10-K: Winmark Reports Strong 2025 Growth, Boosts Shareholder Returns

Winmark Corporation reported a 5.9% increase in total revenue and a 4.6% rise in net income for fiscal year 2025, driven by robust franchising performance and increased shareholder distributions.

Summary

• Total revenue for fiscal year 2025 increased by 5.9% to $86.1 million, up from $81.3 million in 2024.
• Net income grew by 4.6% to $41.7 million in 2025, compared to $40.0 million in 2024.
• Basic earnings per share (EPS) rose to $11.73 in 2025 from $11.36 in 2024, while diluted EPS increased to $11.30 from $10.89.
• System-wide sales across all franchise brands reached $1,682.0 million in 2025, an increase from $1,610.2 million in 2024.
• The company added a net of 28 franchised stores in 2025, bringing the total to 1,378 locations in the U.S. and Canada.
• Franchise renewal activity remained strong at 98% in 2025, consistent with historical rates.
• Leasing operations run-off was completed as of December 27, 2025, with leasing income in 2025 boosted by a $2.2 million litigation settlement.
• The company paid $49.1 million in cash dividends in 2025, including a $10.00 per share special cash dividend, and repurchased 7,944 shares of common stock for $2.4 million.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with consistent growth in core franchising revenue and system-wide sales, coupled with a high franchise renewal rate. The significant return of capital to shareholders through increased dividends and share repurchases reflects robust financial health and management confidence, despite a slight decrease in cash reserves due to these distributions.

Positives

• Total revenue increased by 5.9% to $86.1 million in 2025, indicating healthy business expansion.
• Net income grew by 4.6% to $41.7 million, demonstrating improved profitability.
• Basic EPS increased to $11.73 and diluted EPS to $11.30, reflecting enhanced shareholder value.
• System-wide sales across all brands rose to $1,682.0 million, highlighting strong consumer demand for resale items.
• The company achieved a net increase of 28 franchised stores, expanding its operational footprint.
• A high franchise renewal rate of 98% in 2025 suggests strong franchisee satisfaction and business model viability.
• The completion of the leasing portfolio run-off simplifies the business model and eliminates a non-core segment.
• Increased cash dividends, including a $10.00 per share special dividend, and share repurchases indicate confidence in financial health and commitment to shareholder returns.
• Interest expense decreased by 14.4% due to lower average corporate borrowings, improving financial efficiency.

Negatives

• Cash, cash equivalents, and restricted cash decreased from $12.3 million at the end of 2024 to $10.5 million at the end of 2025, primarily due to significant dividend payments and share repurchases.
• Merchandise sales decreased by 8.8% to $3.3 million in 2025, attributed to a decrease in technology purchases by franchisees.
• Selling, general and administrative expenses increased by 13.7% to $28.4 million, driven by higher compensation and a non-recurring software license expense.

Risks

• Dependence on franchise renewals: A significant number of franchise agreements (110 in 2026, 103 in 2027, 92 in 2028) are set to expire, and non-renewal could materially and adversely impact financial performance.
• Dependence on new franchisees: Unfavorable macro-economic conditions or difficulty in obtaining external financing could hinder new franchise openings, affecting revenue growth.
• Risk that awarded franchises may not open: There is no assurance that all currently sold but unopened franchises will commence operations and generate royalties.
• Franchisees' dependence on supply of used merchandise: The ability to obtain high-quality used merchandise from the general public is crucial, and supply problems could adversely affect franchisee success.
• Inability to collect accounts receivable from franchisees: A significant decline in collection rates could lead to additional charges and materially impact results of operations and financial condition.
• Reliance on a required point-of-sale system: Disruptions or issues with the POS system, including modernization efforts, could adversely affect franchisee operations, customer experience, brand reputation, and financial results.
• Extremely competitive industry: The retail sector, including the resale market, is highly competitive, with many retailers and online marketplaces possessing greater resources.
• Assets held at financial institutions may exceed FDIC insurance coverage, posing a risk of loss in case of financial institution failure.
• Restrictions in line of credit/term loan and note facilities: Failure to comply with financial covenants could result in default and acceleration of indebtedness.
• Indebtedness: The ability to meet debt service obligations depends on future performance, and inability to refinance or raise capital on acceptable terms could have an adverse impact.
• Subject to government regulation: Future franchise legislation or evolving labor/employment laws could impose additional costs or liabilities.
• Inability to protect against data security risks: Breaches of security systems could lead to unfavorable publicity, governmental inquiry, litigation, and financial obligations.
• Stock price volatility: The company's stock price can fluctuate due to various factors, many outside of its control.
• Additional investments outside of core businesses: Unsuccessful investments could materially adversely impact financial results.
• Adverse effects from pandemics, epidemics, or other public health emergencies: Such events could significantly impact business, financial condition, cash flows, and stock market value.

Future Outlook

Management expects the majority of the 82 signed franchise agreements to open in 2026. The company believes its current cash on hand, cash generated from operations, and available Line of Credit will be sufficient to fund planned operations through 2026. Future operating income growth is dependent on effectively supporting franchisees to increase revenues, opening new franchises, and controlling selling, general, and administrative expenses. The company is also pursuing a strategic initiative to modernize its point-of-sale platform to enhance franchisee and in-store experience.

Management Comments

• Our business is not capital intensive and is designed to generate consistent, recurring revenue and strong operating margins.
• Management continually monitors the level and timing of selling, general and administrative expenses.
• Renewal activity is a key focus area for management.
• Our ability to grow our operating income is dependent on our ability to: (i) effectively support our franchisees so that they produce higher revenues, (ii) open new franchises, and (iii) control our selling, general and administrative expenses.
• As of the date of this report we believe that the combination of our cash on hand, the cash generated from our business and our Line of Credit and will be adequate to fund our planned operations through 2026.

Industry Context

StockSavvy.ai notes that Winmark operates in the highly competitive and evolving retail sector, specifically within the growing resale and circular economy segment. The company faces competition from traditional brick-and-mortar retailers like Walmart, Target, Dicks Sporting Goods, and Guitar Center, as well as a rapidly expanding array of online marketplaces such as eBay, Poshmark, thredUP, and Facebook Marketplace. The increasing participation of retail and apparel brands themselves in selling used items, often through e-commerce, adds another layer of competition. Winmark's franchise model, focused on value-oriented used merchandise and sustainability, positions it to capitalize on consumer trends favoring thrift and environmental consciousness, but it must continuously innovate its e-commerce and in-store experience to maintain its competitive edge against both established and emerging players.

Comparison to Industry Standards

• The filing does not provide specific comparable company financial metrics or project results to benchmark Winmark's performance against global industry standards or specific competitors' financial outcomes. While it lists competitors like American Eagle, Gap, Walmart, Target, Dicks Sporting Goods, and Guitar Center, it does not offer a direct quantitative comparison of Winmark's revenue growth, profitability, or store expansion rates against these entities or other franchise systems in the resale market.

Corporate Governance

Legal Proceedings

• The company is not a party to any material litigation and is not aware of any threatened litigation that would have a material adverse effect on its business.
• Leasing income in 2025 included $2.2 million related to the settlement of outstanding customer litigation, indicating a resolution of past legal matters in that segment.

Related Party Transactions

• Information regarding transactions with related persons, promoters, and certain control persons, as well as director independence, is incorporated by reference from the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on April 22, 2026.

Stakeholder Impact

• Shareholders: Benefited from increased cash dividends, including a $10.00 per share special dividend, and share repurchases, indicating strong returns on investment.
• Franchisees: Received ongoing support, training, and technology enhancements (e.g., e-commerce platform, POS system modernization efforts) to help expand their operations and increase sales.
• Employees: Provided with competitive salaries, robust health and welfare benefits, 401(k) plan with matching, profit-sharing, generous paid leave, and development opportunities, fostering an engaged work environment.
• Customers: Continue to benefit from value-oriented, high-quality used merchandise and a sustainable solution for recycling goods, aligning with consumer demand for affordability and environmental responsibility.
• Creditors: The company remains in compliance with all financial covenants under its line of credit and note agreements, ensuring stability for debt holders.

Next Steps

• Hold the Annual Meeting of Shareholders on April 22, 2026.
• Oversee the opening of the majority of the 82 signed franchise agreements expected in 2026.
• Continue the strategic initiative to modernize the point-of-sale (POS) platform.
• Manage and control selling, general, and administrative expenses to support operating income growth.
• Monitor and ensure compliance with financial covenants under existing debt facilities.

Key Dates

Recommendation

Winmark Corporation demonstrates consistent growth in its core franchising business, evidenced by rising total revenue, net income, and system-wide sales. The high franchise renewal rate and continued store expansion underscore the strength and attractiveness of its business model. Management's commitment to shareholder returns, highlighted by increased regular and special dividends, along with share repurchases, signals strong financial health and confidence in future performance. The completion of the leasing portfolio run-off simplifies operations. While SG&A increased, the overall financial performance and strategic focus on the profitable franchising segment make Winmark an attractive investment.

Keywords

Franchising, Resale, Circular Economy, Retail, Platos Closet, Once Upon A Child, Play It Again Sports, Style Encore, Music Go Round, SEC Filing, 10-K, Financial Results, System-Wide Sales, Dividends, Share Repurchase, Sustainability