY)
• Q4 consolidated comps 2.5%–4%; North America comps 4.5%–6.5%; International comps down low-single digits
• Q4 product margin modestly higher vs prior year; Q4 operating income expected 8.0%–8.5% of sales
• Q4 EPS $0.97–$1.07 vs $0.78 prior year; diluted shares ~16.5M (excludes post-Q3 repurchases)
• FY sales growth expected ~4.5%–5%; FY EPS $0.57–$0.67 vs loss of $0.09; FY product margin +40–50 bps; effective tax rate ~51%–54%
• CapEx $10M–$12M; D&A ~ $22M; 6 store openings and ~21 closures (closures estimated to reduce sales by ~$15M)

Business Commentary:

* Strong Financial Performance and Sales Growth: - Zumiez reported comparable sales growth of 7.6% for Q3, building on a 7.5% increase in the previous year. - The growth was fueled by the North American business, which saw double-digit sales growth, and positive contributions from women's, hard goods, and private label categories.

• Improved Profitability and Gross Margin:
• Gross margin improved by 240 basis points, reaching 37.6%, driven by 110 basis points of leverage in store occupancy costs and improved product margins by 100 basis points.

• Earnings per share reached $0.55, significantly surpassing the high end of guidance at $0.29.

• Private Label Expansion and Margin Benefits:

• Zumiez's private label business penetration increased by 200 basis points year-over-year, representing approximately 31% of total sales.

• The expansion of private label offerings contributes to higher product margins and increased consumer demand, allowing the company to maintain full-price selling and enhance profit margins.

• Skate Hard Goods Market Rebound:

• Skate hard goods saw double-digit comparative sales growth, marking a significant turnaround after several years of decline.
• The rebound is attributed to a multiyear trend reversal, with the category showing promise for future growth, particularly during the holiday season.

Sentiment Analysis:

Overall Tone: Positive

• "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." Management noted "Earnings per share reached $0.55...well above the high end of our guidance" and said they are "increasingly confident in closing out the year with strong holiday results," highlighting margin expansion and private-label momentum.

Q&A:

• Question from Mitchel Kummetz (Seaport Research Partners): Could you elaborate on what's driving the strong performance in hard goods? Is it skate or snow, and what trends in skate are you seeing in the U.S.?
  Response: Management: Skate is the clear driver globally; after multiyear declines the category is turning — cautious optimism that a new skate hard-goods cycle is beginning, with holiday a key test.

• Question from Mitchel Kummetz (Seaport Research Partners): On the fourth-quarter outlook, what comp assumptions are embedded for the balance of the quarter to get to your guide?
  Response: CFO: Guide assumes slight deceleration in North America from strong November; Europe expected to be negative comps due to anniversary of prior promotional activity but to produce higher product-margin dollars.

• Question from Mitchel Kummetz (Seaport Research Partners): Can you speak to private-label performance in the quarter, current penetration, and contribution to product margins?
  Response: CFO: Private-label penetration is up ~200 bps year-over-year and now runs just under 31% YTD; it carries higher product margin and drives full‑price sales and customer demand.

• Question from Mitchel Kummetz (Seaport Research Partners): Are you seeing more strength on the women's side than the men's contributing to women's outperformance?
  Response: CEO: Strength exists across both men's and women's private-label lines; penetration and mix differ, but both are performing well.

• Question from Jeff Van Sinderen (B. Riley Securities, Inc., Research Division): What is current private-label penetration roughly?
  Response: CFO: Year-to-date private-label is running just under 31% of total product, versus ~11%–12% about five years ago.

• Question from Jeff Van Sinderen (B. Riley Securities, Inc., Research Division): Where might private-label penetration peak — could it reach 40%?
  Response: CFO: No target peak; mix will follow customer demand and brand cycles — management will retain branded assortments and does not plan to become predominantly private-label.

• Question from Jeff Van Sinderen (B. Riley Securities, Inc., Research Division): Who do you think you're taking market share from in North America and is the demographic changing with private label/stronger women's performance?
  Response: CEO: Focus remains on the core trend-driven youth customer; gains have primarily come from higher AUR via on‑trend assortments and execution, possibly bringing adjacent customers in but not a deliberate demographic shift.

• Question from Jeff Van Sinderen (B. Riley Securities, Inc., Research Division): During the November period you finished, what did you see in store traffic?
  Response: CFO: Consolidated transactions roughly flat; transactions increased in North America and were down slightly in Europe; week 4 of November was the strongest week.

Contradiction Point 1

Skate Hardgoods Market Trends and Private Label Penetration

It involves differing viewpoints on the skate hardgoods market recovery and the role of private label in the company's sales mix, which are crucial for understanding the company's growth strategy and financial performance.

What factors are driving the strong hard goods performance, particularly regarding European snowfall and U.S. skateboarding trends? - Mitchel Kummetz(Seaport Research Partners)

2026Q3: The driver here is skate. We're seeing improvements in North America and international regions. This is a reversal from a multiyear negative trend that reached an all-time low in 2024. - Richard Brooks(CEO)

Which categories of the private label business are showing the most strength? Are there specific penetration levels for denim? - Mitchel Kummetz(Seaport Research Partners)

2025Q2: Our private label business strength is broad, with significant growth in denim due to our premium positioning. The trend towards faster brand cycles necessitates deeper involvement in private label cutting and sewing, benefiting sales and margins. - Richard Brooks(CEO)

Contradiction Point 2

Footwear Market Performance

It involves differing perspectives on the performance of the footwear category, which is a critical component of the company's product offerings and affects its financial results.

What is the transaction and footwear situation? Is footwear still a negative category? - Jeff Van Sinderen(B. Riley Securities, Inc., Research Division)

2026Q3: Yes, footwear is still a challenging category for us. It's been our toughest category with a negative trend. - Christopher Work(CFO)

How much of the product margin opportunity is due to private label penetration growth, and what is the margin delta between private label and third-party products? - Jeff Van Sinderen(B. Riley Securities, Inc., Research Division)

2025Q2: We do think footwear has turned. We'll have to see how it plays out over the next few months, but our first quarter results do seem to indicate that. - Richard Brooks(CEO) (though not direct contradiction, it shows a change in outlook from optimistic to challenging)

Contradiction Point 3

Private Label Penetration Growth

It involves the growth trajectory and potential future peak of private label penetration, which impacts the company's strategic direction and potential profitability.

What is the current penetration rate of private label products? - Jeff Van Sinderen (B. Riley Securities, Inc., Research Division)

2026Q3: As of year-to-date, we're running just under 31% of total product, having grown by 200 basis points year-over-year. Five years ago, we were around 11% to 12%. - Christopher Work(CFO)

Can you provide details on the progress of the private label business and how much traction it's gaining? Do you anticipate this segment growing to 25%-30% of total business? How does it impact supply chain and COGS? - Mitch Kummetz (Seaport)

2025Q4: We expect our private label business to continue to grow. As of today, that business is just under 20% of our total business. - Christopher Work(CFO)

Contradiction Point 4

Tariff Mitigation and Product Margin Growth

It involves the company's strategies and expectations regarding tariff mitigation and its impact on product margins, which are crucial for financial planning and investor expectations.

What's the peak private label penetration rate? Could it reach 40%? - Jeff Van Sinderen (B. Riley Securities, Inc., Research Division)

2026Q3: Despite tariffs, we expect modest growth in product margins due to proactive measures taken. - Christopher Work(CFO)

Can you provide an update on the tariffs situation, your China exposure, and cost mitigation strategies? How do tariffs impact your product margins? - Mitchel John Kummetz (Seaport Research Partners)

2025Q1: Product margin growth is still anticipated, though modestly. - Christopher Work(CFO)

Contradiction Point 5

Sales and Operating Profit Growth Expectations

It involves the company's outlook for growth in sales and operating profit, which are critical for investor expectations and strategic planning.

What are the comp assumptions for the remainder of the quarter? Are you adopting a conservative approach due to consumer uncertainty? - Mitchel Kummetz (Seaport Research Partners)

2026Q3: We're assuming a slight deceleration in North America from November's strong performance, settling into a more regular pace after the Black Friday and Cyber Monday weekend. In Europe, while November saw positive comps, we're expecting a negative comp for the rest of the quarter as we anniversary promotional trends from last year, but this will be offset by product margin improvements. - Christopher Work(CFO)

Can you grow operating margins on a low-single-digit comp? - Mitch Kummetz (Seaport)

2025Q4: We believe we can grow sales and operating profit in 2025 despite store closures. Opportunities for growth in product margin and leverage on items like occupancy and distribution costs exist. SG&A is expected to grow in line with sales, offering high flow-through potential if sales exceed expectations. - Chris Work(CFO)