Good afternoon, ladies and gentlemen, and welcome to the Zoomies Inc. Second Quarter Fiscal 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. Before we begin, I'd like to remind everyone of the company's safe harbor language. Today's conference call includes comments concerning Zooming Inc.'s business outlook and contains forward-looking statements. These forward-looking statements and all other statements that may be 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 these factors that could cause actual results to differ materially from the information that will be disclosed is available in Zumi's filings with the SEC. At this time, I'd like to turn the call over to Rick Brooks, Chief Executive Officer. Mr. Brooks?

With me today is Chris Work, our Chief Financial Officer.

and the trends we're seeing so far in the third quarter before providing an update on our strategic priorities for the remainder of the year. Chris will then take you through our financial results along with our outlook for the third quarter. After that, we'll open the call to your questions. Our second quarter sales decreased 2.5% from the prior year. While we're disappointed that results are short of expectations due to softness in the U.S., We're encouraged by the diversification of our global business where our international entities provided positive sales growth for the quarter. Our current quarter date trends through Labor Day have shown similar results to the second quarter. The U.S. is trending down after very strong performance over the similar period in the two prior years, growing 14.1% in 2024 and 13.2% in 2025. while our international needs have seen low single digit positive comparable sales in the same timeframe this year. Current overall sales results have been meaningfully impacted by our US sales deceleration, driven by softness in footwear and an overall drop in transactions. We know from experience that these down cycles are generally temporary and we're actively working to refine our merchandise assortments and further lean into our customer experience initiatives to improve the trajectory. As we move forward, we're executing on both our domestic and international strategies to continue advancing the business. First, domestically, we're evaluating all areas of business to positively impact the customer through the important holiday cycle and into 2027. As we reflect on the U.S. business second quarter and back to school results through Labor Day, the footwear category has been the most significant headwind, accounting for 70% of the total U.S. sales decline from the prior year through that timeframe. Forward has been challenged since the second quarter of 2025, and the year-over-year comparisons get easier as we head into the fourth quarter of this year. We've also seen evolution in apparel trends that have positively driven the business for over two years. These changes created a sense of urgency to work with our brand partners as well as our own private label brands to bring newness and changes to our assortment. On the service front, we continue to invest in our people with training focused on capturing every sale. We are learning more about our customers through our data initiatives, which are enhancing our ability to communicate with them in relevant ways to improve the effectiveness of marketing initiatives and evaluate where operational changes are needed in the business to enhance the customer experience. As we've said for some time, our job is to meet consumers where they are and continue to move with them in this important stage of their life. Identifying and leaning on trends has been at the core of Zimney's success throughout our history, and we have confidence that our teams will deliver as we move through this transitional period. Second, internationally we remain focused on the key strategic priorities that have helped us improve the business dating back to the fourth quarter last year. This includes Driving revenue through refreshing our product mix with innovative, distinctive offerings. Continued growth of private label that supplemented our branded product and resonated with our customers while enhancing our margin profile. Maintaining a rigorous commitment to profitability optimization in each market. This includes executing a premium pricing strategy to drive margin expansion while managing expenses to grow at the bottom line. With the positive inflection in our sales, we are making traction on this initiative in each of the international markets. Lastly, we continue to maintain our solid financial foundation, which is the backbone of our ability to manage volatility while funding initiatives aimed at serving our customer. Our financial position remains a source of real strength, giving us the flexibility to continue investing in our strategic objectives while also delivering value to shareholders through our share repurchase program. Financial flexibility matters more than ever in a consumer environment where the speed of trend cycles has never been faster. And it underpins confidence in our ability to navigate whatever comes next while continuing to build long-term shareholder value. Let me be clear, I'm disappointed with our current results and our people are working hard to improve the business. I have confidence in our team to make the changes needed to positively impact the fourth quarter and 2027. Closing, I want to thank our entire organization for the continued hard work and dedication to our customers. It remains the foundation of everything we do. Let me hand things over to Chris for the finance review.

Thanks, Rick, and good afternoon, everyone. I'm going to start with a review of our second quarter fiscal 2026 results. I'll then provide an update on our quarter-day sales trends before providing an outlook for the third quarter. Net sales for the second quarter of fiscal 2026 decreased 2.5% to $209 million, compared with $214.3 million in the second quarter of fiscal 2025. Comparable sales were down 2.1% for the quarter, with Canada, Europe, and Australia all having positive comparable sales growth for the quarter. The negative comp was driven by softness in the U.S., as Rick previously covered. For the second quarter, North American net sales were $173.9 million, A decrease of 3.4% from fiscal 2025. Other international net sales, which consists of Europe and Australia, were $35.1 million, up 2.5% from last year. Excluding the impact of foreign currency translation, North American net sales decreased 3.3%, and other international net sales were up 0.8% year-over-year. Comparable sales for North America were down 2.9%, while other international comparable sales increased 2.1% in the second quarter. From a category perspective, accessories was our largest positive comping category, followed by men's. Footwear was our largest negative comping category, followed by hard goods and women's. The consolidated decrease in comparable sales was driven by a decrease in transactions, partially offset by an increase in dollars per transaction. Dollars per transaction were up for the quarter, driven by an increase in units per transaction, offset by a decrease in average unit retail. Second quarter gross profit decreased to $73.9 million. compared to $76.1 million in the second quarter of last year. Gross margin was 35.3% of sales for the quarter, compared with 35.5% in the second quarter of fiscal 2025. The 20 basis point decrease in gross margin was primarily driven by 60 basis points of deleverage in store occupancy costs due to lower sales, partially offset by 50 basis points of benefit from tariff refunds. SG&A expense for the second quarter of fiscal 2026 was $75.2 million, are 35.9% of net sales compared with $75.9 million or 35.4% of net sales in fiscal 2025. The 50 basis point increase in SG&A as a percentage of net sales was driven by a 50 basis point increase in non-wage store operating costs, 40 basis points of deleverage in store wages on lower sales, 40 basis points of deleverage related to non-store wages, and 20 basis points of deleverage in other corporate costs. This was partially offset by 70 basis points of benefit related to lower annual incentive compensation and 30 basis points benefit related to a litigation settlement recorded in the second quarter of last year. Operating loss in the second quarter was $1.3 million or 0.6% of net sales compared to a prior year operating income of $0.1 million or 0.1% of net sales. Net loss for the second quarter was $2.7 million or 17 cents per share. In the year-ago period, we reported a net loss of $1 million, or 6 cents per share. Our effective tax rate for the current quarter was negative 91.5% versus 210% a year ago. The unusual tax rates in the second quarter this year and last year were primarily due to the allocation of losses across the jurisdictions in which we operate. Lastly, due to our repurchase activity over the past 12 months, our share count is down approximately 6% since the second quarter last year, which will positively benefit full-year EPS, but is a headwind in the quarters where we record a lot. Turning to the balance sheet, the business ended the quarter in a strong financial position. We had cash and current marketable securities of $97.3 million as of August 1st, 2026, compared with $106.7 million as of August 2nd, 2025. The decrease in cash and current marketable securities from the second quarter of last year was primarily driven by $34.5 million in share repurchases and $10.6 million of capital expenditures, partially offset by $35.7 million in cash flow from operations. As of August 1st, 2026, we have no debt on the balance sheet and we continue to maintain our full $25 million unused credit facility. During the second quarter, we repurchased 1.2 million shares at a total cost of $23.2 million under the authorization provided by the Board of Directors on March 11th, 2026. Year to date through the second quarter, We have repurchased a total of 1.5 million shares at a total cost of $29.5 million. We ended the quarter with $157.3 million in inventory, compared with $157.7 million in inventory last year. On a constant currency basis, our inventory levels were down 0.6% from last year. We feel good about our current inventory position and the quality of our inventory on hand. Now, to our third quarter to date results through Labor Day. Net sales for the 37-day period into September 7, 2026 decreased 4.3% compared to the 37-day period in the prior year, ended September 8, 2025. Comparable sales for the 37-day period into September 7, 2025 were down 3.5% from the comparable period in the prior year. This was on top of a two-year stack of positive 21.8%. From a regional perspective, net sales for North America business for the 37-day period ended September 7, 2026 decreased 4.7% compared to the 37-day period ended September 8, 2025, while our other international business decreased 0.9%. Excluding the impact of foreign currency translation, North American net sales for the 37-day period in September 7, 2026 decreased 4.7% from the prior year. while international sales decreased 2% compared to 2025. Comparable sales for North America decreased 3.9% for the 37-day period ended September 7, 2026, compared to the same weeks in the prior year, while comparable sales for our other international business increased 0.5%. From a category perspective, accessories was our only positive comping category. Footwear was our largest negative comping category, followed by women's, men's, and hard goods. The consolidated decrease in comparable sales was driven by a decrease in transactions, partially offset by an increase in dollars per transaction. Dollars per transaction were up for the period, driven by an increase in units per transaction, partially offset by a decrease in average unit retail. With respect to our outlook for the third quarter of fiscal 2026, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity in estimating sales, product margin, and earnings growth, given a variety of internal and external factors that impact our performance. Given the softness in back-to-school results, we believe it's prudent to look forward to an appropriate level of conservatism. We are anticipating total sales to be between $222 million and $226 million for the 13 weeks ended October 31, 2026, representing a decline in sales of 5.5% to 7% compared to the prior year. Comparable sales are expected to be between negative 5% and negative 6.5%. For the third quarter, we are expecting product margin to be down 20 basis points to 40 basis points due to decline in our U.S. business and a higher penetration of international sales that operate at a lower margin. Consolidated operating income for the third quarter is expected to be between 1% and 1.7% of sales, and we anticipate earnings per share will be between 0 and 10 cents compared to earnings per share of 55 cents in the prior year. regarding our full fiscal 2026. With the slowdown in our business and the increased consumer pressures we're observing, we believe caution is warranted when constraining our outlook for the full year. Given this, we'll refrain from providing specific full-year earnings guidance at this time, but we'll provide some high-level context around how we see the business. From sales, we are currently seeing stronger results in our international business and softer results in our domestic business. Considering these trend lines in the business and inclusive of a third quarter guidance, we now believe sales will be down low single digits to the prior year, which includes the $12 million of negative impact of closed stores. We believe consolidated product margin will be roughly flat to the prior year with growth internationally, while our domestic business will be down slightly. With the anticipated product margin, We believe gross margin will be roughly flat to the prior year as a percent of sales. SG&A is expected to be down slightly in total dollars on lower levels of incentive compensation and deleverage with sales down to the prior year. Operating margin, with the previously mentioned assumptions and barring significant deterioration in the consumer environment, We now believe operating margin will be down slightly in fiscal 2026 compared to previously communicated levels of 50 to 100 basis points of growth. While effective tax rates will fluctuate by quarter, we anticipate that our full year effective tax rate will be roughly 55% in fiscal 2026 compared to an effective tax rate of 44% in fiscal 2025. We are planning to open five new stores in fiscal 2026 all within the US. We plan to close approximately 16 stores during fiscal 2026, including 10 in North America and six internationally. We expect our capital expenditures for fiscal 2026 to be between $13 million and $15 million. We expect that depreciation and amortization, excluding non-cash lease expense, will be approximately $19.2 million, down from $21.3 million in fiscal 2025. and we are currently projecting our diluted share count for the full year to be approximately 15.8 million shares. The share count does contemplate full execution of the 40 million repurchase program approved by the board on March 11, 2026, which was officially completed in early September. Our strong financial position and proven ability to execute gives us confidence in our ability to navigate the current environment while continuing to invest in our long-term strategic priorities. and with that operator, we'd like to open the call up for questions.

Certainly. Ladies and gentlemen, if you do have a question at this time, please press star 1 1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1 1 again. Our first question comes from the line from Seaport. Your question please.

Yes, thanks for taking my questions.

Rick, I was hoping to just get your take on what's happening in footwear. A number of retailers have already reported, not necessarily maybe the most direct competitors of yours, but there's been talk about weakness and legacy silhouettes. There's also been some talk about maybe a shift away from athletic to non-athletic. I don't know to what extent you're seeing some of that. And how are you sort of planning to kind of pivot the assortment so that you're Thank you, Mitch.

I think we are clearly seeing that it's been a challenge for us for quite a number of quarters now, as we said. And it is, I think, we are aligned around the idea that we're selling lifestyle athletic footwear. So it's been, I think, we're in kind of sweet spots. It's really been struggling. in terms of, again, what our mix of products has always said. So as we look at this niche, as we look forward, we're certainly trying a lot of different things. We have some things that are working to offset, but it's not working at a level that is able to deal with the big brands that are trending down. So our goal looking forward as you look into the back half of this year and the next year is to continue to try and work with our partners continue to drive uniqueness into our footwear business. That's where we really see that we can have success. Now, that's going to be easier for us to see, Mitch, because I really feel that we're going to find the bottom of this cycle here as the anniversary of these big negative comps in Q4. So I think it is as usual for us. It's going to be about uniqueness of product, and then finding that next trend brand that's really going to drive us forward.

And there's also been a lot of talk among some of these retailers that this has been a particularly promotional back-to-school season around footwear and I'm just wondering, you know, how are you guys addressing that and to what extent is that putting pressure on your margins to the extent that you have to compete with some of those promotions?

Yeah, good question, Mitch. And first, let me say I think we feel pretty good about our position, our inventory position in footwear. We have been working closely because this has been with our partners over the last few quarters really to manage what our inventory exposure is here. So again, appreciate our partner support here. And I think I don't think we have a lot of risk around our inventory position mix. So we have not been as promotional as I think some of our competitors been on price point. That said, we are, as you can see on our website, we're certainly trying to clear some footwear out. And it is impacted margin some within these quarters. So I think we don't have a major inventory problem. We are having to deal with some of the issues left yet in terms of margin impact.

And then maybe last one for me. As far as the third quarter comp outlook is concerned, the range that you've provided is, I guess I would say, worse than what you're seeing quarter to date. Maybe two questions. How much of the quarter is essentially in the books through September 7th? The expectation for that comp to deteriorate over the balance of the quarter, how much of that is just sort of conservatism that you've baked into your guide versus just the thought that the pattern that we've been in for a while, the consumer kind of disappears in between events. And once we get through back to school, there's not a whole lot that might be compelling the consumer to shop over the balance of the quarter.

Yeah, thanks, Mitch. I'll go ahead and take that. You know, I think you kind of hit on the two points we tried to factor into the guide. We are just over 50% of the way through from a sales-in perspective. And as you can tell with a guide that's worse than where we're trending, we are expecting the back half of the quarter to be, you know, worse than what we experienced through back to school. That would be consistent. with what we've seen at least the last couple years, but actually for a number of years, where we've just performed much stronger in the back-to-school time period. And then when there's less of a reason to shop, it has slowed. And we're also baked some conservatism in. The second quarter, as you noted, was a mess to where we thought the second quarter was going to come in. and we have identified that some of the trends that have really been driving this business have moved pretty quickly. And so we're really focused on how to impact the fourth quarter and into 2027. And in those cycles, what we've learned in the past is when trends move, they move. And so we're trying to be cautious in how we're planning the rest of the quarter. And hopefully we can come back to you here in early December, and talk about how we were able to outperform this.

Thank you, and best of luck.

Thanks. Thanks, Mitch. Thank you. Once again, if you have a question at this time, please press star 11 on your telephone. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Rick Brooks for any further remarks.

All right, as always, I just want to thank everyone for their interest in Zoomies, and we'll look forward to talking to you in December with third quarter results. Thank you, everybody.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.