Winmark (WINA -1.88%), known for its franchise retail models, released its fourth-quarter earnings on Feb. 19, 2025. The company's focus on sustainable growth was evident, though it did not meet the financial expectations set by analysts. For Q4 2024, Winmark reported a diluted Earnings Per Share (EPS) of $2.60, which fell short of the anticipated $2.65 and slightly down from $2.64 in the same quarter of 2023. Total revenue reached $19.55 million, directly below the expected $20 million and reflecting a 2.4% decrease from last year. Despite these misses, Winmark's continued expansion in its core franchise business underlines a stable operational quarter.
| Metric | Q4 2024 | Q4 Estimate | Q4 2023 | Y/Y Change |
|---|---|---|---|---|
| EPS (Diluted) | $2.60 | $2.65 | $2.64 | -1.5% |
| Revenue | $19.55M | $20.0M | $20.04M | -2.4% |
| Net Income | $9.58M | N/A | $9.72M | -1.4% |
| Royalties | $17.64M | N/A | $17.17M | +2.7% |
Source: Analyst estimates for the quarter provided by FactSet.
Company Overview
Winmark focuses on franchising retail resale of used goods, prominently in North America. Its brands include Plato's Closet, Once Upon A Child, Play It Again Sports, Style Encore, and Music Go Round. The company operates 1,350 franchise stores as of the end of 2024, marking a steady growth from 1,319 the previous year.
Winmark's franchise model remains central, providing recurring revenue through franchise fees and royalties, especially as the company phases out its leasing segment. The decision to phase out leasing, which currently narrows revenue margins, aligns with its strategic shift. Sustainability, through promoting a circular economy, becomes a prominent focus.
NASDAQ: WINA
Key Data Points
Quarterly Performance and Strategic Developments
In Q4 2024, Winmark faced financial headwinds, evident from a drop in both revenue and net income compared to last year. This was mainly due to the run-off of its leasing portfolio, a move initiated in May 2021. Leasing income dropped significantly to $1.81 million in 2024 from $4.77 million previously, explaining part of the revenue shortfall. This transition underscores Winmark's shift towards its core franchise operations.
Franchise expansion remains positive, with Winmark awarding 79 franchises, slated to increase the franchise count in the future. The number of operational franchise stores hit 1,350. The potential remains high with more than 2,800 untapped territories available for development.
Brand performance varied, with royalties and merchandise sales as significant contributors to revenue. Key brands like Plato's Closet and Once Upon A Child continue to play crucial roles. Royalties rose by 2.7% year-on-year, reaching $17.64 million.
Outlook and Future Implications
Looking forward, Winmark's management maintains a cautiously optimistic outlook, with planned franchise expansions. Investors should monitor Winmark's execution of its franchise expansion and e-commerce evolution, which are crucial to its long-term growth and competitive stance.
