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01/11 11:51
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows mixed signals: positive product margin improvements and controlled SG&A expenses, but net loss increased and cash reserves decreased. The Q&A highlighted cautious optimism with growth in private label and AUR, but challenges in footwear and European markets remain. The guidance suggests stable but not strong growth, with operating losses expected. The lack of a clear timeline for margin improvement and challenges in key markets suggest a neutral market reaction.
Net Sales Second quarter net sales were $214.3 million, up 1.9% from $210.2 million in the second quarter of 2024. The increase was primarily driven by the North America business, which showed outsized strength despite macroeconomic uncertainty.
Comparable Sales Comparable sales were up 2.5% for the quarter. North America comparable sales were up 4.2%, marking the sixth consecutive quarter of growth. The increase was driven by an increase in dollars per transaction, partially offset by a decrease in transactions.
Gross Profit Second quarter gross profit was $76 million, up 5.9% compared to $71.8 million in the second quarter of last year. Gross profit as a percentage of sales was 35.5%, up from 34.2% in 2024. The 130 basis point increase was driven by 60 basis points of improvement in product margin and 60 basis points of leverage on store occupancy costs.
SG&A Expense SG&A expense was $75.9 million or 35.4% of sales, compared to $72.2 million or 35.4% of net sales a year ago. The increase was driven by higher corporate costs, legal settlements, incentive compensation, and wage costs, partially offset by benefits in non-wage store operating costs.
Operating Income Operating income was $0.1 million or 0.1% of net sales, compared to an operating loss of $0.4 million or 0.2% of net sales last year. The improvement was due to higher gross profit and controlled SG&A expenses.
Net Loss Net loss for the second quarter was $1 million or $0.06 per share, compared to a net loss of $0.8 million or $0.04 per share in the second quarter of 2024. The higher loss was attributed to tax rate fluctuations and allocation of losses across jurisdictions.
Cash and Investments Cash and liquid investments were $106.7 million at quarter end, down from $127 million a year ago. The decrease was due to share repurchases and capital expenditures, partially offset by cash from operating activities and release of restricted cash.
Inventory Inventory levels were $157.7 million, down 0.6% compared to $158.8 million last year. On a constant currency basis, inventory levels were down 1.7%. The decrease reflects effective inventory management.
Introduction of new brands: Over 120 new brands were introduced throughout 2024, contributing to strong customer response and momentum.
Private label performance: Private label sales reached 30% of total sales year-to-date, up from 27% a year ago, marking the highest private label penetration in the company's history.
North America sales growth: North America net sales increased by 2.1% in Q2 2025, with comparable sales up 4.2%, marking the sixth consecutive quarter of growth.
International market performance: International net sales increased by 1% in Q2 2025, but comparable sales declined by 5.5% due to challenging market conditions in Europe.
Profitability optimization: Premium pricing strategies and operational improvements supported margin gains and market share expansion in North America.
Inventory management: Inventory levels decreased by 0.6% year-over-year, reflecting effective inventory management.
Store closures and openings: Plans to close 20 stores in 2025, including 17 in the U.S., 2 in Canada, and 1 in Europe, while opening 6 new stores, including 5 in North America and 1 in Australia.
Capital allocation: Capital expenditures for 2025 are projected to be between $11 million and $13 million, down from $15 million in 2024.
Economic Uncertainty: Broader economic uncertainties, including tariffs and consumer spending, pose risks to the company's outlook and financial performance.
International Market Challenges: Challenging market conditions in Europe have led to negative comparable sales in 2025, making it difficult to sustain improvements achieved in 2024.
Tariff Impact: The ongoing tariff situation adds complexity to pricing strategies and could limit consumer spending, impacting revenue growth.
Store Closures: Planned closure of 20 stores in 2025, including 17 in the U.S., could negatively impact sales by approximately $14 million for the year.
Consumer Traffic Trends: Softening non-peak consumer traffic trends could affect sales performance, particularly during non-holiday periods.
Legal and Operational Costs: Higher-than-anticipated legal settlements and increased SG&A expenses, including corporate costs and store wages, could pressure profitability.
Foreign Currency Impact: Foreign currency translation has negatively impacted international net sales, particularly in Europe and Australia.
Revenue Expectations: Total sales for the third quarter of fiscal 2025 are anticipated to be between $232 million and $237 million, with comparable sales growth of 5.5% to 7.5% over the prior year. For the full year 2025, year-over-year sales growth is projected at 3% to 4%, despite planned store closures.
Margin Projections: Product margin is expected to increase in the third quarter of fiscal 2025 compared to the prior year. For the full year 2025, modest year-over-year growth in product margins is anticipated, building on 70 basis points of improvement in fiscal 2024. Additional gross margin leverage is expected through expense categories such as occupancy, distribution, and logistics.
Capital Expenditures: Capital expenditures for fiscal 2025 are expected to range between $11 million and $13 million, compared to $15 million in fiscal 2024 and $20.4 million in 2023.
Store Openings and Closures: Six new store openings are planned for fiscal 2025, including five in North America and one in Australia. Approximately 20 store closures are expected, including up to 17 in the United States, two in Canada, and one in Europe.
Earnings Projections: Earnings per share for the third quarter of fiscal 2025 are expected to range between $0.19 and $0.29, compared to $0.06 in the prior year. For the full year 2025, the company expects a return to profitability, with year-over-year increases in operating margins and net profit.
Tax Rate and Share Count: The full-year effective tax rate for fiscal 2025 is projected to be roughly 50% to 60%. The diluted share count for the full year is expected to be approximately 17.3 million shares, excluding any additional stock repurchases.
Share Repurchase: During the second quarter, the company repurchased 0.6 million shares at an average cost, including commission, of $13.10 per share for a total of $7.8 million. As of August 2, 2025, $7.2 million remained on the $15 million repurchase authorization approved by the Board on June 4.
The earnings call highlights strong financial performance with significant increases in gross profit, operating income, and net income. Product margins and SG&A efficiency improved, and the private label business is growing. Despite some challenges in the footwear category and cautious guidance, the overall sentiment is positive with optimistic guidance and strategic growth in private labels. Market reaction is likely positive, driven by improved financial metrics and strategic positioning.
The earnings call reveals strong financial performance with increased revenue, gross profit, and net income. Positive trends in skate hard goods and private label products, along with a cautious but optimistic outlook, support positive sentiment. Despite a slight deceleration in North America and challenges in footwear, improved margins and efficient expense management are encouraging. The Q&A highlights optimism in skate products and private label growth, despite some management evasiveness. Overall, the positive financials and strategic positioning suggest a positive stock price movement in the near term.
The earnings call shows mixed signals: positive product margin improvements and controlled SG&A expenses, but net loss increased and cash reserves decreased. The Q&A highlighted cautious optimism with growth in private label and AUR, but challenges in footwear and European markets remain. The guidance suggests stable but not strong growth, with operating losses expected. The lack of a clear timeline for margin improvement and challenges in key markets suggest a neutral market reaction.
The earnings call provided mixed signals: net sales and comparable sales showed growth, and there was a significant share repurchase program, which are positives. However, there are concerns about macroeconomic uncertainty, European market challenges, and a notable operating loss. Additionally, the Q&A section highlighted unclear strategies for international growth and the impact of tariffs. The overall sentiment is neutral, as positives are offset by risks and uncertainties, suggesting limited short-term stock movement.
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