10-Q 1 zumz-20240504.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MAY 4, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-51300

 

 

ZUMIEZ INC.

(Exact name of registrant as specified in its charter)

 

 

Washington

 

91-1040022

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

4001 204th Street SW, Lynnwood, WA 98036

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (425) 551-1500

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock

ZUMZ

Nasdaq Global Select

At June 1, 2024, there were 20,274,412 shares outstanding of common stock.

 

 

 


 

ZUMIEZ INC.

FORM 10-Q

TABLE OF CONTENTS

Part I.

Financial Information

 

 

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at May 4, 2024 (unaudited) and February 3, 2024

3

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Loss for the three months ended May 4, 2024 and April 29, 2023

4

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended May 4, 2024 and April 29, 2023

5

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended May 4, 2024 and April 29, 2023

6

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended May 4, 2024 and April 29, 2023

7

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

 

Part II.

Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

31

 

 

 

 

 

Item 1A.

Risk Factors

31

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

31

 

 

 

 

 

Item 4.

Mine Safety Disclosures

31

 

 

 

 

 

Item 5.

Other Information

31

 

 

 

 

 

Item 6.

Exhibits

32

 

 

 

 

Signature

33

 

 

 

2


 

ZUMIEZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

May 4, 2024

 

 

February 3, 2024

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

74,864

 

 

$

88,875

 

Marketable securities

 

 

71,757

 

 

 

82,704

 

Receivables

 

 

13,415

 

 

 

13,780

 

Inventories

 

 

146,815

 

 

 

128,827

 

Prepaid expenses and other current assets

 

 

14,177

 

 

 

12,401

 

Total current assets

 

 

321,028

 

 

 

326,587

 

Fixed assets, net

 

 

89,831

 

 

 

90,508

 

Operating lease right-of-use assets

 

 

192,607

 

 

 

196,775

 

Goodwill

 

 

15,385

 

 

 

15,374

 

Intangible assets, net

 

 

14,117

 

 

 

14,200

 

Deferred tax assets, net

 

 

11,158

 

 

 

8,623

 

Other long-term assets

 

 

12,495

 

 

 

12,159

 

Total long-term assets

 

 

335,593

 

 

 

337,639

 

Total assets

 

$

656,621

 

 

$

664,226

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade accounts payable

 

$

62,301

 

 

$

38,885

 

Accrued payroll and payroll taxes

 

 

16,958

 

 

 

18,431

 

Operating lease liabilities

 

 

59,191

 

 

 

60,885

 

Other current liabilities

 

 

18,869

 

 

 

25,886

 

Total current liabilities

 

 

157,319

 

 

 

144,087

 

Long-term operating lease liabilities

 

 

155,040

 

 

 

159,877

 

Other long-term liabilities

 

 

6,927

 

 

 

7,052

 

Total long-term liabilities

 

 

161,967

 

 

 

166,929

 

Total liabilities

 

 

319,286

 

 

 

311,016

 

Commitments and contingencies (Note 5)

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding

 

 

 

 

 

 

Common stock, no par value, 50,000 shares authorized; 20,318 shares issued and outstanding at May 4, 2024 and 19,833 shares issued and outstanding at February 3, 2024

 

 

198,047

 

 

 

196,144

 

Accumulated other comprehensive loss

 

 

(20,025

)

 

 

(19,027

)

Retained earnings

 

 

159,313

 

 

 

176,093

 

Total shareholders’ equity

 

 

337,335

 

 

 

353,210

 

Total liabilities and shareholders’ equity

 

$

656,621

 

 

$

664,226

 

See accompanying notes to condensed consolidated financial statements

 

3


 

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

 

 

May 4, 2024

 

 

 

April 29, 2023

 

Net sales

 

$

 

177,388

 

 

$

 

182,887

 

Cost of goods sold

 

 

 

125,489

 

 

 

 

133,529

 

Gross profit

 

 

 

51,899

 

 

 

 

49,358

 

Selling, general and administrative expenses

 

 

 

72,054

 

 

 

 

70,712

 

Operating loss

 

 

 

(20,155

)

 

 

 

(21,354

)

Interest income, net

 

 

 

1,321

 

 

 

 

858

 

Other expense, net

 

 

 

(767

)

 

 

 

(541

)

Loss before income taxes

 

 

 

(19,601

)

 

 

 

(21,037

)

Benefit from income taxes

 

 

 

(2,821

)

 

 

 

(2,655

)

Net loss

 

$

 

(16,780

)

 

$

 

(18,382

)

Basic loss per share

 

$

 

(0.86

)

 

$

 

(0.96

)

Diluted loss earnings per share

 

$

 

(0.86

)

 

$

 

(0.96

)

Weighted average shares used in computation of loss per share:

 

 

 

 

 

 

Basic

 

 

 

19,465

 

 

 

 

19,197

 

Diluted

 

 

 

19,465

 

 

 

 

19,197

 

See accompanying notes to condensed consolidated financial statements

 

4


 

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

May 4, 2024

 

 

April 29, 2023

 

Net loss

 

$

(16,780

)

 

$

(18,382

)

Other comprehensive (loss) income, net of tax and reclassification adjustments:

 

 

 

 

 

 

Foreign currency translation

 

 

(895

)

 

 

386

 

Net change in unrealized loss on available-for-sale debt securities

 

 

(103

)

 

 

330

 

Other comprehensive (loss) income, net

 

 

(998

)

 

 

716

 

Comprehensive loss

 

$

(17,778

)

 

$

(17,666

)

See accompanying notes to condensed consolidated financial statements

 

5


 

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

Common Stock

 

 

Accumulated
Other
Comprehensive

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at February 3, 2024

 

 

19,833

 

 

$

196,144

 

 

$

(19,027

)

 

$

176,093

 

 

$

353,210

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(16,780

)

 

 

(16,780

)

Other comprehensive loss, net

 

 

 

 

 

 

 

 

(998

)

 

 

 

 

(998

)

Issuance and exercise of stock-based awards

 

 

485

 

 

 

228

 

 

 

 

 

 

 

 

 

228

 

Stock-based compensation expense

 

 

 

 

 

1,675

 

 

 

 

 

 

 

 

 

1,675

 

Balance at May 4, 2024

 

 

20,318

 

 

$

198,047

 

 

$

(20,025

)

 

$

159,313

 

 

$

337,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Accumulated
Other
Comprehensive

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at January 28, 2023

 

 

19,489

 

 

$

188,418

 

 

$

(19,793

)

 

$

238,703

 

 

$

407,328

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(18,382

)

 

 

(18,382

)

Other comprehensive income, net

 

 

 

 

 

 

 

 

716

 

 

 

 

 

716

 

Issuance and exercise of stock-based awards

 

 

293

 

 

 

275

 

 

 

 

 

 

 

 

 

275

 

Stock-based compensation expense

 

 

 

 

 

1,906

 

 

 

 

 

 

 

 

 

1,906

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 29, 2023

 

 

19,782

 

 

$

190,599

 

 

$

(19,077

)

 

$

220,321

 

 

$

391,843

 

See accompanying notes to condensed consolidated financial statements

 

6


 

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

May 4, 2024

 

 

April 29, 2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(16,780

)

 

$

(18,382

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

5,561

 

 

 

5,379

 

Noncash lease expense

 

 

14,522

 

 

 

16,313

 

Deferred taxes

 

 

(2,590

)

 

 

(2,912

)

Stock-based compensation expense

 

 

1,675

 

 

 

1,906

 

Impairment of long-lived assets

 

 

101

 

 

 

312

 

Other

 

 

525

 

 

 

375

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

1,077

 

 

 

1,030

 

Inventories

 

 

(18,876

)

 

 

(13,091

)

Prepaid expenses and other assets

 

 

1,754

 

 

 

(925

)

Trade accounts payable

 

 

21,763

 

 

 

18,868

 

Accrued payroll and payroll taxes

 

 

(1,458

)

 

 

2,087

 

Income taxes payable

 

 

(797

)

 

 

(301

)

Operating lease liabilities

 

 

(17,276

)

 

 

(18,609

)

Other liabilities

 

 

(7,778

)

 

 

(4,929

)

Net cash used in operating activities

 

 

(18,577

)

 

 

(12,879

)

Cash flows from investing activities:

 

 

 

 

 

 

Additions to fixed assets

 

 

(2,546

)

 

 

(5,438

)

Purchases of marketable securities

 

 

(1,967

)

 

 

(1,850

)

Sales and maturities of marketable securities and other investments

 

 

12,510

 

 

 

5,571

 

Net cash provided by (used in) investing activities

 

 

7,997

 

 

 

(1,717

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from revolving credit facilities

 

 

3,220

 

 

 

1,549

 

Payments on revolving credit facilities

 

 

(3,220

)

 

 

(1,549

)

Proceeds from issuance and exercise of stock-based awards

 

 

358

 

 

 

460

 

Payments for tax withholdings on equity awards

 

 

(130

)

 

 

(185

)

Net cash provided by financing activities

 

 

228

 

 

 

275

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(245

)

 

 

(509

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(10,597

)

 

 

(14,830

)

Cash, cash equivalents, and restricted cash, beginning of period

 

 

94,284

 

 

 

88,453

 

Cash, cash equivalents, and restricted cash, end of period

 

$

83,687

 

 

$

73,623

 

Supplemental disclosure on cash flow information:

 

 

 

 

 

 

Cash paid during the period for income taxes

 

$

654

 

 

$

536

 

Accrual for purchases of fixed assets

 

 

2,094

 

 

 

2,323

 

 

See accompanying notes to condensed consolidated financial statements

 

 

7


 

ZUMIEZ INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. Nature of Business and Basis of Presentation

Nature of Business—Zumiez Inc., including its wholly owned subsidiaries, (the “Company,” “we,” “us,” “its” and “our”) is a leading specialty retailer of apparel, footwear, accessories and hardgoods for young men and women who want to express their individuality through the fashion, music, art and culture of action sports, streetwear, and other unique lifestyles. We operate under the names Zumiez, Blue Tomato and Fast Times. We operate ecommerce websites at zumiez.com, zumiez.ca, blue-tomato.com and fasttimes.com.au. At May 4, 2024, we operated 751 stores; 593 in the United States (“U.S.”), 86 in Europe, 47 in Canada, and 25 in Australia.

Fiscal Year—We use a fiscal calendar widely used by the retail industry that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31. Each fiscal year consists of four 13-week quarters, with an extra week added to the fourth quarter every five or six years. The three months ended May 4, 2024 and April 29, 2023 were 13-week periods.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of Zumiez Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.

In our opinion, the unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the condensed consolidated balance sheets, operating results and cash flows for the periods presented.

The financial data at February 3, 2024 is derived from audited consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended February 3, 2024, and should be read in conjunction with the audited consolidated financial statements and notes thereto. Interim results are not necessarily indicative of results for the full fiscal year due to seasonality and other factors.

Reclassifications—Certain amounts reported in prior years in the financial statements have been reclassified to conform to the current year's presentation. These reclassifications had no effect on the consolidated statements of loss.

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. These estimates can also affect supplemental information disclosed by us, including information about contingencies, risk and financial condition. Actual results could differ from these estimates and assumptions.

 

8


 

Restricted Cash—Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are recorded as restricted cash in other current assets and other long-term assets on our condensed consolidated balance sheets. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statement of cash flows (in thousands):

 

 

May 4, 2024

 

 

February 3, 2024

 

Cash and cash equivalents

 

$

 

74,864

 

 

$

 

88,875

 

Restricted cash included in other current assets and other long-term assets

 

 

 

8,823

 

 

 

 

5,409

 

Total cash, cash equivalents, and restricted cash as shown in the statement of cash flows

 

$

 

83,687

 

 

$

 

94,284

 

 

Restricted cash included in other current assets and other long-term assets represents amounts held as insurance collateral and collateral for bank guarantees on certain store operating leases.

Recent Accounting Standards—We review recent account pronouncements on a quarterly basis and have excluded discussion of those that are not applicable and those that we determined did not have, or are not expected to have, a material impact on the condensed consolidated financial statements.

 

Global Anti-Base Erosion Model Rules ("Pillar Two")

The Organization for Economic Co-operation and Development ("OECD") has published a proposal to establish a new global minimum corporate tax rate of 15%, commonly referred to as Pillar Two. While the U.S. has not yet adopted the Pillar Two framework into law, several countries in which we operate have enacted tax legislation based on the Pillar Two framework with certain components of the minimum tax rules effective beginning in fiscal year 2024 and further rules becoming effective beginning in fiscal year 2025. These rules are not expected to materially impact the Company’s Consolidated Financial Statements, considering the Company does not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum rate. The Company will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.

 

2. Revenue

 

The following table disaggregates net sales by geographic region (in thousands):

 

 

Three Months Ended

 

 

 

May 4, 2024

 

 

April 29, 2023

 

United States

 

$

 

133,873

 

 

$

135,549

 

Europe

 

 

 

29,569

 

 

 

33,511

 

Canada

 

 

 

8,826

 

 

 

8,434

 

Australia

 

 

 

5,120

 

 

 

5,393

 

Net sales

 

$

 

177,388

 

 

$

182,887

 

 

Net sales for the three months ended May 4, 2024 had no material affect from changes in foreign exchange rates, which consist of a $0.2 million increase in Europe, offset by a $0.2 million decrease in Australia. $-

Our contract liabilities include deferred revenue related to our customer loyalty program and gift cards. The current liability for gift cards was $3.2 million at May 4, 2024 and $4.3 million at February 3, 2024, respectively. Deferred revenue related to our STASH loyalty program was $1.1 million and $1.0 million at May 4, 2024 and February 3, 2024, respectively.

 

9


 

3. Cash, Cash Equivalents and Marketable Securities

The following tables summarize the estimated fair value of our cash, cash equivalents and marketable securities and the gross unrealized holding gains and losses (in thousands):

 

 

May 4, 2024

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Holding
Gains

 

 

Gross
Unrealized
Holding
Losses

 

 

Estimated
Fair Value

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

15,940

 

 

$

 

 

$

 

 

$

15,940

 

Money market funds

 

 

19,921

 

 

 

 

 

 

 

 

 

19,921

 

U.S. treasury and government agency securities

 

 

5,663

 

 

 

 

 

 

 

 

 

5,663

 

Corporate debt securities

 

 

33,348

 

 

 

 

 

 

(8

)

 

 

33,340

 

Total cash and cash equivalents

 

 

74,872

 

 

 

 

 

 

(8

)

 

 

74,864

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

16,912

 

 

 

 

 

 

(3,247

)

 

 

13,665

 

Corporate debt securities

 

 

36,564

 

 

 

 

 

 

(685

)

 

 

35,879

 

State and local government securities

 

 

6,025

 

 

 

 

 

 

(49

)

 

 

5,976

 

Certificate of deposits

 

 

11,607

 

 

 

 

 

 

 

 

 

11,607

 

Variable-rate demand notes

 

 

4,630

 

 

 

 

 

 

 

 

 

4,630

 

Total marketable securities

 

$

75,738

 

 

$

 

 

$

(3,981

)

 

$

71,757

 

 

February 3, 2024

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Holding
Gains

 

 

Gross
Unrealized
Holding
Losses

 

 

Estimated
Fair Value

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

38,188

 

 

$

 

 

$

 

 

$

38,188

 

Money market funds

 

 

11,322

 

 

 

 

 

 

 

 

 

11,322

 

Corporate debt securities

 

 

39,374

 

 

 

 

 

 

(9

)

 

 

39,365

 

Total cash and cash equivalents

 

 

88,884

 

 

 

 

 

 

(9

)

 

 

88,875

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

17,610

 

 

 

 

 

 

(2,834

)

 

 

14,776

 

Corporate debt securities

 

 

41,218

 

 

 

1

 

 

 

(948

)

 

 

40,271

 

Certificates of deposit

 

 

16,607

 

 

 

 

 

 

 

 

 

16,607

 

State and local government securities

 

 

6,525

 

 

 

 

 

 

(105

)

 

 

6,420

 

Variable-rate demand notes

 

 

4,630

 

 

 

 

 

 

 

 

 

4,630

 

Total marketable securities

 

$

86,590

 

 

$

1

 

 

$

(3,887

)

 

$

82,704

 

 

All of our marketable securities have an effective maturity date or weighted average life of five years or less at the time of purchase and may be liquidated, at our discretion, prior to maturity.

The following tables summarize the gross unrealized holding losses and fair value for investments in an unrealized loss position, and the length of time that individual securities have been in a continuous loss position (in thousands):

 

 

May 4, 2024

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

28,155

 

 

$

(8

)

 

$

 

 

$

 

 

$

28,155

 

 

$

(8

)

Total cash and cash equivalents

 

 

28,155

 

 

 

(8

)

 

 

 

 

 

 

 

 

28,155

 

 

 

(8

)

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

 

 

 

 

 

 

13,665

 

 

 

(3,247

)

 

 

13,665

 

 

 

(3,247

)

Corporate debt securities

 

 

 

 

 

 

 

 

31,286

 

 

 

(685

)

 

 

31,286

 

 

 

(685

)

State and local government securities

 

 

 

 

 

 

 

 

5,976

 

 

 

(49

)

 

 

5,976

 

 

 

(49

)

Total marketable securities

 

$

 

 

$

 

 

$

50,927

 

 

$

(3,981

)

 

$

50,927

 

 

$

(3,981

)

 

 

10


 

 

 

February 3, 2024

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

29,093

 

 

$

(9

)

 

$

 

 

$

 

 

$

29,093

 

 

$

(9

)

Total cash and cash equivalents

 

 

29,093

 

 

 

(9

)

 

 

 

 

 

 

 

 

29,093

 

 

 

(9

)

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

 

 

 

 

 

 

14,777

 

 

 

(2,834

)

 

 

14,777

 

 

 

(2,834

)

Corporate debt securities

 

 

 

 

 

 

 

 

37,878

 

 

 

(948

)

 

 

37,878

 

 

 

(948

)

State and local government securities

 

 

 

 

 

 

 

 

6,420

 

 

 

(105

)

 

 

6,420

 

 

 

(105

)

Total marketable securities

 

$

 

 

$

 

 

$

59,075

 

 

$

(3,887

)

 

$

59,075

 

 

$

(3,887

)

 

4. Leases

At May 4, 2024, we had operating leases for our retail stores, certain distribution and fulfillment facilities, vehicles and equipment. Our remaining lease terms vary from under one month to twelve years, with varying renewal and termination options.

The following table presents components of lease expense (in thousands):

 

 

 

Three Months Ended

 

 

 

May 4, 2024

 

 

April 29, 2023

 

 

Operating lease expense

 

$

16,638

 

 

$

17,766

 

 

Variable lease expense

 

 

3,377

 

 

 

3,052

 

 

Total lease expense (1)

 

$

20,015

 

 

$

20,818

 

 

 

(1)
Total lease expense includes short-term lease expense and sublease income which is immaterial to the Company. Total lease expense does not include right-of-use asset impairment charges, common area maintenance charges and other non-lease components.

 

Supplemental cash flow information related to leases is as follows (in thousands):

 

 

Three Months Ended

 

 

 

May 4, 2024

 

 

April 29, 2023

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

Operating cash flows from operating leases

 

$

(17,276

)

 

$

(18,609

)

Right-of-use assets obtained in exchange for new operating lease liabilities

 

 

17,840

 

 

 

10,076

 

 

Weighted-average remaining lease term and discount rate were as follows:

 

 

 

May 4, 2024

 

 

April 29, 2023

 

Weighted-average remaining lease term

 

 

4.9

 

 

 

5.0

 

Weighted-average discount rate

 

 

3.9

%

 

 

2.6

%

 

 

 

11


 

At May 4, 2024, the maturities of our operating leases liabilities are as follows (in thousands):

 

Fiscal 2024

 

$

50,343

 

Fiscal 2025

 

 

58,819

 

Fiscal 2026

 

 

38,775

 

Fiscal 2027

 

 

29,418

 

Fiscal 2028

 

 

19,597

 

Thereafter

 

 

38,661

 

Total minimum lease payments

 

 

235,613

 

Less: interest

 

 

(21,382

)

Present value of lease obligations

 

 

214,231

 

Less: current portion

 

 

(59,191

)

Long-term lease obligations (1)

 

$

155,040

 

 

(1)
Amounts in the table do not include contingent rent, common area maintenance charges and other non-lease components.

 

At May 4, 2024, we have excluded from the table above $3.4 million of operating leases that were contractually executed, but had not yet commenced. These operating leases are expected to commence by the end of fiscal 2024.

5. Commitments and Contingencies

Purchase Commitments—At May 4, 2024, we had outstanding purchase orders to acquire merchandise from vendors of $221.6 million. We have an option to cancel these commitments with no notice prior to shipment, except for certain private label and international purchase orders in which we are obligated to repay contractual amounts upon cancellation.

Litigation—We are involved from time to time in claims, proceedings and litigation arising in the ordinary course of business. We have made accruals with respect to these matters, where appropriate, which are reflected in our condensed consolidated financial statements. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made. We may enter into discussions regarding settlement of these matters, and may enter into settlement agreements, if we believe settlement is in the best interest of our shareholders.

On October 14, 2022, former employee Seana Neihart filed a representative action under California’s Private Attorneys General Act, California Labor Code section 2698 et seq (“PAGA”), against us. An answer to the complaint was filed on December 8, 2022. A first amended complaint was filed on February 8, 2023 adding Jessica King as a plaintiff. The lawsuit alleges a series of wage and hour violations under California’s Labor Code. Zumiez has answered the complaint. We are in the process of investigating the claims and we intend to vigorously defend ourselves.

Insurance Reserves—We use a combination of third-party insurance and self-insurance for a number of risk management activities including workers’ compensation, general liability and employee-related health care benefits. We maintain reserves for our self-insured losses, which are estimated based on historical claims experience and actuarial and other assumptions. The self-insurance reserve at May 4, 2024 and February 3, 2024 was $1.5 million and $1.7 million, respectively.

6. Revolving Credit Facilities and Debt

We were previously parties to a Credit Agreement with Wells Fargo Bank, N.A. (the “Bank”) that provided us with a senior secured credit facility (“credit facility”) for working capital and other general corporate purposes of up to $25.0 million through December 1, 2024. Effective as of May 3, 2024 (the “Termination Date”), we terminated the Credit Agreement with the Bank. There were no borrowings or open commercial letters of credit outstanding under the credit facility as of the Termination Date. At the time of the Termination Date, there were $3.4 million in issued, but undrawn, standby letters of credit that are being transitioned to restricted deposits with the Bank.

There were no early termination penalties incurred by us in connection with the termination of the Credit Agreement. As referenced above, there were no borrowings or open commercial letters of credit outstanding under the credit facility and we believe that our significant sources of liquidity continue to be funds generated by our operating activities and available cash, cash equivalents and current marketable securities. Termination of the Credit Agreement allows us to discontinue paying an unused commitment fee of 0.50% of the credit facility amount per annum.

 

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There were no borrowings outstanding under the credit facility at February 3, 2024. We had no open commercial letters of credit outstanding as of February 3, 2024. We had $3.5 million in issued, but undrawn, standby letters of credit at February 3, 2024.

 

7. Fair Value Measurements

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1— Quoted prices in active markets for identical assets or liabilities;
Level 2— Quoted prices for similar assets or liabilities in active markets or inputs that are observable; and
Level 3— Inputs that are unobservable.

The following tables summarize assets measured at fair value on a recurring basis (in thousands):

 

 

May 4, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

19,921

 

 

$

 

 

$

 

U.S. treasury and government agency securities

 

 

 

 

$

5,663

 

 

 

 

Corporate debt securities

 

 

 

 

 

33,340

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

 

 

 

13,665

 

 

 

 

Corporate debt securities

 

 

 

 

 

35,879

 

 

 

 

Certificates of deposit

 

 

 

 

 

11,607

 

 

 

 

State and local government securities

 

 

 

 

 

5,976

 

 

 

 

Variable-rate demand notes

 

 

 

 

 

4,630

 

 

 

 

Long-term assets:

 

 

 

 

 

 

 

 

 

Money market funds

 

 

8,823

 

 

 

 

 

 

 

Total

 

$

28,744

 

 

$

110,760

 

 

$

 

 

 

February 3, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

11,322

 

 

$

 

 

$

 

Corporate debt securities

 

 

 

 

 

39,365

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

 

 

 

14,776

 

 

 

 

Corporate debt securities

 

 

 

 

 

40,271

 

 

 

 

Certificates of deposit

 

 

 

 

 

16,607

 

 

 

 

State and local government securities