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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 JULY 30, 2022

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 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

 

 

2


 

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

 

3


 

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

 

4


 

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

 

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 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

 

6


 

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

 

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 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):

8


 

 

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

 

 

$

 

124,052

 

 

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

 

 

Six Months Ended

 

 

 

July 30, 2022

 

 

July 31, 2021

 

 

July 30, 2022

 

 

July 31, 2021

 

United States

 

$

 

178,265

 

 

$

226,043

 

 

$

 

354,694

 

 

$

464,832

 

Canada