Zumiez Inc [ZUMZ] Filings

10-Q 1 zumz-20231028.htm 10-Q 10-Q

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 OCTOBER 28, 2023


☐	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 November 29, 2023, there were 19,834,032 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 October 28, 2023 (unaudited) and January 28, 2023	3

		Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended October 28, 2023 and October 29, 2022	4

		Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended October 28, 2023 and October 29, 2022	5

		Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended October 28, 2023 and October 29, 2022	6

		Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 28, 2023 and October 29, 2022	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	33

	Item 4.	Controls and Procedures	33

Part II.	Other Information

	Item 1.	Legal Proceedings	34

	Item 1A.	Risk Factors	34

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

	Item 3.	Defaults Upon Senior Securities	34

	Item 4.	Mine Safety Disclosures	34

	Item 5.	Other Information	34

	Item 6.	Exhibits	35

Signature			36

ZUMIEZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	October 28, 2023			January 28, 2023
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	48,968		$	81,503
Marketable securities		86,857			91,986
Receivables		23,022			20,613
Inventories		175,882			134,824
Prepaid expenses and other current assets		11,315			11,252
Total current assets		346,044			340,178
Fixed assets, net		92,925			93,746
Operating lease right-of-use assets		212,984			222,240
Goodwill		55,145			56,566
Intangible assets, net		13,819			14,443
Deferred tax assets, net		10,788			8,205
Other long-term assets		11,321			12,525
Total long-term assets		396,982			407,725
Total assets	$	743,026		$	747,903

Liabilities and Shareholders’ Equity
Current liabilities
Trade accounts payable	$	74,337		$	40,379
Accrued payroll and payroll taxes		18,756			16,321
Operating lease liabilities		69,084			65,460
Other liabilities		19,602			23,649
Total current liabilities		181,779			145,809
Long-term operating lease liabilities		176,233			188,835
Other long-term liabilities		5,550			5,931
Total long-term liabilities		181,783			194,766
Total liabilities		363,562			340,575
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; 19,836 shares issued and outstanding at October 28, 2023 and 19,489 shares issued and outstanding at January 28, 2023		194,230			188,418
Accumulated other comprehensive loss		(24,347	)		(19,793	)
Retained earnings		209,581			238,703
Total shareholders’ equity		379,464			407,328
Total liabilities and shareholders’ equity	$	743,026		$	747,903

See accompanying notes to condensed consolidated financial statements

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended							Nine Months Ended
	October 28, 2023				October 29, 2022			October 28, 2023				October 29, 2022
Net sales	$	216,339		$		237,591		$	593,664		$		678,270
Cost of goods sold		143,135				155,608			409,425				448,861
Gross profit		73,204				81,983			184,239				229,409
Selling, general and administrative expenses		73,361				71,544			216,243				213,519
Operating (loss) profit		(157	)			10,439			(32,004	)			15,890
Interest income, net		948				428			2,581				1,279
Other expense, net		(1,037	)			(1,256	)		(1,156	)			(850	)
(Loss) earnings before income taxes		(246	)			9,611			(30,579	)			16,319
Provision for (Benefit from) income taxes		1,985				2,679			(1,456	)			6,717
Net (loss) income	$	(2,231	)	$		6,932		$	(29,122	)	$		9,602
Basic (loss) earnings per share	$	(0.12	)	$		0.36		$	(1.51	)	$		0.50
Diluted (loss) earnings per share	$	(0.12	)	$		0.36		$	(1.51	)	$		0.49
Weighted average shares used in computation of (loss) earnings per share:
Basic		19,327				19,101			19,278				19,239
Diluted		19,327				19,248			19,278				19,490

See accompanying notes to condensed consolidated financial statements

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended						Nine Months Ended
	October 28, 2023			October 29, 2022			October 28, 2023			October 29, 2022
Net (loss) income	$	(2,231	)	$	6,932		$	(29,122	)	$	9,602
Other comprehensive income (loss), net of tax and reclassification adjustments:
Foreign currency translation		(6,116	)		(4,476	)		(5,345	)		(14,622	)
Net change in unrealized loss on available-for-sale debt securities		326			(2,147	)		791			(5,200	)
Other comprehensive loss, net		(5,790	)		(6,623	)		(4,554	)		(19,822	)
Comprehensive income (loss)	$	(8,021	)	$	309		$	(33,676	)	$	(10,220	)

See accompanying notes to condensed consolidated financial statements

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 July 29, 2023		19,809	$	192,169	$	(18,557	)	$	211,812		$	385,424
Net loss		—		—		—			(2,231	)		(2,231	)
Other comprehensive loss, net		—		—		(5,790	)		—			(5,790	)
Issuance and exercise of stock-based awards		27		429		—			—			429
Stock-based compensation expense		—		1,632		—			—			1,632
Balance at October 28, 2023		19,836	$	194,230	$	(24,347	)	$	209,581		$	379,464


	Common Stock				Accumulated Other Comprehensive			Retained
	Shares		Amount		Loss			Earnings		Total
Balance at July 30, 2022		19,474	$	184,619	$	(26,662	)	$	220,339	$	378,296
Net income		—		—		—			6,932		6,932
Other comprehensive loss, net		—		—		(6,623	)		—		(6,623	)
Issuance and exercise of stock-based awards		16		329		—			—		329
Stock-based compensation expense		—		1,736		—			—		1,736
Balance at October 29, 2022		19,490	$	186,684	$	(33,285	)	$	227,271	$	380,670


	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		—		—		—			(29,122	)		(29,122	)
Other comprehensive loss, net		—		—		(4,554	)		—			(4,554	)
Issuance and exercise of stock-based awards		347		704		—			—			704
Stock-based compensation expense		—		5,108		—			—			5,108
Balance at October 28, 2023		19,836	$	194,230	$	(24,347	)	$	209,581		$	379,464



	Common Stock					Accumulated Other Comprehensive			Retained
	Shares			Amount		Loss			Earnings			Total
Balance at January 29, 2022		21,215		$	180,824	$	(13,463	)	$	300,957		$	468,318
Net income		—			—		—			9,602			9,602
Other comprehensive loss, net		—			—		(19,822	)		—			(19,822	)
Issuance and exercise of stock-based awards		189			611		—			—			611
Stock-based compensation expense		—			5,249		—			—			5,249
Repurchase of common stock		(1,914	)		—		—			(83,288	)		(83,288	)
Balance at October 29, 2022		19,490		$	186,684	$	(33,285	)	$	227,271		$	380,670

See accompanying notes to condensed consolidated financial statements

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended
	October 28, 2023			October 29, 2022
Cash flows from operating activities:
Net (loss) income	$	(29,122	)	$	9,602
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation, amortization and accretion		16,209			15,802
Noncash lease expense		51,607			50,074
Deferred taxes		(3,014	)		3,441
Stock-based compensation expense		5,108			5,249
Impairment of long-lived assets		925			372
Other		943			1,331
Changes in operating assets and liabilities:
Receivables		(1,767	)		(2,317	)
Inventories		(43,186	)		(52,020	)
Prepaid expenses and other assets		(273	)		(5,365	)
Trade accounts payable		34,270			14,570
Accrued payroll and payroll taxes		2,684			(10,191	)
Income taxes payable		252			(1,790	)
Operating lease liabilities		(52,656	)		(56,796	)
Other liabilities		(4,902	)		(8,374	)
Net cash used in operating activities		(22,922	)		(36,412	)
Cash flows from investing activities:
Additions to fixed assets		(16,210	)		(17,720	)
Purchases of marketable securities and other investments		(28,679	)		(1,914	)
Sales and maturities of marketable securities and other investments		34,506			80,051
Net cash (used in) provided by investing activities		(10,383	)		60,417
Cash flows from financing activities:
Proceeds from revolving credit facilities		25,682			19,844
Payments on revolving credit facilities		(25,682	)		(19,844	)
Proceeds from issuance and exercise of stock-based awards		890			1,110
Payments for tax withholdings on equity awards		(185	)		(499	)
Common stock repurchased		—			(87,860	)
Net cash provided by (used in) financing activities		705			(87,249	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(1,643	)		(4,978	)
Net decrease in cash, cash equivalents, and restricted cash		(34,243	)		(68,222	)
Cash, cash equivalents, and restricted cash, beginning of period		88,453			124,052
Cash, cash equivalents, and restricted cash, end of period	$	54,210		$	55,830
Supplemental disclosure on cash flow information:
Cash paid during the period for income taxes	$	1,686		$	5,166
Accrual for purchases of fixed assets		2,780			1,802

See accompanying notes to condensed consolidated financial statements

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 October 28, 2023, we operated 766 stores; 610 in the United States (“U.S.”), 83 in Europe, 49 in Canada, and 24 in Australia.

COVID-19— In December 2019, a novel strain of coronavirus (“COVID-19”) was first identified, and in March 2020, the World Health Organization categorized COVID-19 as a pandemic. Changes in our operations due to COVID-19 resulted in material fluctuations to our results of operations during fiscal 2020 and in certain geographies during fiscal 2021. On April 1, 2022, we received 3.2 million Euro ($3.6 million) as a taxable subsidy from the German government related to our European business for costs incurred during fiscal 2020 and fiscal 2021 related to the COVID-19 pandemic. The subsidy received was granted free of future obligations to repay and was recorded as a reduction to selling, general and administrative expenses on the condensed consolidated statement of operations in the first quarter of fiscal 2022.

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 October 28, 2023 and October 29, 2022 were 13-week periods. The nine months ended October 28, 2023 and October 29, 2022 were 39-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 January 28, 2023 is derived from audited consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended January 28, 2023, 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 operations.

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.

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 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):


	October 28, 2023		January 28, 2023
Cash and cash equivalents	$	48,968	$	81,503
Restricted cash included in other long-term assets		5,242		6,950
Total cash, cash equivalents, and restricted cash as shown in the statement of cash flows	$	54,210	$	88,453

Restricted cash included in 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.

2. Revenue

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


	Three Months Ended				Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
United States	$	169,530	$	192,743	$	455,071	$	547,437
Canada		12,056		13,578		30,172		35,121
Europe		29,536		26,006		92,535		80,217
Australia		5,217		5,264		15,886		15,495
Net sales	$	216,339	$	237,591	$	593,664	$	678,270

Net sales for the three months ended October 28, 2023 included a $1.6 million increase due to the change in foreign exchange rates, which consisted of a $2.1 million increase in Europe partially offset by a $0.3 million decrease in Canada and a $0.2 million decrease in Australia. Net sales for the nine months ended October 28, 2023 included a $0.4 million increase due to the change in foreign exchange rates, which consisted of a $2.5 million increase in Europe, partially offset by a $1.2 million decrease in Canada and a $0.9 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 $3.1 million at October 28, 2023 and $4.9 million at January 28, 2023, respectively. Deferred revenue related to our STASH loyalty program was $1.0 million at October 28, 2023 and $1.2 million at January 28, 2023.

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):


	October 28, 2023
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	23,997	$	—	$	—		$	23,997
Money market funds		10,241		—		—			10,241
Corporate debt securities		14,732		—		(2	)		14,730
Total cash and cash equivalents		48,970		—		(2	)		48,968
Marketable securities:
U.S. treasury and government agency securities		18,317		—		(3,416	)		14,901
Corporate debt securities		61,504		—		(1,628	)		59,876
State and local government securities		12,293		—		(213	)		12,080
Total marketable securities	$	92,114	$	—	$	(5,257	)	$	86,857


	January 28, 2023
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	30,587	$	—	$	—		$	30,587
Money market funds		22,121		—		—			22,121
Corporate debt securities		28,802		—		(7	)		28,795
Total cash and cash equivalents		81,510		—		(7	)		81,503
Marketable securities:
U.S. treasury and government agency securities		20,973		—		(2,891	)		18,082
Corporate debt securities		60,832		—		(2,848	)		57,984
State and local government securities		16,490		—		(570	)		15,920
Total marketable securities	$	98,295	$	—	$	(6,309	)	$	91,986

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):


	October 28, 2023
	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	$	7,544	$	(2	)	$	—	$	—		$	7,544	$	(2	)
Total cash and cash equivalents		7,544		(2	)		—		—			7,544		(2	)
Marketable securities:
U.S. treasury and government agency securities	$	—	$	—		$	14,901	$	(3,416	)	$	14,901	$	(3,416	)
Corporate debt securities		1,596		(4	)		43,302		(1,624	)		44,898		(1,628	)
State and local government securities		—		—			12,080		(213	)		12,080		(213	)
Total marketable securities	$	1,596	$	(4	)	$	70,283	$	(5,253	)	$	71,879	$	(5,257	)


	January 28, 2023
	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	$	27,099	$	(7	)	$	—	$	—		$	27,099	$	(7	)
Total cash and cash equivalents		27,099		(7	)		-		-			27,099		(7	)
Marketable securities:
U.S. treasury and government agency securities		3,682		(229	)		14,399		(2,662	)		18,081		(2,891	)
Corporate debt securities		12,044		(604	)