WINMARK CORP Annual Report - Your Investor's Guide to This Year's Performance

Dive into WINMARK CORP's latest annual report with this straightforward guide. We've translated the key details into plain English, offering clear, actionable insights to help you understand their business, financial performance, and future prospects. Forget the jargon – this is your accessible investor's overview.

Business Overview

Winmark – The Resale Company® – is a leading franchisor behind popular resale stores like Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore®, and Music Go Round®. Their mission, "Resale for Everyone®," empowers entrepreneurs to open and operate these successful stores.

Winmark is deeply committed to sustainability. Since 2010, they have helped recycle and extend the life of over 2.1 billion items, aligning with growing consumer demand for eco-friendly shopping. As of December 27, 2025, Winmark operated a robust network of 1,378 franchise stores across the United States and Canada. The company sees significant growth potential, with over 2,800 available territories for expansion.

Financial Performance

Winmark delivered robust financial performance in 2025, fueled by increased royalty revenue from strong system-wide sales and consistent franchise fee income. Their franchise network also performed strongly, with system-wide sales (the total sales generated by all franchise locations) reaching $1,682.0 million in 2025. This marked a healthy 4.5% increase from $1,610.2 million in 2024 and a 5.8% increase from $1,589.0 million in 2023. This strong franchisee performance directly translated into excellent financial results for Winmark itself.

• Winmark's Total Revenue:

  • 2025: $125.8 million, up 8.5% from 2024.
  • 2024: $115.9 million, up 6.2% from 2023.
  • 2023: $109.1 million.
  • Revenue primarily comes from royalties (typically 4-6% of franchisee gross sales), franchise fees, and equipment sales to new stores.

• Net Income:

  • 2025: $48.5 million, a 10.0% increase from 2024.
  • 2024: $44.1 million, up 7.8% from 2023.
  • 2023: $40.9 million.

• Diluted Earnings Per Share (EPS):

  • 2025: $13.25, reflecting strong 12.0% growth, partly due to active share repurchases.
  • 2024: $11.83, up 9.5% from 2023.
  • 2023: $10.80.

• Profitability Margins: Winmark maintains impressive profitability, with a gross margin of approximately 90% and a net profit margin of around 38.5% in 2025. This is characteristic of its capital-light franchise model.

• Shareholder Returns: The company continued its commitment to shareholders, paying out $15.0 million in dividends and repurchasing $25.0 million of its own stock in 2025. This demonstrates confidence in its future and efficient capital allocation.

System-Wide Sales Breakdown (across all franchise locations):

• Total System-Wide Sales:

  • 2025: $1,682.0 million (up about 4.5% from 2024)
  • 2024: $1,610.2 million (up about 1.3% from 2023)
  • 2023: $1,589.0 million

• Brand Contributions to System-Wide Sales (2025):

  • Plato’s Closet: $675.5 million (up 3.4%)
  • Once Upon A Child: $543.4 million (up almost 5%)
  • Play It Again Sports: $350.0 million (up about 5.5%)
  • Style Encore: $61.7 million (up about 4.4%)
  • Music Go Round: $51.4 million (up about 6.4%)

Canadian operations also showed growth, contributing $7.8 million to system-wide sales in 2025, up from $7.3 million in 2024.

Risk Factors

Investors should be aware of the following potential risks:

• Economic Downturn: A significant recession or prolonged period of high inflation could reduce consumer discretionary spending on both new and used goods, impacting franchisee sales and Winmark's royalty income.
• Increased Competition: The growing popularity of resale could attract more competitors, including large online platforms and traditional retailers entering the used goods market, potentially eroding market share.
• Franchisee Performance & Retention: Winmark's success highly depends on the profitability and operational excellence of its franchisees. Franchisee failures or an inability to attract new, qualified franchisees could hinder growth.
• Brand Reputation: Negative publicity related to product authenticity, store cleanliness, or customer service at any franchise location could damage the overall brand image.
• Technological Disruption: Rapid changes in retail technology or cybersecurity threats could pose risks if Winmark does not adequately address them, despite its e-commerce investments.
• Regulatory Changes: Potential changes in franchise laws, labor regulations impacting franchisees, or environmental policies could increase compliance costs or alter the business model.

Management Discussion

Major Wins:

• Exceptional Financial Performance: Winmark achieved record revenue, net income, and EPS in 2025, significantly outpacing system-wide sales growth due to operational efficiencies and effective capital management.
• Strong System-Wide Sales Growth: All brands contributed positively, with Plato's Closet, Once Upon A Child, and Play It Again Sports leading the charge. Even brands that saw minor dips in 2024 (Style Encore, Music Go Round) rebounded strongly in 2025.
• Strategic E-commerce Expansion: The successful rollout of e-commerce platforms for Music Go Round, Play It Again Sports, and Style Encore has enhanced franchisee capabilities, driving incremental sales and improving customer reach. Approximately 60% of eligible stores have adopted the platform, contributing an estimated 2% to system-wide sales growth.
• Continued Network Expansion: Winmark opened 60 new franchise stores in 2025, expanding its footprint and reinforcing its market leadership.
• Reinforced Sustainability Impact: The company continues to leverage its strong environmental credentials, which resonates with a growing segment of consumers and enhances brand loyalty.

Challenges This Year:

• Inflationary Pressures: While Winmark's asset-light model provides some insulation, rising operating costs for franchisees (e.g., labor, rent) could impact their profitability and, indirectly, Winmark's royalty revenue.
• Intensifying Competition: The resale market is becoming more crowded, with increased competition from online marketplaces (e.g., ThredUp, Poshmark) and other brick-and-mortar concepts.
• Economic Uncertainty: Potential economic slowdowns or shifts in consumer discretionary spending could impact demand for both buying and selling used goods.
• Franchisee Recruitment & Support: Maintaining the high quality of franchisees and providing adequate support in a dynamic retail environment remains an ongoing operational challenge.

Leadership and Strategy: Winmark's leadership remains stable, with a continued focus on enhancing the franchise model and driving multi-channel growth. Management reported no major changes in executive leadership, ensuring continuity in strategic direction. A key strategic priority is to support its franchisees in becoming "multi-channel retailers" through active investment in technology, tools, and training. This includes significant investment ($5.0 million in 2025) in developing and rolling out advanced e-commerce platforms and integrated POS systems. The company provides enhanced training programs and marketing support to help franchisees maximize both in-store and online sales. Management also continuously evaluates opportunities for new brand concepts or strategic partnerships that align with the resale market and sustainability trends.

Market Trends and Regulatory Changes: Winmark is strategically aligned with several powerful market trends and actively adapts to the evolving retail landscape. The booming circular economy and increasing consumer preference for sustainable consumption directly benefit Winmark's resale model. The digital transformation in retail is a key trend, and Winmark is responding by investing heavily in its e-commerce platforms. While the resale market can be counter-cyclical, economic headwinds such as inflationary pressures and rising interest rates could impact consumer spending and franchisee costs; however, Winmark's value proposition helps mitigate some of these effects. The company actively monitors the evolving regulatory environment, including potential changes in data privacy laws (e.g., CCPA, GDPR) and franchise agreements, to ensure compliance and adapt its strategies.

Financial Health

Winmark maintains a very healthy financial position, characterized by strong cash generation and a manageable debt profile.

• Cash and Cash Equivalents: $65.0 million as of December 27, 2025, providing ample operational flexibility.
• Total Debt: $130.0 million, primarily long-term, reflecting a conservative leverage strategy.
• Net Debt: $65.0 million.
• Liquidity: The company maintains a strong current ratio of 2.5x (current assets of $100M vs. current liabilities of $40M), indicating excellent short-term liquidity.
• Cash Flow from Operations: Generated $55.0 million in operating cash flow in 2025, comfortably covering capital expenditures, dividends, and share repurchases.
• Debt-to-Equity Ratio: A healthy 0.8x, demonstrating a balanced capital structure.

Future Outlook

Winmark's management anticipates continued growth and strong financial performance in the coming year, expressing a cautiously optimistic outlook.

• Revenue Guidance: For 2026, Winmark expects revenue growth in the range of 5-7%, driven by new store openings and continued strength in system-wide sales.
• EPS Guidance: The company projects diluted EPS to grow by 8-10% in 2026, reflecting operational efficiencies and ongoing share repurchases.
• Network Expansion: The company plans to open 50-70 new franchise stores in 2026, further expanding its market reach.
• Strategic Focus: Winmark will continue to invest in technology and franchisee support to solidify its omnichannel capabilities and competitive advantage.
• Capital Allocation: Winmark intends to maintain its consistent dividend policy and continue its opportunistic share repurchase program, while preserving a strong balance sheet.
• Market Position: Management believes Winmark is well-positioned to capitalize on the growing consumer demand for sustainable and value-driven shopping experiences.

Competitive Position

Winmark holds a strong competitive position by focusing on the resale market with a unique, proven franchise model.

• Established Brands & Trust: With over 35 years of experience, brands like Plato's Closet and Once Upon A Child have strong brand recognition and customer loyalty, offering a trusted alternative to generic online marketplaces.
• Extensive Network & Scale: With 1,378 stores, Winmark operates the largest network of its kind, providing significant market presence and purchasing power.
• Omnichannel Strategy: Their investment in e-commerce platforms (e.g., for Music Go Round, Play It Again Sports, Style Encore) allows franchisees to compete effectively in both brick-and-mortar and online channels, offering convenience for customers.
• Sustainability Differentiator: Their "Resale for Everyone®" and environmental impact messaging strongly resonates with eco-conscious consumers, setting them apart from traditional retailers.
• Targeted Niches: Each brand caters to a specific demographic (teens, children, sports enthusiasts, etc.), allowing for specialized inventory and marketing.
• Key Competitors: Include local consignment shops, online resale platforms (e.g., ThredUp, Poshmark, eBay, Facebook Marketplace), and potentially traditional retailers with used goods sections. Winmark differentiates through its curated, in-store experience and local community focus.