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Zumiez's Q4 2024 Earnings Call: Navigating Tariffs, Pricing Strategies, and Inventory Challenges
Written byEarnings Decrypt
Thursday, Mar 13, 2025 10:47 pm ET1min read
Contradiction Point 1
Tariff Impacts and Leveraging Occupancy Costs
It involves the company's strategy and impact of tariffs on their operations, affecting financial stability and strategic decision-making, as well as the strategy to leverage occupancy costs, which are critical for managing operational efficiency and financial performance.
What impact are tariffs having on your private label business? - Mitch Kummetz(Seaport)
2024Q4: Our current sourcing strategy is largely to work with our brands, representing just over 70% of our business. We are trying to be as diversified as possible, moving away from a high concentration in China. Inventory receipts were pulled forward in anticipation of tariffs. - Chris Work(CFO)
What are the trends in the post-Black Friday season and your plans for agile inventory? - Richard Magnusen(B. Riley)
2025Q3: Our promotional strategy remains consistent, focusing on value through bundling rather than excessive discounting. We've seen success with our private label and new brands. We expect to remain less promotional than competitors, focusing on unique products to drive margins. - Richard Brooks(CEO)
Contradiction Point 2
Tariff Impact and Pricing Strategies
It involves the company's approach to mitigating tariff impacts and adapting pricing strategies, which directly impact financial performance and investor expectations.
What impact are tariffs having on your private label business and across your brands in terms of pricing? - Mitch Kummetz (Seaport)
2024Q4: Our current sourcing strategy is largely to work with our brands, representing just over 70% of our business. We are trying to be as diversified as possible, moving away from a high concentration in China. Inventory receipts were pulled forward in anticipation of tariffs. Diversification efforts are ongoing to mitigate tariff impacts. Specific information about future tariffs and their impacts is minimal at this stage. - Chris Work(CFO)
Rick, can you explain why the business performed well for back-to-school? How much was due to consumer attendance at events and your response to that? - Mitchel Kummetz (Seaport)
2025Q2: We have a real opportunity to take advantage of that with our private label, brands that we have, to really bring that out and drive the sales, and that's what we're focusing on. - Richard Brooks(CEO)
Contradiction Point 3
Inventory Management and Strategic Initiatives
It pertains to the company's management of inventory levels and strategic initiatives, which are vital for maintaining profitability and operational efficiency.
Can you elaborate on leverage, even though you aren't providing specific guidance for '25? - Mitch Kummetz(Seaport)
2024Q4: We're investing appropriately in driving business forward, particularly in apparel categories. Planning to be value leadership with Private Label and bundling efforts. - Richard Brooks(CEO)
What are your plans for managing inventory during back-to-school? - Richard Magnusen(B. Riley)
2025Q1: We are pleased with the continued strength in our Private Label business. We had strong performance in the women's category driven by Private Label. We are excited by the momentum of our Private Label brand. - Richard Brooks(CEO)
These are the key contradictions discussed in Zumiez's latest 2024Q4 earnings call, specifically including: Tariff Impacts and Leveraging Occupancy Costs, Tariff Impact and Pricing Strategies, and Inventory Management and Strategic Initiatives:
Revenue and Sales Performance:
- Zumiez Inc. reported total sales of $279 million for Q4, which was $7 million below the midpoint of their initial guidance range and $2 million above the high end of their revised guidance.
- The shortfall was primarily driven by lower-than-planned sales in mid- to late December in their North America business.
Operating Profitability Improvement:
- The company's operating profit more than doubled to $20 million in Q4, with an EPS increase of 95% to $0.78.
- The improvement was due to significant gross margin expansion and meaningful reductions in operating expenses.
Regional Sales Trends:
- North America net sales increased by 0.8% to $214.2 million, while other international net sales, including Europe and Australia, decreased by 6.4% to $65 million.
- The decline in Europe was due to a challenging macroeconomic environment, but sales trends improved each quarter, with Q4 turning positive at 3.7%.
Inventory and Tariff Management:
- Inventory levels were up 13.8% year-on-year, driven primarily by the North America business, with an additional $7.4 million increase due to tariff-related pull-forward.
- The company is diversifying its sourcing strategy to reduce exposure to tariffs, particularly with China, which represented 50% of North America receipts in 2024.
Revenue and Sales Performance:
- Zumiez Inc. reported total sales of $279 million for Q4, which was $7 million below the midpoint of their initial guidance range and $2 million above the high end of their revised guidance.
- The shortfall was primarily driven by lower-than-planned sales in mid- to late December in their North America business.
Operating Profitability Improvement:
- The company's operating profit more than doubled to $20 million in Q4, with an EPS increase of 95% to $0.78.
- The improvement was due to significant gross margin expansion and meaningful reductions in operating expenses.
Regional Sales Trends:
- North America net sales increased by 0.8% to $214.2 million, while other international net sales, including Europe and Australia, decreased by 6.4% to $65 million.
- The decline in Europe was due to a challenging macroeconomic environment, but sales trends improved each quarter, with Q4 turning positive at 3.7%.
Inventory and Tariff Management:
- Inventory levels were up 13.8% year-on-year, driven primarily by the North America business, with an additional $7.4 million increase due to tariff-related pull-forward.
- The company is diversifying its sourcing strategy to reduce exposure to tariffs, particularly with China, which represented 50% of North America receipts in 2024.
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