Winmark Falls Short on EPS, Revenue

Core Insights - Winmark reported Q4 2024 earnings below analyst expectations, indicating challenges and strategic shifts in its business model [2][6] - The company's focus on sustainable growth remains evident despite financial misses [2] Financial Performance - For Q4 2024, Winmark's diluted Earnings Per Share (EPS) was $2.60, below the expected $2.65 and slightly down from $2.64 in Q4 2023, representing a year-over-year decrease of 1.5% [3] - Total revenue for Q4 2024 was $19.55 million, falling short of the anticipated $20 million and reflecting a 2.4% decrease from the previous year [3] - Net income decreased to $9.58 million, down 1.4% from $9.72 million in Q4 2023 [3] - Royalties increased by 2.7% year-over-year, reaching $17.64 million [3][8] Company Overview - Winmark specializes in franchising retail resale of used goods, operating brands such as Plato's Closet and Once Upon A Child, with 1,350 franchise stores as of the end of 2024, up from 1,319 the previous year [4] Strategic Developments - The company is phasing out its leasing segment, which has narrowed revenue margins, and is focusing on its core franchise operations [5][6] - Leasing income dropped significantly to $1.81 million in 2024 from $4.77 million previously, contributing to the revenue shortfall [6] Franchise Expansion - Winmark awarded 79 new franchises, increasing the operational franchise count to 1,350, with over 2,800 untapped territories available for future development [7] Brand Performance - Key brands like Plato's Closet and Once Upon A Child continue to be significant contributors to revenue, with royalties being a major revenue source [8] Future Outlook - Management maintains a cautiously optimistic outlook with planned franchise expansions and emphasizes the importance of executing franchise growth and e-commerce evolution for long-term success [9]