Good afternoon, ladies and gentlemen, and welcome to Zumiez Inc. Fourth Quarter Fiscal 2024 Earnings Conference Call. At this time, all participants towards the end of this conference. Before we begin, we would like to remind everyone of the company's Safe Harbor language. Today's conference call includes comments concerning Zumiez Inc. business outlook and contains forward-looking statements. These forward-looking statements and all other statements made on this call that are not based on historical facts are subject to risks and uncertainties. Actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available in Zumiez Inc.'s filings with the SEC. At this time, I would like to turn the call over to Rick Brooks, Chief Executive Officer. Mr. Brooks, hello, and thank you everyone for joining us on today's call.

With me today is Chris Work, our Chief Financial Officer. I'll begin with a few remarks about fourth quarter performance before touching on our strategic priorities for 2025. Chris will then take you through the financials and our outlook for the year ahead. After that, we'll open the call to your questions. Our fourth quarter results demonstrate meaningful progress on our efforts to improve profitability despite an unexpected lull in demand during the middle of the holiday season. Comparable sales increased 5.9%, marking our third consecutive quarter of positive comparable sales growth. Total sales were $279 million, which was $7 million below the midpoint of our initial guidance range and $2 million above the high end of our revised guidance provided at the beginning of January. The overall shortfall to our original guidance was primarily driven by the lower than planned sales in mid to late December in our North America business. What is particularly encouraging about our fourth quarter performance was substantial improvement in operating profitability. Driven by significant gross margin expansion and meaningful reduction, operating profit more than doubled to $20 million and EPS increased 95% to $0.78 after adjusting prior numbers for the $41.1 million one-time goodwill impairment charge worth $2.13. Improvement reflects the successful execution of our strategic initiatives throughout 2024, which has positioned us to better navigate the challenging retail environment while delivering enhanced value for our shareholders. Looking at performance by category, we continue to see strength in our core businesses. Our men's category maintained its positive momentum through year-end, delivering growth for the fifth consecutive quarter. Our women's category, which has shown tremendous momentum since turning positive in Q1, continued to post strong results, becoming our largest growth category for the quarter. Footwear also positively contributed for the third quarter in a row.…

Thanks, Rick, and good afternoon, everyone. I'm gonna start with a review of our fourth quarter and full year 2024 results. Then provide an update on our first quarter date sales trends before providing some perspective on the full year. Net sales for the fourth quarter of 2024, which was a 13-week period, decreased 0.9% to $279.2 million compared to $281.8 million in the fourth quarter of 2023, which was a 14-week period. The decrease in total sales was driven by the incremental 53rd week in the prior year with approximately $12 million. Comparable sales for the 13-week period ended February 1, 2025, compared to the same 13-week period in the prior year increased 5.9%. Comparable sales exclude the impact of new stores, closed stores, and the 53rd week in the prior year and are generally a better measure of operating performance. From a regional perspective, comparing the 13-week period in the current year to the 14-week period in the prior year, North America net sales were $214.2 million, an increase of 0.8% from 2023. Other international net sales, which consists of Europe and Australia, were $65 million, down 6.4% from last year. Excluding the impact of foreign currency translation, North America net sales increased 1.2%, and other international net sales decreased 2.7% compared with 2023. Comparable sales for North America were up 7.2%, marking the fourth consecutive quarter of comparable sales growth. Our other international comparable sales were up 1.9% for the quarter. From a category perspective, women's was our largest positive comping category, followed by men's and then footwear. Accessories was our largest negative comping category, followed by hard goods. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions. Dollars per transaction were up for…

Star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Mitch Kummetz with Seaport. Your line is open. Please go ahead.

Yes. Thanks for taking my questions. I guess just starting off, just big picture. Can you just kind of walk us through what you're seeing in terms of the impact of tariffs, you know, how, you know, how is that impacting your private label business? Where you have direct exposure? And what are you seeing kind of across the brands and how they might be dealing with it from a pricing standpoint where you've got, I guess, you know, more indirect exposure? Just kind of big picture thoughts there.

Yeah. Thanks, Mitch. I'll go ahead and try to answer this and let Rick jump in. I mean, obviously, like many retailers, we've been trying to stay up to date on all the tariff information that's come out since last November. You know, our current sourcing strategy is largely to work with our brands. That represents just over 70% of our business, and we're, you know, in high twenties as a percent of the brands that we control within our own private label grouping of brands. So, you know, we're trying to be as diversified as possible. As we exited 2024, our North America receipts were more concentrated than we had hoped with China. They're right around 50%. I kind of harken back to when we went through this before in the last administration. We were around 60% in 2018. We moved to about 45% in 2019, and then we got to 40% coming from China in 2020. Ultimately, this kind of landed in the high thirties. I think over the last four years, since the first term of President Trump, you know, we saw our private label grow a little bit in China just based on the speed and ability to really move quickly and the functionality of what they were able to do in China. That being said, we've already started the process of moving production and diversifying more into 2025. We expect that that rate of roughly 50% of our entire goods base coming from China in North America to come down pretty meaningfully. As we move through 2025. As we indicated on the call, with inventory, we also pulled some forward ahead of the tariffs so we feel good about where we are in our media receipts through spring. And, you know, we've got some more work to do here. But as you know, this is a complex topic because there are other locations that are getting tariffs as well. And so I think the smartest thing we can do over the long term is just diversify as much as possible so that we're able to move quickly should this continue into the future.

That's helpful. Thanks. And then just as a follow-up question, Chris, I know you're not giving specific guidance for 2025, but you talked a little bit about leverage. I'm curious, you know, what are your leverage points? On, like, EBITDA versus SG&A? And then maybe could you also address, you know, what the flow-through rate might look like assuming you could, you know, top better than what those leverage points are.

Sure. Yeah. I mean, I think, you know, as we look at the entire year, what we did try to push is that we think we'll grow sales. And we'll grow operating profit. I know that's not a great detail in guidance, but that's what we're pushing despite the fact that, you know, we've closed a fair amount of stores and the reason we feel comfortable with doing that is really looking at the trend lines of business. And certainly, there's a lot of uncertainty out there. I want to make sure I preface any answer here with that because as we know, uncertainty creates a little fear. And fear can have the consumer pull back. So we've considered some of that, but obviously, it's hard to imagine everything with a crystal ball. From a leverage perspective, what we did say is we think that, you know, we've got good opportunity within gross margin. To continue to grow product margin and leverage items like occupancy and some of our distribution costs. I think we've shown across 2024 some good movement there, and we think we can continue to manage that into 2025. On the SG&A front, we talked about really probably SG&A growing more in line with sales and that we are, you know, saying growing sales. We're not talking about huge amounts at this point. But to your point, you're absolutely right. If we can exceed a low sales growth number, we would expect to see good flow-through. And the reason we think we'll see good flow-through is I think we've done a good job over our last two years of challenge, 2022, 2023. And now 2024 being a little more of a stabilization year. Of really trying to manage some of the SG&A expenses around store labor. Being our largest cost. Some of the other store costs and then obviously corporate SG&A as well. I'm not gonna, you know, say this has been easy. We all know there's been inflation in this area, wage inflation, as well as other things that have had a higher cost. But we've tried to be smart about how we manage hours in stores, how we manage what we're trying to do, and the strategic initiatives of the business. With the closure of stores, we've had to make some difficult decisions in areas that do have a, I would say, sort of a fixed it semi-fixed amount with stores when you think about things like our field team that oversees stores, some of the areas of the corporate office, that are more variable with the number of stores, we've had to make some difficult decisions to cut back there too, which has helped us manage SG&A. So a lot in the answer there Mitch, but I think overall, you know, if we can grow sales, beyond what we're planning, we would expect to see a high level of flow-through. By high level of flow-through, I would probably say 30% plus.

Let me just real quick follow-up to that. Can you grow operating margin on like, a low single-digit comp, like, a fairly low single-digit comp?

Yes.

Okay. Thanks, and good luck.

Thank you. I would now like to hand the conference back over to Rick Brooks for any further remarks.

Alright. Thank you very much. As always, we look forward to hearing from you and your questions. So we look forward to reporting you on first quarter results later this year. Thanks, everybody.

This does conclude today's conference call. Thank you for participating, and you may all disconnect. Everyone, have a great day.