Winmark Corp (WINA) 10-K Summary: Fiscal Year Ended December 27, 2025
Business Context and Reporting Period
Winmark Corporation is a franchisor of value-oriented resale brands including Plato's Closet, Once Upon A Child, Play It Again Sports, Style Encore, and Music Go Round. The company operates 1,378 franchised stores in the U.S. and Canada as of December 27, 2025. The reporting period covers the fiscal year ended December 27, 2025. Winmark does not own or operate any corporate stores; all locations are owned and operated by franchisees.
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Total Revenue | $86.1 million | $81.3 million |
| Net Income | $41.7 million | $40.0 million |
| Diluted EPS | $11.30 | $10.89 |
| Operating Cash Flow | $44.9 million | $42.2 million |
| Cash & Equivalents | $10.5 million | $12.3 million |
| Total Debt | $60.0 million | $60.0 million |
| Operating Margin | 63.4% | 65.1% |
Revenue Composition: Royalties accounted for 88.7% of total revenue ($76.4 million). Leasing income was $2.6 million, primarily driven by litigation settlements as the leasing portfolio run-off completed in 2025.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 5.9% year-over-year, driven by a 5.8% increase in royalties due to higher franchise retail sales and net store growth.
- Expense Increase: Selling, general, and administrative (SG&A) expenses rose 13.7% to $28.4 million, attributed to higher compensation costs and non-recurring third-party software license expenses.
- Store Count: Net store growth of 28 locations (55 opened, 27 closed), bringing the total to 1,378 stores.
- Leasing Segment: The equipment leasing business completed its run-off; no leasing customers or assets remained as of year-end. Leasing income increased due to a $2.2 million litigation settlement.
- Dividends: The company paid $49.1 million in cash dividends, including a $10.00 per share special dividend.
Guidance, Outlook, and Risks
Outlook: Management expects cash flows from operations and existing credit facilities to be adequate to fund operations through 2026. The company continues to focus on franchise renewals (98% renewal rate in 2025) and opening new territories.
Risks and Contingencies:
- Franchise Renewals: 110 franchise agreements expire in 2026; failure to renew a significant number would materially impact financial performance.
- POS Modernization: The company is modernizing its point-of-sale system, which carries execution risk and potential for operational disruption.
- Competition: Intense competition from online marketplaces (eBay, Facebook Marketplace) and traditional retailers.
- Debt Covenants: The company maintains $60 million in debt (Line of Credit and Notes Payable) and must comply with financial covenants regarding debt service coverage and leverage.
Investor Verification Checklist
- Verify the sustainability of the 98% franchise renewal rate given 110 agreements expiring in 2026.
- Monitor the progress and potential disruption risks associated with the POS system modernization initiative.
- Confirm the stability of royalty revenue growth against the backdrop of increased SG&A expenses.
- Review the status of the $60 million debt obligations and compliance with financial covenants.
- Assess the impact of the completed leasing portfolio run-off on future non-franchising income streams.