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 APRIL 29, 2023

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 May 29, 2023, there were 19,779,446 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 April 29, 2023 (unaudited) and January 28, 2023

3

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations for the three months ended April 29, 2023 and April 30, 2022

4

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended April 29, 2023 and April 30, 2022

5

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended April 29, 2023 and April 30, 2022

6

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended April 29, 2023 and April 30, 2022

7

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

 

 

Item 2.

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

16

 

 

 

 

 

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)

 

 

April 29, 2023

 

 

January 28, 2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

66,655

 

 

$

81,503

 

Marketable securities

 

 

88,684

 

 

 

91,986

 

Receivables

 

 

20,655

 

 

 

20,613

 

Inventories

 

 

147,871

 

 

 

134,824

 

Prepaid expenses and other current assets

 

 

12,755

 

 

 

11,252

 

Total current assets

 

 

336,620

 

 

 

340,178

 

Fixed assets, net

 

 

94,419

 

 

 

93,746

 

Operating lease right-of-use assets

 

 

216,091

 

 

 

222,240

 

Goodwill

 

 

56,925

 

 

 

56,566

 

Intangible assets, net

 

 

14,404

 

 

 

14,443

 

Deferred tax assets, net

 

 

11,034

 

 

 

8,205

 

Other long-term assets

 

 

12,005

 

 

 

12,525

 

Total long-term assets

 

 

404,878

 

 

 

407,725

 

Total assets

 

$

741,498

 

 

$

747,903

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade accounts payable

 

$

59,551

 

 

$

40,379

 

Accrued payroll and payroll taxes

 

 

18,378

 

 

 

16,321

 

Operating lease liabilities

 

 

63,866

 

 

 

65,460

 

Other liabilities

 

 

19,298

 

 

 

23,649

 

Total current liabilities

 

 

161,093

 

 

 

145,809

 

Long-term operating lease liabilities

 

 

182,507

 

 

 

188,835

 

Other long-term liabilities

 

 

6,055

 

 

 

5,931

 

Total long-term liabilities

 

 

188,562

 

 

 

194,766

 

Total liabilities

 

 

349,655

 

 

 

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; 19,782 shares issued and outstanding at April 29, 2023 and 19,489 shares issued and outstanding at January 28, 2023

 

 

190,599

 

 

 

188,418

 

Accumulated other comprehensive loss

 

 

(19,077

)

 

 

(19,793

)

Retained earnings

 

 

220,321

 

 

 

238,703

 

Total shareholders’ equity

 

 

391,843

 

 

 

407,328

 

Total liabilities and shareholders’ equity

 

$

741,498

 

 

$

747,903

 

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

 

 

 

April 29, 2023

 

 

 

April 30, 2022

 

Net sales

 

$

 

182,887

 

 

$

 

220,686

 

Cost of goods sold

 

 

 

133,529

 

 

 

 

148,312

 

Gross profit

 

 

 

49,358

 

 

 

 

72,374

 

Selling, general and administrative expenses

 

 

 

70,712

 

 

 

 

71,877

 

Operating (loss) profit

 

 

 

(21,354

)

 

 

 

497

 

Interest income, net

 

 

 

858

 

 

 

 

492

 

Other (expense) income, net

 

 

 

(541

)

 

 

 

172

 

(Loss) earnings before income taxes

 

 

 

(21,037

)

 

 

 

1,161

 

(Benefit from) provision for income taxes

 

 

 

(2,655

)

 

 

 

1,558

 

Net loss

 

$

 

(18,382

)

 

$

 

(397

)

Basic loss per share

 

$

 

(0.96

)

 

$

 

(0.02

)

Diluted loss per share

 

$

 

(0.96

)

 

$

 

(0.02

)

Weighted average shares used in computation of loss per share:

 

 

 

 

 

 

Basic

 

 

 

19,197

 

 

 

 

19,533

 

Diluted

 

 

 

19,197

 

 

 

 

19,533

 

See accompanying notes to condensed consolidated financial statements

 

4


 

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

April 29, 2023

 

 

April 30, 2022

 

Net loss

 

$

(18,382

)

 

$

(397

)

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

 

 

 

 

 

 

Foreign currency translation

 

 

386

 

 

 

(6,372

)

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

 

 

330

 

 

 

(3,439

)

Other comprehensive income (loss), net

 

 

716

 

 

 

(9,811

)

Comprehensive loss

 

$

(17,666

)

 

$

(10,208

)

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 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

 

Balance at April 29, 2023

 

 

19,782

 

 

$

190,599

 

 

$

(19,077

)

 

$

220,321

 

 

$

391,843

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 loss

 

 

 

 

 

 

 

 

 

 

 

(397

)

 

 

(397

)

Other comprehensive loss, net

 

 

 

 

 

 

 

 

(9,811

)

 

 

 

 

(9,811

)

Issuance and exercise of stock-based awards

 

 

158

 

 

 

375

 

 

 

 

 

 

 

 

 

375

 

Stock-based compensation expense

 

 

 

 

 

1,700

 

 

 

 

 

 

 

 

 

1,700

 

Repurchase of common stock

 

 

(1,914

)

 

 

 

 

 

 

 

 

(83,288

)

 

 

(83,288

)

Balance at April 30, 2022

 

 

19,459

 

 

$

182,899

 

 

$

(23,274

)

 

$

217,272

 

 

$

376,897

 

See accompanying notes to condensed consolidated financial statements

 

6


 

ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

April 29, 2023

 

 

April 30, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(18,382

)

 

$

(397

)

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

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

5,379

 

 

 

5,416

 

Noncash lease expense

 

 

16,313

 

 

 

16,495

 

Deferred taxes

 

 

(2,912

)

 

 

1,838

 

Stock-based compensation expense

 

 

1,906

 

 

 

1,700

 

Impairment of long-lived assets

 

 

312

 

 

 

-

 

Other

 

 

375

 

 

 

(72

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

1,030

 

 

 

(4,172

)

Inventories

 

 

(13,091

)

 

 

(14,580

)

Prepaid expenses and other assets

 

 

(925

)

 

 

(280

)

Trade accounts payable

 

 

18,868

 

 

 

9,672

 

Accrued payroll and payroll taxes

 

 

2,087

 

 

 

(11,696

)

Income taxes payable

 

 

(301

)

 

 

(4,987

)

Operating lease liabilities

 

 

(18,609

)

 

 

(18,403

)

Other liabilities

 

 

(4,929

)

 

 

(5,011

)

Net cash used in operating activities

 

 

(12,879

)

 

 

(24,477

)

Cash flows from investing activities:

 

 

 

 

 

 

Additions to fixed assets

 

 

(5,438

)

 

 

(3,562

)

Purchases of marketable securities and other investments

 

 

(1,850

)

 

 

(1,914

)

Sales and maturities of marketable securities and other investments

 

 

5,571

 

 

 

64,041

 

Net cash (used in) provided by investing activities

 

 

(1,717

)

 

 

58,565

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from revolving credit facilities

 

 

1,549

 

 

 

17,414

 

Payments on revolving credit facilities

 

 

(1,549

)

 

 

(17,414

)

Proceeds from issuance and exercise of stock-based awards

 

 

460

 

 

 

782

 

Payments for tax withholdings on equity awards

 

 

(185

)

 

 

(407

)

Common stock repurchased

 

 

 

 

 

(87,860

)

Net cash provided by (used in) financing activities

 

 

275

 

 

 

(87,485

)

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

 

 

(509

)

 

 

(1,497

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(14,830

)

 

 

(54,894

)

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

 

 

88,453

 

 

 

124,052

 

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

 

$

73,623

 

 

$

69,158

 

Supplemental disclosure on cash flow information:

 

 

 

 

 

 

Cash paid during the period for income taxes

 

$

536

 

 

$

4,657

 

Accrual for purchases of fixed assets

 

 

2,323

 

 

 

2,530

 

 

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 April 29, 2023, we operated 758 stores; 607 in the United States (“U.S.”), 80 in Europe, 50 in Canada, and 21 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 April 29, 2023 and April 30, 2022 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 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.

 

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 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):

 

 

April 29, 2023

 

 

January 28, 2023

 

Cash and cash equivalents

 

$

 

66,655

 

 

$

 

81,503

 

Restricted cash included in other long-term assets

 

 

 

6,968

 

 

 

 

6,950

 

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

 

$

 

73,623

 

 

$

 

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

 

 

 

April 29, 2023

 

 

April 30, 2022

 

United States

 

$

 

135,549

 

 

$

176,429

 

Canada

 

 

 

8,434

 

 

 

9,906

 

Europe

 

 

 

33,511

 

 

 

29,502

 

Australia

 

 

 

5,393

 

 

 

4,849

 

Net sales

 

$

 

182,887

 

 

$

220,686

 

 

Net sales for the three months ended April 29, 2023 included a $1.9 million decrease due to the change in foreign exchange rates, which consisted of $0.8 million in Europe, $0.6 million in Canada and $0.5 million in Australia.

Our contract liabilities include deferred revenue related to our customer loyalty program and gift cards. The current liability for gift cards was $4.0 million at April 29, 2023 and $4.9 million at January 28, 2023, respectively. Deferred revenue related to our STASH loyalty program was $1.2 million at April 29, 2023 and 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):

 

 

April 29, 2023

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Holding
Gains

 

 

Gross
Unrealized
Holding
Losses

 

 

Estimated
Fair Value

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

33,592

 

 

$

 

 

$

 

 

$

33,592

 

Money market funds

 

 

22,382

 

 

 

 

 

 

 

 

 

22,382

 

Corporate debt securities

 

 

10,683

 

 

 

 

 

 

(2

)

 

 

10,681

 

Total cash and cash equivalents

 

 

66,657

 

 

 

 

 

 

(2

)

 

 

66,655

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

20,147

 

 

 

 

 

 

(2,945

)

 

 

17,202

 

Corporate debt securities

 

 

57,926

 

 

 

 

 

 

(2,447

)

 

 

55,479

 

State and local government securities

 

 

16,483

 

 

 

 

 

 

(480

)

 

 

16,003

 

Total marketable securities

 

$

94,556

 

 

$

 

 

$

(5,872

)

 

$

88,684

 

 

9


 

 

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