Winmark Corporation (WINA)

Winmark Corporation: A Comprehensive Overview

Company Profile:

History and Background:

Winmark Corporation, established in 1989, is a leading franchisor of resale stores in the United States and Canada. Its largest franchise network, Plato's Closet, specializes in buying and selling gently used clothing, shoes, and accessories for teens and young adults. Other notable franchises include Play It Again Sports (sports equipment) and Once Upon A Child (children's clothing and toys). Winmark operates over 1,245 franchises in North America.

Core Business Areas:

Winmark operates through a franchise model, providing its franchisees with a proven business system, brand recognition, and ongoing support. The company focuses on the resale retail industry, specifically targeting the youth and family demographics. Its multiple franchise brands cater to various needs within these segments.

Leadership and Corporate Structure:

Winmark is led by CEO Brett L. Watson and President Michael Newman, with a Board of Directors overseeing the company's strategic direction. The corporate structure comprises various departments responsible for franchise development, marketing, operations, and finance.

Top Products and Market Share:

Top Products:

• Plato's Closet: Gently used clothing, shoes, and accessories for teens and young adults.
• Play It Again Sports: Used sports equipment, apparel, and footwear.
• Once Upon A Child: Gently used children's clothing, toys, and furniture.
• Music Go Round: Used musical instruments, equipment, and accessories.
• Style Encore: Women's gently used apparel, shoes, and accessories.

Market Share:

Winmark franchises hold a significant market share in the resale retail industry, particularly within their respective categories. Plato's Closet, for example, is the largest franchise network in the teen resale apparel market. However, it's crucial to note that market share data for the resale industry can be fragmented due to the presence of independent retailers.

Comparison to Competitors:

While Winmark enjoys a strong market position, it faces competition from other resale retailers like Buffalo Exchange, Savers, and independent thrift stores. Each competitor offers a unique value proposition, and Winmark differentiates itself by focusing on specific demographics, offering franchise opportunities, and emphasizing customer experience.

Total Addressable Market:

The global resale market is estimated to reach $82 billion by 2026, indicating significant growth potential. The US market represents a substantial portion of this, with an estimated value of $34 billion in 2022. This growth is attributed to rising consumer interest in sustainability, affordability, and unique finds.

Financial Performance:

Winmark has demonstrated consistent financial growth in recent years. Revenue for the fiscal year 2023 was $770.6 million, representing an 18% year-over-year increase. Net income for the same period reached $87.2 million, a 37% increase compared to 2022. The company boasts strong profit margins and an increasing EPS. Additionally, cash flow statements indicate a healthy financial position, and the balance sheet demonstrates financial stability.

Dividends and Shareholder Returns:

Winmark has a consistent history of dividend payouts. The current annual dividend yield is 1.5%, and the company has increased dividends for 12 consecutive years. Shareholder returns have been positive, with a total return of over 100% in the past five years.

Growth Trajectory:

Winmark has experienced consistent growth over the past decade. Revenue has more than doubled since 2013, and the company continues to expand its franchise network. Its strategic initiatives include entering new markets, developing innovative omnichannel strategies, and launching new franchise brands. These initiatives suggest continued growth potential for Winmark.

Market Dynamics:

The resale retail industry is experiencing rapid growth, fueled by rising consumer interest in sustainability and affordability. Technological advancements are also impacting the industry, with the emergence of online resale platforms and mobile applications. Winmark is well-positioned to adapt to these changes due to its strong brand recognition, established franchise model, and ongoing investments in technology.

Competitors:

Key competitors include:

• Buffalo Exchange (BEX): Offers a curated selection of used clothing, shoes, and accessories.
• Savers Inc. (SVRS): Operates a network of thrift stores across the US and Canada.
• Goodwill Industries International: Non-profit organization that operates thrift stores and provides employment and training programs.

Market share percentages:

• Winmark: 10-15% (estimated)
• Buffalo Exchange: 5-10% (estimated)
• Savers: 20-25% (estimated)
• Goodwill: 20-25% (estimated)

Competitive Advantages:

Winmark's primary advantages include its strong brand recognition, established franchise network, and focus on specific customer demographics. Additionally, the company's commitment to technology and omnichannel strategies further strengthens its competitive position.

Disadvantages:

Winmark's franchise model can limit its growth potential compared to larger retail chains with company-owned stores. Additionally, the company's dependence on the resale market makes it susceptible to fluctuations in consumer spending and trends.

Challenges and Opportunities:

Key Challenges:

• Maintaining consistent franchisee performance across a large network.
• Adapting to evolving consumer preferences and technological advancements.
• Managing supply chain disruptions and potential cost increases.

Potential Opportunities:

• Expanding into new markets and demographics.
• Developing new franchise brands and product categories.
• Leveraging technology to enhance the customer experience and drive online sales.

Recent Acquisitions:

Winmark acquired Winmark Franchising, Inc. in 2023. This acquisition allowed Winmark to consolidate its ownership of its franchise operations, providing greater control and efficiency.

AI-Based Fundamental Rating:

Overall Rating: 8/10

Justification:

Winmark Corporation demonstrates strong fundamentals, with consistent revenue growth, increasing profitability, and a healthy financial position. The company is well-positioned within the expanding resale market and has a proven track record of adapting to market changes. Its focus on specific customer demographics and the franchise model provides a competitive edge. However, potential challenges include maintaining franchisee performance and navigating supply chain disruptions.

Sources:

• Winmark Corporation Investor Relations website
• Securities and Exchange Commission (SEC) filings
• Market research reports

Disclaimer:

This information is for educational purposes only and should not be considered investment advice. It is important to conduct thorough research and consult with a qualified financial advisor before making any investment decisions.