Zumiez(ZUMZ) - 2026 Q2 - Quarterly Report

Part I. Financial Information Presents the company's interim financial statements and management's discussion and analysis of financial condition Item 1. Condensed Consolidated Financial Statements Presents Zumiez Inc.'s unaudited condensed consolidated financial statements for Q2 and H1 2025, including balance sheets, income, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and shareholders' equity as of August 2, 2025 Condensed Consolidated Balance Sheets (in thousands) | Metric | August 2, 2025 (Unaudited) | February 1, 2025 | | :-------------------------------- | :--------------------------- | :----------------- | | Cash and cash equivalents | $78,804 | $112,668 | | Marketable securities | $27,936 | $34,890 | | Inventories | $157,722 | $146,648 | | Total current assets | $300,762 | $322,385 | | Total assets | $623,388 | $634,881 | | Total current liabilities | $171,009 | $155,514 | | Total liabilities | $330,951 | $305,904 | | Total shareholders' equity | $292,437 | $328,977 | - Total assets decreased by $11.493 million from $634.881 million at February 1, 2025, to $623.388 million at August 2, 2025[8] - Total liabilities increased by $25.047 million from $305.904 million at February 1, 2025, to $330.951 million at August 2, 2025[8] - Total shareholders' equity decreased by $36.540 million from $328.977 million at February 1, 2025, to $292.437 million at August 2, 2025[8] Unaudited Condensed Consolidated Statements of Loss Details the company's revenues, expenses, and net loss for the three and six months ended August 2, 2025 Unaudited Condensed Consolidated Statements of Loss (in thousands, except per share data) | Metric | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $214,275 | $210,179 | $398,618 | $387,567 | | Gross profit | $76,018 | $71,794 | $131,333 | $123,693 | | Operating profit (loss) | $107 | $(393) | $(19,765) | $(20,547) | | Net loss | $(1,002) | $(847) | $(15,333) | $(17,627) | | Basic loss per share | $(0.06) | $(0.04) | $(0.88) | $(0.91) | | Diluted loss per share | $(0.06) | $(0.04) | $(0.88) | $(0.91) | - Net sales increased by 1.9% for the three months ended August 2, 2025, and by 2.9% for the six months ended August 2, 2025, compared to the prior year periods[11] - The company reported a net loss of $1.002 million for the three months ended August 2, 2025, an increase from $0.847 million net loss in the prior year period[11] - For the six months ended August 2, 2025, net loss improved to $15.333 million from $17.627 million in the prior year period[11] Unaudited Condensed Consolidated Statements of Comprehensive Income (loss) Presents the company's comprehensive income or loss, including net loss and other comprehensive income items Unaudited Condensed Consolidated Statements of Comprehensive Income (loss) (in thousands) | Metric | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(1,002) | $(847) | $(15,333) | $(17,627) | | Foreign currency translation | $880 | $184 | $7,494 | $(712) | | Net change in fair value of marketable debt securities | $182 | $997 | $600 | $895 | | Other comprehensive income | $1,062 | $1,181 | $8,094 | $183 | | Comprehensive income (loss) | $60 | $334 | $(7,239) | $(17,444) | - Comprehensive income for the three months ended August 2, 2025, was $60 thousand, a decrease from $334 thousand in the prior year period[13] - For the six months ended August 2, 2025, comprehensive loss significantly improved to $7.239 million from $17.444 million in the prior year period, primarily due to a positive foreign currency translation adjustment[13] Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity Outlines changes in common stock, accumulated other comprehensive loss, and retained earnings, impacting shareholders' equity Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric | Balance at February 1, 2025 | Net Loss | Other Comprehensive Income, net | Issuance/Exercise of Stock-based Awards | Stock-based Compensation Expense | Repurchase of Common Stock | Balance at August 2, 2025 | | :-------------------------------- | :-------------------------- | :--------- | :------------------------------ | :-------------------------------------- | :------------------------------- | :------------------------- | :-------------------------- | | Common Stock Amount | $203,581 | — | — | $186 | $3,621 | — | $207,388 | | Accumulated Other Comprehensive Loss | $(23,778) | — | $8,094 | — | — | — | $(15,684) | | Retained Earnings | $149,174 | $(15,333) | — | — | — | $(33,108) | $100,733 | | Total Shareholders' Equity | $328,977 | $(15,333) | $8,094 | $186 | $3,621 | $(33,108) | $292,437 | - Total shareholders' equity decreased from $328.977 million at February 1, 2025, to $292.437 million at August 2, 2025, primarily due to net loss and common stock repurchases[14] - The company repurchased common stock totaling $33.108 million during the six months ended August 2, 2025[14] Unaudited Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended August 2, 2025 Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(9,501) | $(15,422) | | Net cash provided by investing activities | $3,520 | $15,912 | | Net cash used in financing activities | $(32,497) | $(19,354) | | Net decrease in cash, cash equivalents, and restricted cash | $(36,864) | $(19,077) | | Cash, cash equivalents, and restricted cash, end of period | $84,665 | $75,207 | - Net cash used in operating activities decreased by $5.921 million, from $15.422 million in the prior year to $9.501 million for the six months ended August 2, 2025[16] - Net cash provided by investing activities decreased significantly from $15.912 million in the prior year to $3.520 million for the six months ended August 2, 2025[16] - Net cash used in financing activities increased to $32.497 million from $19.354 million in the prior year, primarily due to increased common stock repurchases[16] Notes to Condensed Consolidated Financial Statements Provides detailed explanations of accounting policies, financial line items, and other disclosures for the financial statements 1. Nature of Business and Basis of Presentation Describes Zumiez Inc.'s operations as a specialty retailer and the accounting principles for interim financial reporting - Zumiez Inc. is a specialty retailer of apparel, footwear, accessories, and hardgoods for young men and women, operating under the names Zumiez, Blue Tomato, and Fast Times, with e-commerce websites[18] - As of August 2, 2025, the company operated 731 stores globally: 571 in the U.S., 86 in Europe, 46 in Canada, and 28 in Australia[18] - The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information, including normal recurring adjustments[20][21] Restricted Cash (in thousands) | Restricted Cash Category | August 2, 2025 | February 1, 2025 | | :---------------------------------------------------------------- | :------------- | :--------------- | | Restricted cash included in other current assets and other long-term assets | $5,861 | $8,861 | | Total cash, cash equivalents, and restricted cash as shown in the statement of cash flows | $84,665 | $121,529 | - Restricted cash, primarily for insurance collateral and bank guarantees on store operating leases, decreased from $8.861 million to $5.861 million[25] - The company is evaluating the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses) and will adopt ASU 2023-09 (Improvements to Income Tax Disclosures) for fiscal year 2025[27][28] - The One Big Beautiful Bill Act, enacted July 4, 2025, makes permanent 100% bonus depreciation and immediate expensing of domestic research costs, expected to decrease current and future U.S. cash tax liabilities[29] 2. Revenue Analyzes net sales performance across geographic regions and discusses factors influencing revenue recognition Net Sales by Geographic Region (in thousands) | Geographic Region | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | United States | $169,079 | $166,186 | $309,120 | $300,057 | | Europe | $28,923 | $28,320 | $58,215 | $57,890 | | Canada | $11,011 | $10,148 | $20,703 | $18,974 | | Australia | $5,262 | $5,525 | $10,580 | $10,646 | | Net sales | $214,275 | $210,179 | $398,618 | $387,567 | - Net sales for the three months ended August 2, 2025, increased by $4.1 million (1.9%) to $214.275 million, with a $1.7 million increase due to foreign exchange rates, primarily in Europe[30][31] - For the six months ended August 2, 2025, net sales increased by $11.051 million (2.9%) to $398.618 million, with a $1.2 million increase due to foreign exchange rates, mainly from Europe[30][31] - Current liability for gift cards decreased from $3.6 million at February 1, 2025, to $2.7 million at August 2, 2025[32] 3. Cash, Cash Equivalents and Marketable Securities Details the composition and fair value of the company's cash, cash equivalents, and marketable securities Cash, Cash Equivalents and Marketable Securities (in thousands) | Category | August 2, 2025 (Fair Value) | February 1, 2025 (Fair Value) | | :-------------------------------- | :---------------------------- | :---------------------------- | | Cash and cash equivalents | $78,804 | $112,668 | | Marketable securities | $27,936 | $34,890 | | Total | $106,740 | $147,558 | - Total marketable securities decreased from $34.890 million at February 1, 2025, to $27.936 million at August 2, 2025, with gross unrealized losses of $1.926 million[33][34] - All marketable securities have an effective maturity date or weighted average life of five years or less at the time of purchase[33] 4. Leases Provides information on operating and variable lease expenses, weighted-average lease terms, and discount rates Lease Expense Components (in thousands) | Lease Expense Component | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :---------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Operating lease expense | $19,267 | $20,174 | $35,783 | $36,812 | | Variable lease expense | $1,689 | $1,256 | $5,995 | $4,633 | | Total lease expense | $20,956 | $21,430 | $41,778 | $41,445 | - Total lease expense for the three months ended August 2, 2025, decreased to $20.956 million from $21.430 million in the prior year, while for the six months, it slightly increased to $41.778 million from $41.445 million[36] - The weighted-average remaining lease term is 4.7 years, with a weighted-average discount rate of 4.8% as of August 2, 2025[37] - Total minimum lease payments for operating leases amount to $234.410 million, with a present value of lease obligations of $208.723 million as of August 2, 2025[38] 5. Commitments and Contingencies Outlines the company's outstanding purchase orders, legal settlements, and self-insurance reserves - As of August 2, 2025, the company had outstanding purchase orders for merchandise totaling $199.6 million, with cancellation options for most[39] - A settlement in principle of $2.890 million has been reached for a PAGA lawsuit filed by former employees, subject to court approval[41] - Self-insurance reserves for workers' compensation, general liability, and employee health care benefits were $1.7 million at August 2, 2025, up from $1.5 million at February 1, 2025[42] 6. Revolving Credit Facilities and Debt Details the company's new revolving credit facility, its terms, and outstanding letters of credit - On December 20, 2024, Zumiez entered into a new $25 million revolving credit facility with PNC Bank, replacing a previous agreement[43] - The new credit facility is secured by cash and marketable securities, bears interest at SOFR plus 1.00% per annum, and matures on December 20, 2025[44][45] - As of August 2, 2025, the company had less than $0.2 million in open commercial letters of credit and $3.2 million in issued, but undrawn, standby letters of credit[46] 7. Fair Value Measurements Categorizes assets measured at fair value and reports impairment losses on fixed assets and right-of-use assets Fair Value Measurements (in thousands) | Fair Value Level | August 2, 2025 | February 1, 2025 | | :--------------- | :------------- | :--------------- | | Level 1 | $11,757 | $36,652 | | Level 2 | $52,713 | $75,860 | | Level 3 | $0 | $0 | | Total | $64,470 | $112,512 | - The majority of assets measured at fair value on a recurring basis are classified as Level 2, including U.S. treasury and government agency securities, corporate debt securities, and certificates of deposit[47] - Impairment losses of $0.5 million related to fixed assets and $0.3 million related to operating lease right-of-use assets were recognized for the six months ended August 2, 2025[50][51] 8. Stockholders' Equity Details common stock repurchase programs and changes in accumulated other comprehensive loss - Zumiez Inc. approved a $25 million common stock repurchase program on March 12, 2025, which was completed in the first fiscal quarter[52] - A new $15 million repurchase program was approved on June 4, 2025, with $7.2 million remaining available as of August 2, 2025[53] Common Stock Repurchase Activity (in thousands, except per share data) | Metric | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Number of shares repurchased | 597 | 945 | 2,405 | 945 | | Average price per share | $13.10 | $20.55 | $13.64 | $20.55 | | Total cost of shares repurchased | $7,816 | $19,421 | $32,816 | $19,421 | - Accumulated other comprehensive loss improved from $(23.778) million at February 1, 2025, to $(15.684) million at August 2, 2025, primarily due to foreign currency translation adjustments[56] 9. Equity Awards Reports stock-based compensation expense and unrecognized compensation cost related to unvested equity awards - Total stock-based compensation expense for the six months ended August 2, 2025, was $3.621 million, an increase from $3.391 million in the prior year[61] - As of August 2, 2025, there was $13.1 million in unrecognized compensation cost related to unvested stock options and restricted equity awards, with a weighted-average remaining recognition period of 1.3 years[61] Restricted Equity Awards Activity (in thousands, except fair value) | Restricted Equity Awards | Outstanding at February 1, 2025 | Granted | Vested | Forfeited | Outstanding at August 2, 2025 | | :----------------------- | :------------------------------ | :------ | :----- | :-------- | :---------------------------- | | Awards/Units (thousands) | 728 | 489 | (263) | (28) | 926 | | Weighted Average Fair Value | $18.19 | $14.35 | $20.81 | $15.88 | $15.54 | 10. Loss per Share, Basic and Diluted Presents basic and diluted loss per share calculations for the three and six months ended August 2, 2025 Loss per Share, Basic and Diluted (in thousands, except per share data) | Metric | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(1,002) | $(847) | $(15,333) | $(17,627) | | Weighted average common shares for basic loss per share | 16,698 | 19,284 | 17,403 | 19,375 | | Basic loss per share | $(0.06) | $(0.04) | $(0.88) | $(0.91) | | Diluted loss per share | $(0.06) | $(0.04) | $(0.88) | $(0.91) | - Basic and diluted loss per share for the three months ended August 2, 2025, was $(0.06), compared to $(0.04) in the prior year[63] - For the six months ended August 2, 2025, basic and diluted loss per share improved to $(0.88) from $(0.91) in the prior year[63] 11. Segment Reporting Describes the company's operating segments and how the Chief Operating Decision Maker evaluates performance - Zumiez operates four operating segments: United States, Canadian, European, and Australian operations, which are aggregated into one reportable segment due to similar business characteristics[64] - The CEO is identified as the Chief Operating Decision Maker (CODM), evaluating segment performance based on key performance indicators like net sales and operating profit[65] Segment Performance Metrics (in thousands) | Metric | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $214,275 | $210,179 | $398,618 | $387,567 | | Gross profit | $76,018 | $71,794 | $131,333 | $123,693 | | Operating profit (loss) | $107 | $(393) | $(19,765) | $(20,547) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Zumiez Inc.'s financial condition and results for Q2 and H1 2025, covering sales, profit, expenses, liquidity, and estimates General Defines key financial metrics including net sales, comparable sales, cost of goods sold, and SG&A expenses - Net sales include gross sales (net of returns and promotions) and shipping revenue, encompassing both store and e-commerce sales[70] - Comparable sales include net sales from stores and e-commerce businesses operating in both comparative periods, adjusted for foreign exchange rates to ensure consistency[71] - Cost of goods sold includes merchandise costs, shrinkage, buying, occupancy, distribution, warehousing, and freight costs for store transfers[72] - Selling, general and administrative expenses cover store and administrative personnel wages, freight, store supplies, depreciation, facility expenses, training, advertising, marketing, credit card fees, and other operating costs[74] Key Performance Indicators Identifies Net Sales, Gross Profit, Operating Profit, and Diluted EPS as primary metrics for evaluating performance - Management evaluates Net Sales, Gross Profit, Operating Profit, and Diluted Earnings Per Share as key performance indicators[75][76][77][78] - Net sales are crucial for leveraging costs and directly impact operating profit, cash, and working capital[75] - Operating profit is a key indicator of success, driven by net sales, gross profit, control of SG&A, and capital expenditures[77] Trends and Uncertainties Affecting Our Results and Comparability Discusses external factors like foreign currency rates, tax law changes, variable costs, and economic conditions impacting financial results - Results are affected by foreign currency rates, changes in laws (including U.S. tax law), fluctuations in variable costs, and general economic conditions[79] - Increased costs in 2024 and 2025, coupled with higher consumer price inflation, have reduced consumer confidence and spending, negatively impacting sales[79] Results of Operations Analyzes the company's financial performance, including net sales, gross profit, and operating expenses Three Months Ended August 2, 2025 Compared With Three Months Ended August 3, 2024 Compares the company's financial performance for the three-month periods, highlighting changes in sales, profit, and expenses Key Financial Metrics (% of Net Sales) - Three Months Ended | Metric (% of Net Sales) | August 2, 2025 | August 3, 2024 | | :---------------------- | :------------- | :------------- | | Net sales | 100.0% | 100.0% | | Cost of goods sold | 64.5% | 65.8% | | Gross profit | 35.5% | 34.2% | | Selling, general and administrative expenses | 35.4% | 34.4% | | Operating profit (loss) | 0.1% | (0.2)% | | Net loss | (0.5)% | (0.4)% | - Net sales increased by 1.9% to $214.3 million, driven by a 2.5% increase in comparable sales, partially offset by 19 store closures[81] - Gross profit increased by 5.9% to $76.0 million, with gross profit margin improving by 130 basis points to 35.5%, due to leverage on higher sales and improved product margin[83] - SG&A expenses increased by 5.2% to $75.9 million, rising 100 basis points as a percent of net sales to 35.4%, primarily due to higher corporate costs, litigation settlement, and increased wages[84] - Net loss for the quarter was $1.0 million ($0.06 per diluted share), compared to $0.8 million ($0.04 per diluted share) in the prior year[85] Six Months Ended August 2, 2025 Compared With Six Months Ended August 3, 2024 Compares the company's financial performance for the six-month periods, detailing changes in sales, profit, and expenses Key Financial Metrics (% of Net Sales) - Six Months Ended | Metric (% of Net Sales) | August 2, 2025 | August 3, 2024 | | :---------------------- | :------------- | :------------- | | Net sales | 100.0% | 100.0% | | Cost of goods sold | 67.1% | 68.1% | | Gross profit | 32.9% | 31.9% | | Selling, general and administrative expenses | 37.9% | 37.2% | | Operating profit (loss) | (5.0)% | (5.3)% | | Net loss | (3.8)% | (4.5)% | - Net sales increased by 2.9% to $398.6 million, driven by a 3.9% increase in comparable sales, partially offset by 19 store closures[86] - Gross profit increased by 6.2% to $131.3 million, with gross profit margin improving by 100 basis points to 32.9%, due to leverage on higher sales and improved product margin[88] - SG&A expenses increased by 4.8% to $151.1 million, rising 70 basis points as a percent of net sales to 37.9%, primarily due to litigation settlements and increased corporate costs[89] - Net loss for the six months was $15.3 million ($0.88 per diluted share), an improvement from $17.6 million ($0.91 per diluted share) in the prior year[90] Liquidity and Capital Resources Examines the company's cash flow, working capital, capital expenditures, and financing activities to assess liquidity - Primary uses of cash include operational expenditures, inventory purchases, and capital investments for new stores, remodels, and infrastructure improvements, along with common stock repurchases[91] - Working capital benefits from quick cash collection from sales and longer payment terms with vendors[92] - Expected capital expenditures for fiscal 2025 are $11.0 million to $13.0 million, mainly for approximately 6 new stores and existing store remodels/relocations[94] - Net cash used in operating activities decreased by $5.9 million to $9.5 million for the six months ended August 2, 2025[95] - Net cash provided by investing activities was $3.5 million, primarily from marketable securities sales net of purchases, offset by capital expenditures[96] - Net cash used in financing activities was $32.5 million, mainly due to $32.7 million in common stock repurchases[97] - The company's main liquidity sources are operating cash flows and available cash, cash equivalents, and current marketable securities, expected to be sufficient for the next twelve months[98] - A new $25 million revolving credit facility with PNC Bank, secured by cash and marketable securities, matures on December 20, 2025[99][100][101] Critical Accounting Estimates Discusses the significant judgments and assumptions made in preparing the financial statements, which could impact reported amounts - The preparation of financial statements requires assumptions and estimates about future events and judgments affecting reported amounts[104] - No significant changes to critical accounting estimates have occurred since the Annual Report on Form 10-K for the fiscal year ended February 1, 2025[105] Item 3. Quantitative and Qualitative Disclosures About Market Risk States that the company's market risk profile remains largely unchanged since February 1, 2025, with detailed disclosures in the Annual Report - The company's market risk profile at August 2, 2025, remains largely unchanged from February 1, 2025[156] - Detailed market risk disclosures are available in the Annual Report on Form 10-K[156] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of August 2, 2025[157] - No material changes in internal control over financial reporting occurred during the three months ended August 2, 2025[158] Part II. Other Information Presents additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Details the company's involvement in ordinary course litigation and refers to financial statement notes for commitments and contingencies - The company is periodically involved in litigation arising in the ordinary course of business[160] - A court determination in any litigation could result in significant liability and materially adverse effects on business, results of operations, or financial condition[160] - Further details on legal proceedings, including a PAGA lawsuit settlement, are provided in Note 5 to the Condensed Consolidated Financial Statements[161] Item 1A. Risk Factors Outlines various risks that could materially affect Zumiez Inc.'s business, including economic, competitive, operational, and regulatory challenges - Investing in Zumiez securities involves a high degree of risk, and actual results may differ materially from forward-looking statements[107] - No material changes have occurred in the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended February 1, 2025[162] U.S. and global economic and political uncertainty Discusses how economic and political uncertainties, including consumer spending and confidence, can impact retail market cyclicality and sales - The retail market is subject to cyclicality, and unpredictable discretionary consumer spending due to economic and political uncertainties (e.g., geopolitical tensions, tariffs) could materially affect operations[108] - A decline in disposable income and consumer confidence may lead to a trend towards inexpensive merchandise, disproportionately impacting Zumiez as a branded merchandise retailer and potentially forcing reliance on promotional sales[109] Failure to anticipate, identify and respond to changing fashion trends Highlights the risk of misjudging volatile fashion tastes and consumer preferences, potentially leading to lower sales and increased markdowns - Success depends on the ability to anticipate and respond to volatile fashion tastes and consumer preferences; misjudging trends could lead to lower sales and reliance on markdowns[110] Inability to compete favorably in the highly competitive retail industry Addresses the intense competition in the teenage and young adult retail sector, where larger competitors possess greater resources - The teenage and young adult retail industry is highly competitive, with larger competitors having greater financial and marketing resources, potentially leading to price reductions and customer loss[111] Decrease in consumer traffic Examines how declining customer traffic to stores and websites, influenced by economic factors and external events, can adversely affect sales - Dependence on customer traffic to stores (often in malls) and websites means sales can be adversely affected by economic downturns, competition, increased gasoline prices, exchange rate fluctuations, and declining mall popularity[112][113] - Geopolitical events, terrorism threats, or widespread health emergencies could cause people to avoid stores and alter consumer trends, impacting sales[113] Risks associated with international trade and other international conditions Addresses risks from reliance on foreign manufacturers, including natural disasters, political instability, supply chain disruptions, and trade barriers - Most merchandise is produced by foreign manufacturers, exposing the company to risks from natural disasters, political instability, supply chain disruptions (e.g., strikes), and trade barriers[114] - Increased tariffs or other trade restrictions could significantly raise merchandise costs, potentially leading to margin erosion or price increases and customer loss[115] North America growth strategy and international expansion risks Discusses challenges related to optimizing customer engagement, opening new stores, and expanding into international markets with diverse conditions - North America growth depends on optimizing customer engagement and opening new stores, which could strain operational, managerial, and administrative resources[116] - International expansion into European and Australian markets (and potentially others) carries risks due to different competitive conditions, consumer tastes, legal/regulatory environments, and the need to build brand awareness[117][118] Failure to successfully integrate acquired businesses Highlights the difficulties in integrating acquired businesses, which could divert resources and lead to increased costs and inefficiencies - Difficulties in integrating acquired businesses (e.g., Blue Tomato, Fast Times) could divert capital and management attention, leading to increased costs and operating inefficiencies[119] Seasonality and volatility of operations Explains how quarterly results fluctuate due to seasonality, with peak sales in Q3 and Q4, and the risk of markdown reliance - Quarterly results fluctuate significantly due to seasonality, with higher sales and profitability in the third and fourth fiscal quarters (back-to-school and winter holiday seasons)[120] - Unanticipated decreases in demand during peak seasons could necessitate selling excess inventory at markdowns, adversely affecting financial results[120] Pandemics and other health crises Addresses the potential impact of global health crises on business operations, product demand, supply chain, and financial performance - Global or regional health crises (e.g., COVID-19) can affect business operations, product demand, in-stock positions, costs, labor availability, supply chain, and financial performance[122] - Uncertainties include severity and duration of pandemics, macroeconomic factors, labor market changes, and long-term impacts on consumer behaviors[124] Information systems and cybersecurity risks Highlights risks from IT system failures and increasing cybersecurity threats, potentially leading to operational disruptions and data breaches - Failures in information technology systems or third-party service providers could disrupt operations, transaction processing, financial reporting, and growth plans[123][125] - Increasing cybersecurity risks, including sophisticated cyber attacks and the use of AI by attackers, could lead to data breaches, adverse publicity, litigation, and significant expenses[126] Fluctuations in cost of raw materials, global labor, shipping Addresses how rising costs of raw materials, labor, and shipping can increase merchandise costs and negatively impact gross profit - Increases in raw material, global labor, and shipping costs can lead to higher merchandise costs, adversely affecting gross profit if selling prices do not increase proportionately[127] Fluctuations in foreign currency exchange rates Discusses the impact of foreign currency exchange rate volatility on sales, profits, assets, and liabilities, especially with international expansion - Exposure to foreign currency exchange rate risk can impact sales, profits, assets, and liabilities denominated in non-U.S. dollar currencies, increasing with international expansion[128] Increased labor costs Examines how rising labor costs due to competition, minimum wage changes, or unionization could adversely impact operating profit - Increased labor costs due to competition, minimum wage changes, health care, or other benefits could adversely impact operating profit[129] - Potential unionization or inability to meet staffing needs could also increase labor costs and affect operations[130] Manufacturer labor and environmental practices Addresses risks from manufacturers' non-compliance with labor, environmental, quality, and safety standards, potentially harming reputation and operations - Failure of manufacturers to use acceptable labor and environmental practices, or non-compliance with quality and safety regulations, could disrupt shipments, damage reputation, and lead to fines or product recalls[131][132] Vendor relationships and supply Highlights dependence on strong vendor relationships for merchandise supply and the risks of deterioration or vendor instability - Dependence on good vendor relationships for merchandise supply; deterioration could lead to inadequate supply, higher prices, or vendors selling directly, adversely affecting business[133][134] - Smaller, less capitalized vendors are more susceptible to economic downturns, potentially impacting their ability to supply products[135] Weather conditions Discusses how unseasonable weather can render inventory incompatible with demand, negatively affecting business and results - Unseasonable weather conditions (e.g., warm winters, cool summers) can render inventory incompatible, leading to adverse effects on business and results of operations[136] Loss of key executives or inability to attract and retain talent Emphasizes the reliance on key executives and the risk that losing or failing to attract qualified talent could impair growth and performance - Performance depends on key executives; loss of such personnel or inability to attract and retain qualified employees (including store managers, associates, and technical roles) could impair growth and financial performance[137][138][139] Decline in cash flows from operations Addresses the dependence on operating cash flow to fund growth and operations, and the risks of insufficient cash flow - Dependence on operating cash flow to fund operations and growth; insufficient cash flow could hinder business growth, competitive response, and meeting liquidity needs[140] Closure or disruption of home office or distribution centers Highlights the vulnerability of operations to disruptions at single distribution centers or the home office due to unforeseen events - Reliance on single distribution centers in California (U.S.), Austria (Europe), British Columbia (Canada), and Melbourne (Australia), and a home office in Washington, makes operations vulnerable to unforeseen events like natural disasters, political instability, or public health issues[141] Effects of war, acts of terrorism, or mall violence Discusses how geopolitical conflicts, terrorism, or mall violence could lead to decreased consumer traffic and adverse business effects - Threats of terrorism or mall violence could lead to lower consumer traffic and mall closures, resulting in decreased sales and adverse effects on business[142] Intellectual property protection and infringement Addresses risks related to protecting trademarks and domain names, and potential infringement of others' intellectual property - Failure to protect trademarks and domain names (Zumiez, Blue Tomato, Fast Times) or infringement of others' intellectual property could diminish brand value, cause sales decline, or result in costly litigation[143] Litigation risks Outlines the company's exposure to various litigation risks, including employment-related claims and class action suits - Operations expose the company to litigation risks, including employment-related claims and class action suits, which can be time-consuming, costly, and harmful to the business[144][145][146] Regulatory compliance and changes in laws Discusses the impact of failing to comply with diverse laws and regulations or changes in legal frameworks on financial performance - Failure to comply with a wide array of federal, state, local, or foreign laws and regulations (employment, trade, consumer protection, privacy, etc.) or changes in these laws could adversely impact results and financial performance[147] Fluctuations in tax obligations and effective tax rate Addresses uncertainties in tax expense estimates and how changes in tax rates or accounting rules can impact the effective tax rate - Subject to income taxes in multiple jurisdictions, tax expense estimates include reserves for audits, and outcomes can be uncertain[148][149] - Effective tax rate can be materially impacted by changes in tax rates, earnings mix, or accounting rules, potentially affecting financial condition[149] Failure to meet analyst and investor expectations Highlights the risk that operating results falling below analyst and investor estimates could lead to a decline in the company's stock price - If operating results fall below analyst and investor estimates, the company's stock price could decline[150] Impact of share repurchase program Discusses how common stock repurchases may increase the risk of a controlling shareholder group forming - The reduction of outstanding shares through repurchases may increase the risk of a group of shareholders forming a controlling group, potentially influencing company decisions[151][152] Increased scrutiny and changing expectations from stakeholders with respect to ESG matters Addresses the growing focus on ESG practices, which may lead to additional costs, brand harm, and compliance challenges - Increasing stakeholder focus on ESG practices may lead to additional costs, brand harm if expectations are not met, and challenges in complying with evolving ESG legal and regulatory reforms[153][154] Impairment of goodwill, intangible assets and other long-term assets Discusses the risk of impairment charges on goodwill, intangible assets, and long-term assets if actual results fall short of estimates - Goodwill, intangible assets, and long-term assets are subject to impairment testing; if actual results fall short of estimates, further impairment charges could negatively impact earnings[155] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details common stock repurchase activity during the thirteen weeks ended August 2, 2025, including shares purchased and remaining program value Common Stock Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share (with commission) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Dollar Value of Shares that May Yet Be Repurchased Under the Plans or Programs | | :----------------------- | :------------------------------- | :--------------------------------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | May 4, 2025-May 31, 2025 | — | $— | — | $— | | June 1, 2025-July 5, 2025 | 397 | $12.66 | 397 | $9,973 | | July 6, 2025-August 2, 2025 | 200 | $13.96 | 200 | $7,184 | | Total | 597 | | 597 | | - During the thirteen weeks ended August 2, 2025, Zumiez repurchased 597 thousand shares of common stock at an average price of $13.10 per share[54][164] - As of August 2, 2025, $7.184 million remained available for repurchase under the $15 million program approved on June 4, 2025, which is expected to continue through June 30, 2026[53][164] Item 3. Defaults Upon Senior Securities Confirms no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred during the period[165] Item 4. Mine Safety Disclosures States that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to Zumiez Inc[165] Item 5. Other Information Confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended August 2, 2025[165] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including financial statements, officer certifications, and the Inline XBRL formatted cover page - Exhibits include the condensed consolidated financial statements and related notes[167] - Certifications from the Principal Executive Officer and Principal Financial Officer are included pursuant to the Securities Exchange Act and Sarbanes-Oxley Act[169] - The cover page for the Quarterly Report on Form 10-Q is formatted in Inline XBRL[167][169] Signature Contains the signature of Christopher C. Work, CFO and Principal Accounting Officer, certifying the report filing - The report is signed by Christopher C. Work, Chief Financial Officer and Principal Accounting Officer, on behalf of Zumiez Inc[173] - The report was dated September 4, 2025[173]