Zumiez (NASDAQ:ZUMZ) reported lower second-quarter sales and a wider net loss as softness in its U.S. business, particularly in footwear, outweighed positive comparable-sales growth in its international operations.
Net sales for the second quarter of fiscal 2026 declined 2.5% to $209 million from $214.3 million a year earlier. Comparable sales fell 2.1%, driven by a 2.9% decline in North American comparable sales, while comparable sales in Europe and Australia increased 2.1%.
Footwear Weakness Pressures U.S. Results
Brooks identified footwear as the primary pressure on the domestic business. Through Labor Day, footwear accounted for 70% of Zumiez’s total U.S. sales decline from the prior year, he said. The category has been challenged since the second quarter of fiscal 2025, though comparisons are expected to become easier in the fourth quarter.
In the second quarter, accessories was the company’s largest positive comparable-sales category, followed by men’s. Footwear was the largest negative category, followed by hard goods and women’s.
Brooks said Zumiez primarily sells lifestyle athletic footwear, an area that has been under pressure. The company is working with brand partners to add more distinctive merchandise and identify emerging trend brands that could support future growth.
“Our goal looking forward as we look into the back half of this year into next year is to continue to try and work with our partners, continue to drive uniqueness into our footwear business,” Brooks said in response to an analyst question.
The company said it has managed footwear inventory closely with its partners and does not believe it has a major inventory issue. While Zumiez has not been as promotional as some competitors, Brooks said the company is clearing some footwear inventory and that this has affected margins to some extent.
Margins and Earnings
Second-quarter gross profit declined to $73.9 million from $76.1 million in the prior-year period. Gross margin was 35.3% of sales, down 20 basis points from 35.5% a year earlier. The decline reflected 60 basis points of deleverage in store occupancy costs due to lower sales, partially offset by a 50-basis-point benefit from tariff refunds.
Selling, general and administrative expense was $75.2 million, or 35.9% of sales, compared with $75.9 million, or 35.4% of sales, a year earlier. The increase as a percentage of sales reflected higher store operating costs and deleverage in store and non-store wages, partially offset by lower annual incentive compensation.
Zumiez reported an operating loss of $1.3 million, compared with operating income of $100,000 in the prior-year quarter. Net loss widened to $2.7 million, or 17 cents per share, from a loss of $1 million, or 6 cents per share, a year earlier.
Chief Financial Officer Chris Work said the company’s share count was down about 6% from a year earlier due to repurchases over the preceding 12 months. While that reduction is expected to benefit full-year earnings per share, it can create a headwind in quarters where the company posts a loss.
Balance Sheet and Buybacks
Zumiez ended the quarter with $97.3 million in cash and current marketable securities, down from $106.7 million a year earlier. The decline was primarily attributable to $34.5 million in share repurchases and $10.6 million in capital expenditures, partly offset by $35.7 million in operating cash flow.
The company had no debt and retained its full $25 million unused credit facility as of Aug. 1. Inventory totaled $157.3 million, essentially flat with $157.7 million a year earlier; on a constant-currency basis, inventory was down 0.6%.
During the second quarter, Zumiez repurchased 1.2 million shares for $23.2 million. Through the first half, it repurchased 1.5 million shares for $29.5 million. Work said the $40 million repurchase program authorized in March was completed in early September.
Third-Quarter Outlook Reflects Caution
For the 37 days ended Sept. 7, net sales decreased 4.3% from the comparable period a year earlier, while comparable sales declined 3.5%. North American comparable sales fell 3.9%, while comparable sales in Europe and Australia increased 0.5%.
Accessories was the only category with positive comparable sales during the period. Footwear remained the largest negative category, followed by women’s, men’s and hard goods.
Zumiez expects third-quarter sales of $222 million to $226 million for the 13 weeks ending Oct. 31, representing a year-over-year decline of 5.5% to 7%. Comparable sales are forecast to decline 5% to 6.5%. The company expects operating income of 1% to 1.7% of sales and earnings per share between breakeven and 10 cents, compared with 55 cents a year earlier.
Work said the guidance assumes conditions will weaken following the back-to-school period, consistent with historical patterns in which sales slow when customers have fewer reasons to shop. He also said the company incorporated greater conservatism after second-quarter results missed its expectations.
- Fiscal 2026 sales are now expected to decline by low single digits, including a $12 million impact from closed stores.
- Product margin and gross margin are expected to be roughly flat as a percentage of sales for the full year.
- Operating margin is expected to decline slightly, versus prior expectations for 50 to 100 basis points of growth.
- Zumiez plans to open five U.S. stores and close about 16 stores during fiscal 2026, including 10 in North America and six internationally.
- Capital expenditures are expected to total $13 million to $15 million.
Brooks said the company is refining its merchandise assortment, investing in employee training and using customer data to improve marketing and operational decisions. He said management remains focused on actions intended to improve results in the fourth quarter and fiscal 2027.
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.
