ZUMZ Q2 Deep Dive: Private Label Expansion and North American Momentum Offset International Headwinds

Clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) reported Q2 CY2025 results beating Wall Street’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 43.7% above analysts’ consensus estimates.

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StockStory’s Take

Zumiez’s second quarter saw a positive market reaction, driven by stronger-than-expected revenue and earnings. Management attributed the quarter’s outperformance to a robust back-to-school season, with North America delivering its fifth consecutive quarter of positive comparable sales growth. CEO Rick Brooks pointed to the increasing effectiveness of customer-focused merchandise initiatives, noting, “Our momentum continued to build into August, with low teens comparable sales growth in the United States.” The period also saw a significant rise in private label penetration, which management credited for supporting both top-line results and margin improvement.

Looking ahead, Zumiez’s outlook is shaped by continued momentum in North America and cautious optimism regarding the broader economic environment. Management expects ongoing growth in private label and exclusive brands to drive sales and enhance margins, while also investing in staff development and digital engagement to deepen customer relationships. CFO Chris Work emphasized, “We anticipate driving additional gross margin leverage through occupancy, distribution, and logistics,” but also acknowledged macroeconomic uncertainty and potential tariff impacts as risks to near-term performance.

Key Insights from Management’s Remarks

Zumiez’s second quarter performance was defined by strong private label growth, category mix shifts, and operational improvements, while management remains cautious about international headwinds and macroeconomic volatility.

• Private label strength: Management reported private label merchandise reached 30% of total sales, the highest in company history. This expansion was credited to Zumiez’s ability to identify trends and produce products that resonate with targeted customer segments, providing both sales momentum and a margin tailwind.
• North America driving growth: Comparable sales in North America grew for the sixth consecutive quarter, led by robust performance during the back-to-school period. CEO Rick Brooks highlighted that transaction gains, alongside average unit retail increases, contributed to this momentum, reflecting effective merchandising and premium pricing strategies.
• International softness: The European business continued to face challenges, with comparable sales in these markets declining. Management cited weak macroeconomic conditions in Germany, Zumiez’s largest European market, and ongoing war-related uncertainty as key headwinds. However, they reiterated a multi-year plan to return Europe to profitability through assortment curation and improved in-store experiences.
• Category mix shifts: Women’s apparel was the largest positive comping category in the quarter, followed by hard goods and accessories. Footwear remained a drag on results, as several brands underperformed, but management expressed optimism that the bottom may have been reached in skate hardgoods after recent positive trends.
• Margin improvements: Gross margin rose 130 basis points year over year, driven by improved product mix, higher private label penetration, and operational efficiencies such as store closures and better occupancy leverage. SG&A expenses were tightly managed, with anticipated leverage as sales grow, despite one-time legal and compensation costs.

Drivers of Future Performance

Zumiez’s outlook is anchored by private label expansion, disciplined expense management, and a focus on merchandising innovation, but tempered by macroeconomic and tariff-related uncertainties.

• Private label and exclusive brands: Management expects continued growth in private label and exclusive brands to drive both sales and margin expansion, as these products offer higher profitability and differentiate the assortment in a crowded retail landscape. The company’s ability to quickly adapt to consumer trends is seen as a competitive advantage.
• Expense discipline and operational leverage: Zumiez aims to keep SG&A costs flat as a percentage of sales, leveraging higher volumes to improve operating margins. CFO Chris Work highlighted ongoing investments in technology and staff development, but emphasized that expense growth will remain below the rate of sales growth, supporting profitability.
• Macroeconomic and tariff headwinds: Management warned that broader economic uncertainty, ongoing tariff risks, and continued challenges in the European business could impact results. While the North American business remains strong, the company is balancing optimism from recent momentum with caution around consumer discretionary spending and global trade policy changes.

Catalysts in Upcoming Quarters

Over the coming quarters, our team will be closely monitoring (1) whether private label and exclusive brands sustain their current growth trajectory, (2) signs of stabilization or improvement in the European business, and (3) the company’s ability to manage through macroeconomic uncertainty and tariff changes. Progress on store optimization and technology investments will also be key indicators of execution.

Zumiez currently trades at $20.61, up from $18.45 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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