Winmark Corp (WINA) - Q2 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 27, 2026, and the six months ended on that date. Winmark Corporation operates as a franchisor of value-oriented retail concepts, including Plato's Closet, Once Upon A Child, Play It Again Sports, Style Encore, and Music Go Round. As of the period end, the company operated 1,389 franchises. The company has completed the run-off of its equipment leasing business, which concluded as of December 27, 2025.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Revenue | $21.97 million | $20.42 million | $42.82 million | $42.34 million |
| Net Income | $10.39 million | $10.60 million | $19.65 million | $20.56 million |
| Diluted EPS | $2.81 | $2.89 | $5.31 | $5.60 |
| Operating Cash Flow (YTD) | $22.61 million (2026) vs $24.12 million (2025) | |||
| Cash & Equivalents | $25.83 million (as of June 27, 2026) | |||
| Total Debt | $60.0 million ($30M Term Loan + $30M Notes Payable) | |||
| Operating Margin | 62.1% | 64.0% | 60.7% | 63.0% |
Material Changes vs. Prior Period
- Revenue Growth: Royalty revenue increased 7.8% in Q2 and 8.1% YTD, driven by higher franchise retail sales and net store growth (19 new stores opened, 8 closed YTD).
- Leasing Income Elimination: Leasing income was $0 in 2026 compared to $46,600 in Q2 2025 and $2.35 million YTD 2025. The leasing portfolio run-off was completed in late 2025.
- Expense Increases: Selling, General, and Administrative (SG&A) expenses rose 13.9% in Q2 and 9.6% YTD, primarily due to investments in technology, marketing, and compensation.
- Net Income Decline: Despite revenue growth, net income decreased slightly YTD (down 4.4%) due to higher SG&A expenses and a higher effective tax rate (21.6% vs 20.4% YTD 2025) resulting from fewer tax benefits on stock option exercises.
- Capital Expenditures: Investing cash outflows increased significantly to $2.27 million YTD 2026 (vs $0.11 million in 2025) due to capitalized software costs for point-of-sale system modernization.
Guidance, Outlook, and Risks
- Outlook: Management expects cash on hand, operating cash flows, and the $20 million available line of credit to be adequate to fund operations through 2027.
- Dividends: The company paid quarterly dividends of $0.96 (Q1) and $1.02 (Q2) per share. No stock repurchases were made in the first six months of 2026, though 70,656 shares remain authorized for repurchase.
- New Risk Factors: The company introduced a monthly Software Fee and a North American Ad Fund for Plato's Closet locations. Management notes these initiatives may increase franchisee operating costs and could adversely affect franchisee relationships or system performance if viewed as burdensome.
- Debt Covenants: The company remains in compliance with all financial covenants under its CIBC Line of Credit and Prudential Note Agreement.
Investor Verification Checklist
- Franchisee Sentiment: Verify the impact of the new Software Fee and Ad Fund on franchisee retention and renewal rates, given the 100% renewal rate reported YTD.
- Software ROI: Monitor the timeline for the completion and deployment of the new point-of-sale system to ensure the $2.2 million investment yields operational efficiencies.
- SG&A Trajectory: Track whether SG&A expense growth moderates as technology investments mature, as this is currently compressing operating margins.
- Debt Maturity: Confirm the refinancing strategy for the $30 million delayed draw term loan maturing in 2029 and the $30 million Series C notes.