Winmark Corporation Announces Year End Results

Rhea-AI Summary

Winmark Corporation (Nasdaq: WINA) reported a net income of $40,178,100 for 2023, with revenues reaching $83,243,500. The company's fourth quarter net income was $9,716,800. Winmark focuses on franchising resale stores like Plato’s Closet® and Once Upon A Child®.

Insights

Financial Analyst

The reported net income for Winmark Corporation shows a moderate increase from the previous year, indicating a steady performance in a challenging economic environment. The earnings per share (EPS) growth is marginal, suggesting that the company's profitability has improved slightly, but not significantly. The increase in annual revenues also reflects a positive trend, although the growth rate is relatively modest.

It is important to note that the company's decision to run-off its leasing portfolio in May 2021 may have influenced these figures. This strategic move likely resulted in a shift in the company's revenue streams and could have long-term implications for its financial stability and growth potential. The impact of this decision should be closely monitored in future quarters.

The mention of an extra week of operations in the 2022 fiscal year is a critical factor to consider when comparing year-over-year performance. This anomaly could have inflated the previous year's figures, making the 2023 growth appear more subdued than it actually is.

Market Research Analyst

Winmark Corporation's focus on sustainability and support for small business formation through franchising is a strong strategic position in the current market, where there is an increasing consumer demand for sustainable options and entrepreneurial opportunities. The franchise model provides a scalable way to grow the business while leveraging the local knowledge and commitment of franchise partners.

The company's portfolio of resale franchises caters to a growing segment of consumers interested in second-hand goods, a market that has been expanding due to both economic pressures and a cultural shift towards more sustainable consumption patterns. This positions Winmark well within a niche that could see continued growth as consumer behaviors evolve.

With 1,319 franchises in operation and an additional 71 awarded but not yet open, Winmark appears to have a strong pipeline for expansion. However, the growth rate in the second half of the year did slow, which could signal market saturation or operational challenges that may need to be addressed to maintain growth momentum.

Economist

The modest increase in net income and revenues for Winmark Corporation must be contextualized within the broader economic landscape. Given the macroeconomic conditions of 2023, which likely included various challenges such as inflationary pressures, supply chain disruptions and possibly a cautious consumer spending environment, Winmark's performance can be seen as resilient.

The performance of the franchise partners, as highlighted by the CEO, is a key driver of the company's success. The health of the franchise sector is often linked to consumer confidence and disposable income levels, making it a bellwether for the broader economy. The slowdown in growth during the second half of the year could reflect broader economic trends that may continue to affect the company's performance in the short to medium term.

Given the company's reliance on the success of its franchisees, economic indicators such as consumer spending, unemployment rates and small business loan rates would be critical in forecasting Winmark's future performance.

MINNEAPOLIS--(BUSINESS WIRE)-- Winmark Corporation (Nasdaq: WINA) announced today net income for the year ended December 30, 2023 of $40,178,100 or $11.04 per share diluted compared to net income of $39,424,900 or $10.97 per share diluted in 2022. The fourth quarter 2023 net income was $9,716,800 or $2.64 per share diluted, compared to net income of $10,176,600 or $2.86 per share diluted, for the same period last year. Revenues for the year ended December 30, 2023 were $83,243,500, up from $81,410,800 in 2022. 2023 results were impacted by the Company’s decision in May 2021 to run-off its leasing portfolio. Additionally, financial performance for the fourth quarter and full year 2022 included an extra week of operations due to the Company’s fiscal year ending on the last Saturday of December.

“Our 2023 results reflected positive performance by our franchise partners; however, growth was lower in the second half of the year,” commented Brett D. Heffes, Chair and Chief Executive Officer.

Winmark - the Resale Company®, is a nationally recognized franchisor focused on sustainability and small business formation. We champion and guide entrepreneurs interested in operating one of our award winning resale franchises: Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. At December 30, 2023, there were 1,319 franchises in operation and over 2,800 available territories. An additional 71 franchises have been awarded but are not open.

This press release contains forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to future events or the future financial performance of the Company. Such forward-looking statements are only predictions or statements of intention subject to risks and uncertainties and actual events or results could differ materially from those anticipated. Because actual result may differ, shareholders and prospective investors are cautioned not to place undue reliance on such forward-looking statements.

WINMARK CORPORATION CONDENSED BALANCE SHEETS (Unaudited)
	December 30, 2023				December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	13,361,500			$	13,615,600
Restricted cash		25,000				65,000
Receivables, net		1,475,300				1,438,600
Net investment in leases - current		75,100				344,900
Income tax receivable		31,400				558,700
Inventories		386,100				770,600
Prepaid expenses		1,392,100				1,310,400
Total current assets		16,746,500				18,103,800
Net investment in leases – long-term		—				5,400
Property and equipment, net		1,669,800				1,704,600
Operating lease right of use asset		2,425,900				2,716,000
Intangible assets, net		2,994,300				3,348,300
Goodwill		607,500				607,500
Other assets		471,300				429,700
Deferred income taxes		4,052,400				3,540,400
	$	28,967,700			$	30,455,700

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net	$	4,217,900			$	4,217,900
Accounts payable		1,719,400				2,122,000
Accrued liabilities		2,858,200				2,611,700
Deferred revenue		1,666,100				1,643,900
Total current liabilities		10,461,600				10,595,500
Long-Term Liabilities:
Line of credit/Term loan		30,000,000				30,000,000
Notes payable, net		34,848,800				39,066,700
Deferred revenue		7,657,500				6,974,200
Operating lease liabilities		3,715,800				4,287,000
Other liabilities		1,440,100				1,164,400
Total long-term liabilities		77,662,200				81,492,300
Shareholders’ Equity (Deficit):
Common stock, no par, 10,000,000 shares authorized, 3,496,977 and 3,459,673 shares issued and outstanding		7,768,800				1,806,700
Retained earnings (accumulated deficit)		(66,924,900	)			(63,438,800	)
Total shareholders’ equity (deficit)		(59,156,100	)			(61,632,100	)
	$	28,967,700			$	30,455,700

WINMARK CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
		Quarter Ended								Fiscal Year Ended
		December 30, 2023				December 31, 2022				December 30, 2023				December 31, 2022
Revenue:
Royalties		$	17,167,200			$	17,917,700			$	70,230,700			$	67,148,100
Leasing income			817,600				1,091,900				4,766,200				6,937,700
Merchandise sales			1,159,200				1,234,100				4,761,100				3,921,600
Franchise fees			378,600				415,200				1,512,000				1,575,400
Other			517,300				466,800				1,973,500				1,828,000
Total revenue			20,039,900				21,125,700				83,243,500				81,410,800
Cost of merchandise sold			1,091,100				1,160,500				4,461,500				3,712,800
Leasing expense			16,600				92,800				398,300				984,700
Provision for credit losses			(1,000	)			(11,300	)			(5,600	)			(57,900	)
Selling, general and administrative expenses			6,414,400				6,485,300				25,108,700				23,158,400
Income from operations			12,518,800				13,398,400				53,280,600				53,612,800
Interest expense			(751,100	)			(869,300	)			(3,091,000	)			(2,914,900	)
Interest and other income			368,300				78,600				1,171,700				85,600
Income before income taxes			12,136,000				12,607,700				51,361,300				50,783,500
Provision for income taxes			(2,419,200	)			(2,431,100	)			(11,183,200	)			(11,358,600	)
Net income		$	9,716,800			$	10,176,600			$	40,178,100			$	39,424,900
Earnings per share - basic		$	2.78			$	2.95			$	11.55			$	11.30
Earnings per share - diluted		$	2.64			$	2.86			$	11.04			$	10.97
Weighted average shares outstanding - basic			3,494,544				3,452,399				3,479,936				3,487,732
Weighted average shares outstanding - diluted			3,679,444				3,556,190				3,640,524				3,592,456

WINMARK CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
		Year Ended
		December 30, 2023				December 31, 2022
OPERATING ACTIVITIES:
Net income		$	40,178,100			$	39,424,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			772,700				603,100
Provision for credit losses			(5,600	)			(57,900	)
Compensation expense related to stock options			1,952,400				1,652,400
Deferred income taxes			(512,000	)			(287,700	)
Gain from disposal of property and equipment			—				(9,400	)
Operating lease right of use asset amortization			290,100				266,000
Tax benefits on exercised stock options			1,138,500				858,300
Change in operating assets and liabilities:
Receivables			(36,700	)			(335,200	)
Principal collections on lease receivables			556,000				3,646,700
Income tax receivable/payable			(611,200	)			(749,500	)
Inventories			384,500				(445,400	)
Prepaid expenses			(81,700	)			(301,800	)
Other assets			(41,600	)			(11,400	)
Accounts payable			(402,600	)			23,000
Accrued and other liabilities			(16,900	)			222,800
Rents received in advance and security deposits			(275,200	)			(819,200	)
Deferred revenue			705,500				109,600
Net cash provided by operating activities			43,994,300				43,789,300
INVESTING ACTIVITIES:
Proceeds from sales of property and equipment							9,400
Purchase of property and equipment			(383,900	)			(139,100	)
Reacquired franchise rights			—				(3,540,000	)
Net cash used for investing activities			(383,900	)			(3,669,700	)
FINANCING ACTIVITIES:
Proceeds from borrowings on line of credit/term loan			—				33,700,000
Payments on line of credit/term loan			—				(3,700,000	)
Payments on notes payable			(4,250,000	)			(4,250,000	)
Repurchases of common stock			—				(49,119,800	)
Proceeds from exercises of stock options			4,009,700				4,751,700
Dividends paid			(43,664,200	)			(19,257,900	)
Net cash used for financing activities			(43,904,500	)			(37,876,000	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			(294,100	)			2,243,600
Cash, cash equivalents and restricted cash, beginning of period			13,680,600				11,437,000
Cash, cash equivalents and restricted cash, end of period		$	13,386,500			$	13,680,600
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest		$	3,049,400			$	2,722,500
Cash paid for income taxes		$	10,874,300			$	11,308,800

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Balance Sheets to the total of the same amounts shown above:
		Year Ended
		December 30, 2023				December 31, 2022
Cash and cash equivalents		$	13,361,500			$	13,615,600
Restricted cash			25,000				65,000
Total cash, cash equivalents and restricted cash		$	13,386,500			$	13,680,600

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240221814233/en/

Anthony D. Ishaug

763/520-8500

Source: Winmark Corporation

FAQ

What is Winmark Corporation's ticker symbol?

Winmark Corporation's ticker symbol is WINA.

What was Winmark Corporation's net income for the year ended December 30, 2023?

Winmark Corporation reported a net income of $40,178,100 for the year ended December 30, 2023.

How many franchises were in operation at Winmark Corporation as of December 30, 2023?

As of December 30, 2023, Winmark Corporation had 1,319 franchises in operation and over 2,800 available territories.

What are some of the resale franchises operated by Winmark Corporation?

Winmark Corporation operates resale franchises like Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore®, and Music Go Round®.