Zumiez Inc. (NASDAQ:ZUMZ) Q2 2023 Earnings Call Transcript

Rick Brooks: We have steadfastly, throughout the entire pandemic period and into where we’re at today, Jeff, we’ve always considered ourselves to be an office environment where people are going to be here. Of course, our store employees are in the office every day as are our DC teams in the office every day down in our DC facility. So, we believe that collaboration is key at central so that throughout the pandemic, whatever the rules were, we definitely follow them, but if we could have 50% capacity. We’re rotating everyone in 50-50 over alternating weeks. And so pretty much for us, everyone’s back. We have some exceptions for certain specific situations, but pretty much on the fall, we’ve been back.

Jeff Van Sinderen : Okay. Good to hear. And then I have one more sort of broader question for you. I think you were kind of running on average about an 8% to 10% operating margin, call it pre-COVID. But of course, we have elevated labor expenses now and other inflationary inputs. What do you think is a normalized operating margin for the company? Are we looking now probably mid-single digit, do you think? Or just assuming sort of modest sales recovery, call it, maybe a mid-single-digit positive comp, all else being roughly equal, how do you think about that?

Chris Work: Yes. I mean, Jeff, we’ve done a lot of work around this. And obviously, the step back we’ve had in the last couple of years has been super challenging. But as we break it down, we’ve broken it down lots of different ways, I really believe it’s generally sales related. And, this is the bigger challenge in our business. And we actually — if you — coming out of ’14 and ’15, we had talked about getting back to high single digits from an operating profit perspective. We were able to accomplish that. We actually got into double digits. And I think we still believe, over the long term, if we can get sales right and there are other things in the business that help offset some of the inflation, we’ve been able to drive product margin higher.

We’ve been able to — we have an international business that still has a lot of growth around it that I think that high single-digit goal is still achievable, and that’s really our push. And that’s our drive as we think about the business recovering and seeing the sales come back is trying to build a model that will get to that high single digits and obviously, hopefully, potentially beyond. But I think that still seems realistic in our heads.

Operator: [Operator Instructions]. The next question will be coming from Corey Tarlowe from Jefferies. Your line is open.

Corey Tarlowe : Great. Thanks. I think you cited some encouraging trends in Men’s. I was wondering if there’s anything into back-to-school or into the third quarter that has maybe surprised you from a category or fashion trend standpoint that you can talk about?

Rick Brooks: I’ll start and let Chris add-in, Corey. And I guess our — one of these we’ve already talked about, which is the strength of our private label business. And I think that is clearly a strong trend-driven business. I think as Chris said earlier, our teams have done a really good job here of being on trend and on cycle. And of course, we had to plan for that. This isn’t in our — most of these private label categories are cut and sew categories. So, this is something we planned for back-to-school, but I think executed well by our private label product teams and then executed really well with our overall team strategy and the bundling that worked both in stores and online for providing value for our customers and driving DPTs in the process as well as driving margin.