Zumiez (ZUMZ)

Clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 1.9% year on year to $214.3 million. On top of that, next quarter’s revenue guidance ($234.5 million at the midpoint) was surprisingly good and 4.6% above what analysts were expecting. Its GAAP loss of $0.06 per share was 43.8% above analysts’ consensus estimates.

Company Overview

With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.

Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.

Competitors that offer street or skate apparel and footwear include Tilly’s (NYSE:TLYS), Genesco’s (NYSE:GCO) Journeys banner, Foot Locker (NYSE:FL), and private company PacSun.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $900.3 million in revenue over the past 12 months, Zumiez is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.

As you can see below, Zumiez struggled to generate demand over the last six years (we compare to 2019 to normalize for COVID-19 impacts). Its sales dropped by 1.6% annually as it closed stores.

This quarter, Zumiez reported modest year-on-year revenue growth of 1.9% but beat Wall Street’s estimates by 1.4%. Company management is currently guiding for a 5.4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 1.2% over the next 12 months. Although this projection indicates its newer products will catalyze better top-line performance, it is still below the sector average.

Number of Stores

Zumiez listed 730 locations in the latest quarter and has generally closed its stores over the last two years, averaging 1.6% annual declines.

When a retailer shutters stores, it usually means that brick-and-mortar demand is less than supply, and it is responding by closing underperforming locations to improve profitability.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

Zumiez’s demand within its existing locations has been relatively stable over the last two years but was below most retailers. On average, the company’s same-store sales have grown by 1.2% per year. Given its declining store base over the same period, this performance stems from a mixture of higher e-commerce sales and increased foot traffic at existing locations (closing stores can sometimes boost same-store sales).

In the latest quarter, Zumiez’s same-store sales rose 2.5% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.

We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate product differentiation, negotiating leverage, and pricing power.

Zumiez’s gross margin is slightly below the average retailer, giving it less room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged a 33.9% gross margin over the last two years. That means Zumiez paid its suppliers a lot of money ($66.06 for every $100 in revenue) to run its business.

In Q2, Zumiez produced a 35.5% gross profit margin, up 1.3 percentage points year on year and exceeding analysts’ estimates by 3.2%. Zumiez’s full-year margin has also been trending up over the past 12 months, increasing by 1.3 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold.

Operating margin is a key profitability metric because it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.

Although Zumiez broke even this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 2.8% over the last two years. Despite the consumer retail industry’s secular decline, unprofitable public companies are few and far between. It’s unfortunate that Zumiez was one of them.

On the plus side, Zumiez’s operating margin rose by 6.3 percentage points over the last year. Still, it will take much more for the company to reach long-term profitability.

In Q2, Zumiez’s breakeven margin was in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Zumiez, its EPS declined by 12.3% annually over the last six years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

In Q2, Zumiez reported EPS of negative $0.06, down from negative $0.04 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Zumiez’s full-year EPS of negative $0.01 will flip to positive $0.36.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Zumiez has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.2%, subpar for a consumer retail business.

Zumiez’s free cash flow clocked in at $9.49 million in Q2, equivalent to a 4.4% margin. This result was good as its margin was 4.7 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Zumiez historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.5%, lower than the typical cost of capital (how much it costs to raise money) for consumer retail companies.

Zumiez reported $106.7 million of cash and $208.7 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $31.61 million of EBITDA over the last 12 months, we view Zumiez’s 3.2× net-debt-to-EBITDA ratio as safe. We also see its $4.76 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by Zumiez’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 15.4% to $21.29 immediately following the results.

Updated: November 13, 2025 at 9:59 PM EST

Before making an investment decision, investors should account for Zumiez’s business fundamentals and valuation in addition to what happened in the latest quarter.

We see the value of companies helping consumers, but in the case of Zumiez, we’re out. To begin with, its revenue has declined over the last six years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its brand caters to a niche market. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Zumiez’s P/E ratio based on the next 12 months is 44.4x. This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $18 on the company (compared to the current share price of $22.69), implying they don’t see much short-term potential in Zumiez.