ZUMZ Q3 Deep Dive: Margin Expansion and Private Label Growth Drive Upside

Clothing and footwear retailer Zumiez (NASDAQ:ZUMZ) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 7.5% year on year to $239.1 million. Guidance for next quarter’s revenue was optimistic at $293.5 million at the midpoint, 2.7% above analysts’ estimates. Its GAAP profit of $0.55 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Zumiez delivered a third quarter that surpassed Wall Street expectations, with management attributing the results to strong comparable sales growth and improved profitability in North America. CEO Richard Brooks highlighted that multiple product categories contributed to the performance, especially women’s and hard goods, with back-to-school and holiday momentum cited as key demand drivers. Management specifically credited the effectiveness of refreshed merchandise assortments and the company’s ability to attract full-price customers, noting, “Comparable sales grew 7.6% on top of a 7.5% increase in the year-ago quarter, representing our sixth consecutive quarter of positive comparable sales growth.”

Looking ahead, Zumiez’s guidance is underpinned by confidence in continued North American strength and further gains from private label and product margin expansion. Management outlined that new and emerging brands, as well as improvements in the private label mix, are expected to support sales and profitability. CFO Chris Work noted, “Our recent trend line in North America has been very encouraging and provides confidence as we head into the heart of the holiday selling season.” However, the company remains cautious on international markets, where promotional activity and macro uncertainty could restrain growth.

Key Insights from Management’s Remarks

Management stated that private label expansion, higher average unit retail, and premium pricing strategies were the most significant drivers of improved margins and profitability this quarter.

• Private label penetration rises: Private label accounted for just under 31% of total product sales, up sharply from approximately 11-12% five years ago. Management explained that this shift was driven by successful trend identification and full-price selling, which together supported margin gains and provided more control over the merchandise mix.

• North America leads growth: The company saw double-digit comparable sales growth in North America, credited to strong execution in core categories and effective staff development programs. Management pointed out that the region’s sustained performance reflected both higher transaction values and increased customer engagement.

• Skate hard goods rebound: After four years of declines, skate hard goods returned to positive growth, contributing double-digit comps in the quarter. CEO Richard Brooks described this turnaround as “the long-awaited turn that we've been looking for,” reflecting renewed interest in the category across all regions.

• Store portfolio optimization: The closure of underperforming stores and focus on profitable locations resulted in leverage of store occupancy costs. This helped drive a 240 basis point improvement in gross margin, as the company prioritized resource allocation toward higher performing markets.

• International challenges persist: Management acknowledged that while Europe and Australia saw some improvement, international comparable sales remained down. The company is maintaining disciplined expense management and premium pricing in these markets, aiming for long-term product margin gains despite ongoing macroeconomic headwinds.

Drivers of Future Performance

Zumiez expects continued private label expansion and premium pricing in North America to drive future growth, with international recovery and expense control remaining key variables.

• Private label and trend agility: Management cited the continued growth of private label brands and the ability to rapidly identify and capitalize on emerging trends as central to future revenue growth and margin gains. The company believes that responding quickly to shifting consumer preferences will remain critical in maintaining its market position.

• Store optimization and expense discipline: The planned closure of additional underperforming stores and ongoing focus on expense management are expected to deliver further operating leverage. Management anticipates that holding SG&A costs flat as a percentage of sales, even while investing in strategic initiatives, should support profit margins.

• International market uncertainty: While North America is projected to remain strong, management expressed caution regarding international business, highlighting promotional anniversaries and macroeconomic volatility as risks. Product margin growth is still expected internationally, but sales comps may remain negative in the near term.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will be watching (1) the sustainability of private label and hard goods momentum, especially during the holiday season; (2) expense control and the impact of ongoing store optimization on margins; and (3) signs of stabilization or improvement in international markets, where product mix and pricing discipline will play a crucial role. Management’s ability to respond to evolving consumer trends and maintain premium pricing will also be important markers of future performance.

Zumiez currently trades at $28.85, up from $27.26 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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