SEC Filing | Zumiez Inc.

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zumz-10q_20220730.htm

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 JULY 30, 2022

☐	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 204^th 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 September 1, 2022, there were 19,470,365 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 July 30, 2022 (unaudited) and January 29, 2022	3

		Unaudited Condensed Consolidated Statements of Operations for the three and six months ended July 30, 2022 and July 31, 2021	4

		Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended July 30, 2022 and July 31, 2021	5

		Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended July 30, 2022 and July 31, 2021	6

		Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended July 30, 2022 and July 31, 2021	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	31

	Item 4.	Controls and Procedures	31

Part II.	Other Information

	Item 1.	Legal Proceedings	32

	Item 1A.	Risk Factors	32

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

	Item 3.	Defaults Upon Senior Securities	32

	Item 4.	Mine Safety Disclosures	32

	Item 5.	Other Information	32

	Item 6.	Exhibits	33

Signature			34

ZUMIEZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	July 30, 2022			January 29, 2022
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	59,144		$	117,223
Marketable securities		107,036			177,260
Receivables		24,201			14,427
Inventories		151,071			128,728
Prepaid expenses and other current assets		14,053			10,011
Total current assets		355,505			447,649
Fixed assets, net		91,196			91,451
Operating lease right-of-use assets		228,243			230,187
Goodwill		54,017			57,560
Intangible assets, net		13,679			14,698
Deferred tax assets, net		6,546			8,659
Other long-term assets		11,425			11,808
Total long-term assets		405,106			414,363
Total assets	$	760,611		$	862,012

Liabilities and Shareholders’ Equity
Current liabilities
Trade accounts payable	$	72,915		$	55,638
Accrued payroll and payroll taxes		16,970			31,209
Operating lease liabilities		67,411			63,577
Other liabilities		23,951			34,015
Total current liabilities		181,247			184,439
Long-term operating lease liabilities		196,073			204,309
Other long-term liabilities		4,995			4,946
Total long-term liabilities		201,068			209,255
Total liabilities		382,315			393,694
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; 19,474 shares issued and outstanding at July 30, 2022 and 21,215 shares issued and outstanding at January 29, 2022		184,619			180,824
Accumulated other comprehensive loss		(26,662	)		(13,463	)
Retained earnings		220,339			300,957
Total shareholders’ equity		378,296			468,318
Total liabilities and shareholders’ equity	$	760,611		$	862,012

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						Six Months Ended
	July 30, 2022			July 31, 2021			July 30, 2022			July 31, 2021
Net sales	$	219,993	$		268,666		$	440,679	$		547,735
Cost of goods sold		144,929			163,701			293,242			339,602
Gross profit		75,064			104,965			147,437			208,133
Selling, general and administrative expenses		70,109			73,011			141,985			141,900
Operating profit		4,955			31,954			5,452			66,233
Interest income, net		358			965			850			1,940
Other income (expense), net		233			(151	)		405			103
Earnings before income taxes		5,546			32,768			6,707			68,276
Provision for income taxes		2,479			8,770			4,037			17,893
Net income	$	3,067	$		23,998		$	2,670	$		50,383
Basic earnings per share	$	0.16	$		0.95		$	0.14	$		2.00
Diluted earnings per share	$	0.16	$		0.94		$	0.14	$		1.96
Weighted average shares used in computation of earnings per share:
Basic		19,084			25,274			19,308			25,221
Diluted		19,262			25,651			19,592			25,675

See accompanying notes to condensed consolidated financial statements

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	July 30, 2022			July 31, 2021			July 30, 2022			July 31, 2021
Net income	$	3,067		$	23,998		$	2,670		$	50,383
Other comprehensive loss, net of tax and reclassification adjustments:
Foreign currency translation		(3,774	)		(2,694	)		(10,146	)		(2,426	)
Net change in unrealized gain (loss) on available-for-sale debt securities		386			104			(3,053	)		(657	)
Other comprehensive loss, net		(3,388	)		(2,590	)		(13,199	)		(3,083	)
Comprehensive (loss) income	$	(321	)	$	21,408		$	(10,529	)	$	47,300

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 April 30, 2022		19,459		$	182,899		$	(23,274	)	$	217,272		$	376,897
Net income		—			—			—			3,067			3,067
Other comprehensive loss, net		—			—			(3,388	)		—			(3,388	)
Issuance and exercise of stock-based awards		15			(93	)		—			—			(93	)
Stock-based compensation expense		—			1,813			—			—			1,813
Balance at July 30, 2022	$	19,474		$	184,619		$	(26,662	)	$	220,339		$	378,296

	Common Stock						Accumulated Other Comprehensive			Retained
	Shares			Amount			Income (Loss)			Earnings			Total
Balance at May 1, 2021		25,780		$	174,921		$	446		$	406,414		$	581,781
Net income		—			—			—			23,998			23,998
Other comprehensive loss, net		—			—			(2,590	)		—			(2,590	)
Issuance and exercise of stock-based awards		26			339			—			—			339
Stock-based compensation expense		—			1,691			—			—			1,691
Repurchase of common stock		(247	)		—			—			(10,923	)		(10,923	)
Balance at July 31, 2021		25,559		$	176,951		$	(2,144	)	$	419,489		$	594,296

	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		—			—			—			2,670			2,670
Other comprehensive loss, net		—			—			(13,199	)		—			(13,199	)
Issuance and exercise of stock-based awards		173			282			—			—			282
Stock-based compensation expense		—			3,513			—			—			3,513
Repurchase of common stock		(1,914	)		—			—			(83,288	)		(83,288	)
Balance at July 30, 2022		19,474		$	184,619		$	(26,662	)	$	220,339		$	378,296

	Common Stock					Accumulated Other Comprehensive			Retained
	Shares			Amount		Income (Loss)			Earnings			Total
Balance at January 30, 2021		25,599		$	171,628	$	939		$	380,029		$	552,596
Net income		—			—		—			50,383			50,383
Other comprehensive loss, net		—			—		(3,083	)		—			(3,083	)
Issuance and exercise of stock-based awards		207			1,892		—			—			1,892
Stock-based compensation expense		—			3,431		—			—			3,431
Repurchase of common stock		(247	)		—		—			(10,923	)		(10,923	)
Balance at July 31, 2021		25,559		$	176,951	$	(2,144	)	$	419,489		$	594,296

See accompanying notes to condensed consolidated financial statements

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	July 30, 2022			July 31, 2021
Cash flows from operating activities:
Net income	$	2,670		$	50,383
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation, amortization and accretion		10,598			11,639
Noncash lease expense		33,040			32,044
Deferred taxes		3,035			4,260
Stock-based compensation expense		3,513			3,431
Impairment of long-lived assets		65			2,079
Other		(115	)		1,064
Changes in operating assets and liabilities:
Receivables		(5,496	)		(5,353	)
Inventories		(24,671	)		(15,408	)
Prepaid expenses and other assets		(3,946	)		(4,173	)
Trade accounts payable		17,084			10,178
Accrued payroll and payroll taxes		(13,958	)		(4,462	)
Income taxes payable		(4,128	)		(304	)
Operating lease liabilities		(37,239	)		(40,413	)
Other liabilities		(4,611	)		7,165
Net cash (used in) provided by operating activities		(24,159	)		52,130
Cash flows from investing activities:
Additions to fixed assets		(10,253	)		(5,418	)
Purchases of marketable securities and other investments		(1,914	)		(112,888	)
Sales and maturities of marketable securities and other investments		67,890			75,234
Net cash provided by (used in) investing activities		55,723			(43,072	)
Cash flows from financing activities:
Proceeds from revolving credit facilities		2,430			—
Payments on revolving credit facilities		(2,430	)		—
Proceeds from issuance and exercise of stock-based awards		781			2,452
Payments for tax withholdings on equity awards		(499	)		(560	)
Common stock repurchased		(87,860	)		(10,481	)
Net cash used in financing activities		(87,578	)		(8,589	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(2,367	)		139
Net (decrease) increase in cash, cash equivalents, and restricted cash		(58,381	)		608
Cash, cash equivalents, and restricted cash, beginning of period		124,052			80,690
Cash, cash equivalents, and restricted cash, end of period	$	65,671		$	81,298
Supplemental disclosure on cash flow information:
Cash paid during the period for income taxes	$	5,027		$	13,542
Accrual for purchases of fixed assets		2,466			686
Accrual for repurchase of common stock		—			442

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 July 30, 2022, we operated 751 stores; 611 in the United States (“U.S.”), 69 in Europe, 52 in Canada, and 19 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. To help control the spread of the virus and protect the health and safety of our employees and customers, we began closing our retail stores across all markets that we operate in mid-March 2020. We began gradually re-opening retail stores near the end of the first quarter and into the second quarter of fiscal 2020, with the majority of our stores open through the third and fourth quarter of fiscal 2020. Changes in our operations due to COVID-19 resulted in material fluctuations to our results of operations during fiscal 2020 and in certain geographies in 2021. Due to the COVID-19 pandemic, our stores were open on an aggregate basis, approximately 96.3% and 95.0% of the possible days across the global business during the three and six months ended July 31, 2021, and 100% during the three and six months ended July 30, 2022.

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 in 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 July 30, 2022 and July 31, 2021 were 13-week periods. The six months ended July 30, 2022 and July 31, 2021 were 26-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 29, 2022 is derived from audited consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended January 29, 2022, 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.

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):

	July 30, 2022		January 29, 2022
Cash and cash equivalents	$	59,144	$	117,223
Restricted cash included in other long-term assets		6,527		6,829
Total cash, cash equivalents, and restricted cash as shown in the statement of cash flows	$	65,671	$