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Item 7. Management’s Discussion and Analysis

2025-03-13 compared with 2024-03-14 · 300 added, 290 removed, 979 unchanged (38% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis compares the change in the consolidated financial statements for years ended and February 3, 2024 and January 28, 2023 and should be read together with our consolidated financial statements, the accompanying notes, and other information included in this Annual Report.

The following discussion and analysis compares the change in the consolidated financial statements for years ended and February 1, 2025 and February 3, 2024 and should be read together with our consolidated financial statements, the accompanying notes, and other information included in this Annual Report.

In particular, the risk factors contained in Item 1A may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources.

For comparisons of years ended January 28, 2023 and January 29, 2022, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of our Annual Report on Form 10-K for the year ended January 28,2023, filed with the SEC on March 20, 2023 and incorporated herein by reference.

For comparisons of years ended February 3, 2024 and January 28, 2023, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of our Annual Report on Form 10-K for the year ended February 3, 2024, filed with the SEC on March 13, 2025 and incorporated herein by reference.

This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.

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Fiscal 2024—A Review of This Past Year

After achieving record sales in fiscal 2021, we have now experienced two challenging years in a row.

Though we ended the year down 8.6% in net sales, the sales trends improved each quarter throughout the year with sales down 17.1% in the first quarter, down 11.6% in the second quarter, down 8.9% in the third quarter, and turned positive in the fourth quarter with growth of 0.6% inclusive of the 53 rd week.

Overall consolidated sales were down low single digits for the quarter excluding the 53 rd week.While inflation declined throughout the first half 2023 and moderated for the last half of the year, the multi-year inflationary impact on consumer discretionary income, particularly with our younger customer base, negatively affected sales.

This coupled with higher competition for the discretionary dollar with consumers appearing to favor experiences vs.

apparel and negative trends in the business around areas like Skate had a material impact on our results.

The improvement in year-over-year sales trends throughout fiscal 2023 reflects positive momentum in emerging brands on the men’s side of the business as the men’s category had positive sales growth both in the back to school weeks of the third quarter and the entire fourth quarter.

We are also beginning to see some of the more difficult categories over the past two years become less of a negative impact on total sales growth as we reach lower levels of sales and continue to try new things in these categories.

In fiscal year 2023, product margin declined 70 basis points from the prior year, while fiscal 2022 had declined 80 basis points from fiscal 2021.

The decline of 150 basis points in product margin over the past two years was driven largely by the difficult sales environment which necessitated discounting to maintain a healthy inventory position.

In a more normalized sales environment, we believe that we can begin to recover and continue to grow product margins through existing initiatives in the business over time.

In addition to the decline of 70 basis points in product margin in fiscal 2023, the 8.6% decrease in net sales created deleverage of other significant fixed costs included in gross margin such as occupancy and merchandising expenses, resulting in a decrease of 180 basis points in total Gross Margin from the prior year.

Selling General and Administrative costs increased 17.7% in fiscal year 2023 inclusive of a one-time goodwill impairment charge of $41.1 million which represented 14.0% of the total growth for these expenses during the year.

Our loss per share in fiscal 2023 of $3.25 includes a one-time goodwill impairment charge worth $2.14 cents per share was down from earnings per share in fiscal 2022 of $1.08.

As a leading global lifestyle retailer, we continue to differentiate ourselves through our distinctive brand offering and diverse product selection, as well as the unique customer experience across all our platforms.

We remain committed to serving the customer launching nearly 200 new brands in 2023, continuing to focus on our localized fulfillment platform that provides substantial improvements in the speed of delivery to our customers and connecting with our customers in a unique way through our events and digital communications.

The following table shows net sales, operating (loss) profit, operating margin and diluted (loss) earnings per share for fiscal 2023 compared to fiscal 2022:

After stimulus driven, record breaking results in fiscal 2021, the absence of stimulus, trend shifts and the compounding multi-year inflationary impact on consumers were significant detriments throughout fiscal year 2022.While negative sales trends continued into fiscal 2023, they lessened in intensity each quarter with fourth quarter comparable sales down 3.9% from the prior year.

The improving sales trends throughout fiscal 2023 reflected positive momentum in emerging brands on the men’s side of the business as the men’s category turned positive in the fourth quarter.

In 2024, sales trends turned positive after the first quarter and we posted positive comparable sales growth in each of the final eight months of the year with comparable sales up 4.0% for the full year (and total sales up 1.6% despite the negative impacts on growth of both the 53 rd week in the prior year worth $12.0 million and closed stores worth $9.0 million).

The turn of our business continues to be driven by the apparel categories across both men's and women's with the men’s business being our largest growth category followed by women’s and footwear.

In fiscal year 2024, product margin increased 54 basis points from the prior year driven by strong private label performance and less discounting with better sales performance.

Fiscal 2024 was the highest product margin in our history excluding fiscal 2021 which was positively impacted by significant stimulus spending.

Gross Margin improved 200 basis points to 34.1% in 2024 driven by leverage on increased sales, strong management of our lease portfolio, negotiated reductions in shipping costs and well-managed distribution operations.

Our Selling General and Administrative expenses were down $44.6 million from the prior year driven by a $41.1 million goodwill impairment charge in fiscal 2023.

Excluding that charge, Selling General and Administrative expenses were reduced by $3.5 million from fiscal 2023 with continued management of expenses that was slightly offset by higher levels of incentive compensation for current year performance.

Our sales growth, combined with increases in product margins and reductions of expense across multiple areas drove a positive $1.9 million in operating profit for the year, an improvement of $66.7 million from 2023, or an improvement of $25.6 million excluding the goodwill impairment charges in 2023.

Due to an effective tax rate of 142.0% related to the distribution of our income across the jurisdictions in which we operate, we had a $0.09 loss per share in fiscal 2024.

This was an improvement from a loss of $3.25 per share in fiscal 2023, or a $1.12 loss per share excluding goodwill impairment charges.

We remained committed to serving our customer launching well over 120 new brands in 2024.

We made investments over several years to integrate the digital and physical channels creating a seamless shopping experience for our customer.

We are continuing to deliver our online orders in North America from our stores, which has provided substantial improvements in the speed of delivery to our customers, eliminated the need to manage two pools of inventory separately for digital and physical demand, and created one cost structure for execution of both physical and digital sales.

Internationally we continue to see deeper penetration of localized fulfillment and are in various stages of roll-out in different countries.

In-store fulfillment is a key part of strategy that we believe will drive long term market share by leveraging the strengths of our store sales team, providing better and faster service to customers, improving product margins, maximizing the productivity of inventory, providing additional selling opportunities, and utilizing one cost structure to serve the customer.

The following table shows net sales, operating profit (loss), operating margin and diluted (loss) earnings per share for fiscal 2024 compared to fiscal 2023:

Net sales (in thousands) (1)

Operating profit (in thousands)

Operating profit (loss) (in thousands)

Operating margin

Diluted earnings per share

(1) The decrease in net sales was primarily driven by continued inflationary pressures on the consumer, continued challenges in competition for the discretionary dollar, and tougher trends in certain categories of our business.

The decrease in net sales resulted from a decrease in transactions, partially offset by an increase in dollars per transaction.

The increase in dollars per transaction was driven by an increase in average unit retail, partially offset by a decrease in units per transaction.

For the year, all categories were down in comparable sales to the prior year.

The footwear category was our largest declining category followed by women’s, accessories, hardgoods and men’s.

Diluted loss per share

(1) The increase in net sales was primarily driven by an increase in dollars per transaction, partially offset by a decrease in transactions.

The increase in dollars per transaction was driven by an increase in average unit retail, and an increase in units per transaction.

For the year, our largest growth in comparable sales was in our men’s category, followed by women’s and footwear.

Our largest comparable sales decrease was in our accessories category, followed by hardgoods.

Fiscal 2025—A Look At the Upcoming Year

In fiscal 2024, our focus will continue to be serving the customer with strategic investments focused on enhancing the customer experience while growing sales and market share to create operational efficiencies to drive long-term operating margin expansion.

Though the last two years have been challenging, the balance sheet remains strong with $171.6 million in current cash and marketable securities at the end of fiscal 2023.

We were able to minimize the decrease in current cash and marketable securities through this difficult sales cycle with diligent expense management and a reduction in inventory of 4.4% from fiscal 2022.

We believe we have the balance sheet to manage through potential difficulties, while also investing strategically in important long-term initiatives and returning value to our shareholders.

Following a difficult sales and earnings cycle through fiscal 2022 and fiscal 2023, the macro-economic environment in 2024 is unclear.

While inflation is moderating from the peaks in 2022 and early 2023, the impact of multiple years of compounding growth in the cost of consumer goods continues to put pressure on the discretionary income of our customer base.

Comparing fiscal 2023 quarterly performance to pre-pandemic fiscal 2019 which had more typical seasonality throughout the year, our sales in fiscal 2023 stabilized, but remained below 2019 levels.

As we move through 2024, our focus will be to grow sales by building on the momentum we are seeing in emerging brands within the Men’s category during 2023, and continuing to showcase our growing private label offering while also testing new brands to drive sales growth across all of our categories.

We also believe that we can achieve product margin expansion while also diligently controlling spending to drive back to profitability.

As we turn our attention to same store sales, we plan to pull back on new unit growth, slowing new store openings to 10 throughout the year with our largest percentage decline in Europe as we focus on the profitability of the region and driving cash flow.

From a total store count perspective, we expect to end 2024 with less stores than we had at the end of 2023 as we pair back underperforming stores.

With our relentless focus on the customer, we believe we can win in our space as we move through the year despite significant macro challenges to the business.

In fiscal 2025, our focus will continue to be serving the customer by bringing differentiated product in a unique sales experience along with strategic investments focused on enhancing the customer experience while increasing market share and creating operational efficiencies to drive long-term operating margin expansion.

After two difficult years the business returned to growth and positive free cash flow.

The balance sheet remains strong with $147.6 million in cash and marketable securities at the end of fiscal 2024 with no debt.

We are in a solid financial position providing the security to manage through potential difficulties, while also investing strategically in important long-term initiatives and returning value to our shareholders.

While our growth and return to positive operating profit in fiscal 2024 have us optimistic, the macro-economic environment in 2025 remains unclear.

Inflation has moderated, but it is not yet at desired levels.

The impact of multiple years of compounding growth in the cost of consumer goods continues to put pressure on the discretionary income of our customer base as consumer savings balances decrease and consumer debt grows.

The impact of global events and regulation change could also continue to make things less clear on the consumer and potentially result in a pullback of spending.

However, with sales momentum as we exit fiscal 2024, our focus will be to further capitalize on the positive trends in the business and provide the newness that our customers expect from Zumiez.

Trend cycles continue to move quickly, and we will invest in our ability to better understand our customers, communicate with them and serve their needs to drive market share gains.

Net sales constitute gross sales, net of actual and estimated returns and deductions for promotions, and shipping revenue.

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We record the sale of gift cards as a current liability and recognize revenue when a customer redeems a gift card.

Additionally, the portion of gift cards that will not be redeemed (“gift card breakage”) is recognized based on our historical redemption rate in proportion to the pattern of rights exercised by the customer.

Additionally, the portion of gift cards

that will not be redeemed (“gift card breakage”) is recognized based on our historical redemption rate in proportion to the pattern of rights exercised by the customer.

We report “comparable sales” based on net sales beginning on the first anniversary of the first day of operation of a new store or ecommerce business.

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As a result, data herein regarding our comparable sales may not be comparable to similar data made available by our competitors or other retailers.

Cost of goods sold consists of branded merchandise costs and our private label merchandise costs including design, sourcing, importing and inbound freight costs.

Cost of goods sold ("COGS") consists of branded merchandise costs and our private label merchandise costs including design, sourcing, importing and inbound freight costs.

Our cost of goods sold also includes shrinkage, buying, occupancy, ecommerce fulfillment, distribution and warehousing costs (including associated depreciation) and freight costs for store merchandise transfers.

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With respect to the freight component of our ecommerce sales, amounts billed to our customers are included in net sales and the related freight cost is charged to cost of goods sold.

Selling, general and administrative expenses consist primarily of store personnel wages and benefits, administrative staff and infrastructure expenses, freight costs for merchandise shipments from the distribution centers to the stores, store supplies, depreciation on fixed assets at our home office and stores, facility expenses, training expenses and advertising and marketing costs.

Selling, general and administrative expenses consist primarily of store personnel wages and benefits, administrative staff and information technology expenses, freight costs for merchandise shipments from the distribution centers to the stores, store supplies, depreciation on fixed assets at our home office and stores, facility expenses, training expenses and advertising and marketing costs.

Credit card fees, insurance, public company expenses, legal expenses, amortization of intangibles, and other miscellaneous operating costs are also included in selling, general and administrative expenses.

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Selling, general and administrative expenses

Operating profit

Operating profit (loss)

Interest and other income, net

Earnings before income taxes

Earnings (loss) before income taxes

Provision for income taxes

Net (loss) income

Fiscal 2024 Results Compared With Fiscal 2023

Net sales were $875.5 million for fiscal 2023 compared to $958.4 million for fiscal 2022, a decrease of $82.9 million or 8.6%.

The decrease in sales was primarily driven by continued inflationary pressures on the consumer, continued challenges in competition for the discretionary dollar, and tougher trends in certain categories of our business.

The decrease in net sales included a decrease in transactions, partially offset by an increase in dollars per transaction.

The increase in dollars per transaction was driven by an increase in average unit retail, partially offset by a decrease in units per transaction.

For the year, the footwear category was our largest declining category followed by women’s, accessories, hardgoods and men’s.

By region, North America sales decreased $104.7 million or -13.1% and other international sales increased $21.8 million or 14.0% during fiscal 2023 compared to fiscal 2022.

Net sales for the year ended February 3, 2024 included a $2.5 million increase due to the change in foreign exchange rates, which consisted of $4.7 million in Europe, which was offset by decrease of $1.2 million in Canada, and decrease of $1.1 million in Australia.

Excluding the impact of changes in foreign exchange rates, North America sales decreased $103.5 million or -12.9% and other international sales increased $18.2 million or 11.8% during fiscal 2023 compared to fiscal 2022.

Gross profit was $280.9 million for fiscal 2023 compared to $324.7 million for fiscal 2022, a decrease of $43.8 million, or 13.5%.

As a percentage of net sales, gross profit decreased 180 basis points in fiscal 2023 to 32.1%, as we saw significant deleverage on lower sales across our fixed costs as well as rate increases in numerous areas.

The decrease was primarily driven by a 130 basis points deleverage in store occupancy costs and, 70 basis points decrease in product margin.

These decreases were partially offset by a 20 basis points of efficiencies in distribution costs.

Net sales were $889.2 million for fiscal 2024 compared to $875.5 million for fiscal 2023, an increase of $13.7 million or 1.6%.

The increase in sales was primarily driven by key brands and fashion trends in the market partially offset by a decrease of $12.0 million related to the additional week in the 53-week period, and the impact of closed stores worth $9.0 million.

Comparable sales increased 4.0% driven by an increase in dollars per transaction and partially offset by a decrease in transactions.

The increase in dollars per transaction was driven by an increase in both average unit retail, and units per transaction.

For the year, our largest growth in comparable sales was in our men’s category, followed by women’s and footwear.

Our largest comparable sales decrease was in our accessories category, followed by hardgoods.

By region, North America sales increased $22.3 million or 3.2% and other international sales decreased $8.6 million or 4.8% during fiscal 2024 compared to fiscal 2023.

Net sales for the year ended February 1, 2025 included a $3.1 million decrease due to the change in foreign exchange rates, which consisted of a $1.7 million decrease in Europe, a decrease of $1.1 million in Canada, and a decrease of $0.3 million in Australia.

Excluding the impact of changes in foreign exchange rates, North America sales increased $23.5 million or 3.4% and other international sales decreased $6.7 million or 3.8% during fiscal 2024 compared to fiscal 2023.

Gross profit was $303.0 million for fiscal 2024 compared to $280.9 million for fiscal 2023, an increase of $22.1 million, or 7.9%.

As a percentage of net sales, gross profit increased 200 basis points in fiscal 2024 to 34.1%.

The increase was primarily driven by 80 basis point benefit in web shipping costs, 70 basis point increase in product margin (defined as net sales minus cost of goods sold excluding shrinkage, buying, occupancy, distribution and warehousing costs and freight costs for store merchandise transfers) due to reduced discounting and continued strength of our private label that carries higher product margin, 50 basis point leverage in store occupancy costs, and

30 basis point efficiencies in distribution center cost.

These benefits were partially offset by 20 basis point of negative impact related to increased inventory shrinkage.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were $345.7 million for fiscal 2023 compared to $293.6 million for fiscal 2022, an increase of $52.1 million, or 17.7%.

SG&A expenses as a percent of net sales increased 880 basis points in fiscal 2023 to 39.5%.

The increase was primarily driven by 470 basis points due to impairment of goodwill worth $41.1 million, 180 basis points due to store wages tied to both deleverage on lower sales as well as rate increase that we could not offset by management of hours, 110 basis points due to store costs not tied to wages primarily impacted by deleverage on lower sales, 80 basis points in corporate costs, and 60 basis points in non-store wages.

These increases were partially offset by a 20 basis points decrease in training events.

Net (Loss) Income

Net loss for fiscal 2023 was $62.6 million, or $3.25 per diluted share, compared with net income of $21.0 million, or $1.08 per diluted share, for fiscal 2022.

Selling, general and administrative (“SG&A”) expenses were $301.1 million for fiscal 2024 compared to $345.7 million for fiscal 2023, a decrease of $44.6 million, or 12.9%.

SG&A expenses as a percent of net sales decreased 560 basis points in fiscal 2024 to 33.9%.

The benefit was primarily driven by 480 basis point benefit due to impairment of prior year goodwill worth $41.1 million, 30 basis point benefit due to lower corporate costs, 30 basis point benefit in store wages driven by efficiencies in hours and leverage in higher sales and 30 basis points from store costs not tied to wages primarily impacted by leverage on higher sales.

These decreases were partially offset by a 20 basis point increase in annual incentive compensation.

Net loss for fiscal 2024 was $1.7 million, or $0.09 per diluted share, compared with net loss of $62.6 million, or $3.25 per diluted share, for fiscal 2023.

Our effective income tax rate for fiscal 2024 was 142.0% compared to -1.2% for fiscal 2023.

The change in effective income tax rate for fiscal 2023 compared to fiscal 2022 was primarily related to an increase in foreign losses in certain jurisdictions, including Blue Tomato goodwill impairment, which are subject to a valuation allowance.

The change in effective income tax rate for fiscal 2024 compared to fiscal 2023 was primarily related to foreign losses in Austria, which are subject to a valuation allowance.

Due to cumulative and ongoing foreign losses in such jurisdictions, the realization of such deferred tax assets is uncertain and thus subject to a valuation allowance.

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Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day or within several days of the related sale, while we typically have longer payment terms with our vendors.

At February 3, 2024 and January 28, 2023, cash, cash equivalents and current marketable securities were $171.6 million and $173.5 million.

At February 1, 2025 and February 3, 2024, cash, cash equivalents and current marketable securities were $147.6 million and $171.6 million.

Working capital, the excess of current assets over current liabilities, was $166.9 million at the end of fiscal 2024, a decrease of 9% from $182.5 million at the end of fiscal 2023.

The decrease in cash, cash equivalents and current marketable securities in fiscal 2023 was due primarily to cash provided by operating activities of $14.8 million, partially offset by capital expenditures of $20.3 million primarily related to the opening of 19 new stores and 4 remodels and relocations.

The increase in cash, cash equivalents and current marketable securities in fiscal 2024 was due primarily to cash provided by operating activities of $20.7 million, sale of marketable securities net of purchases amounting to $47.6 million, partially offset by the $25.2 million repurchase of common stock, and capital expenditures of $15.0 million primarily related to the opening of 7 new stores and 6 remodels and relocations.

The following table summarizes our cash flows from operating, investing and financing activities (in thousands):

Total cash (used in) provided by

Total cash provided by (used in)

Operating activities

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Effect of exchange rate changes on cash and cash

Net (decrease) increase in cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Operating Activities

Net cash provided by operating activities increased by $5.9 million in fiscal 2024 to $20.7 million cash provided by operating activities from $14.8 million cash provided by operating activities in fiscal 2023.

Net cash provided by operating activities increased by $15.1 million in fiscal 2023 to $14.8 million cash provided by operating activities from $0.4 million cash used in operating activities in fiscal 2022.

Net cash provided by operating activities decreased by $135.3 million in fiscal 2022 to $0.4 million cash used in operating activities from $135.0 million cash provided by operating activities in fiscal 2021.

Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for inventory, employee compensation, store occupancy expenses and other operational expenditures.

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Investing Activities

Net cash provided by investing activities was $32.6 million in fiscal 2024 related to $15.0 million of capital expenditures primarily for and existing store remodels or relocations primarily offset by $47.6 million in sales of marketable securities, net of purchases.

Net cash used in investing activities was $8.5 million in fiscal 2023 related to $20.4 million of capital expenditures primarily for new store openings and existing store remodels or relocations primarily offset by $11.7 million in net sales of marketable securities.

Net cash provided by investing activities was $54.2 million in fiscal 2022 related to $79.8 million in net sales of marketable securities and $25.6 million of capital expenditures primarily for new store openings and existing store remodels or relocations.

Net cash provided by investing activities was $101.6 million in fiscal 2021 related to $117.4 million in net sales of marketable securities and $15.7 million of capital expenditures primarily for new store openings and existing store remodels or relocations.

Financing Activities

Net cash used in financing activities in fiscal 2024 was $24.6 million, related $25.2 million used in the repurchase of common stock partially offset by $0.6 million in proceeds from the issuance and exercise of stock-based awards.

Net cash provided by financing activities in fiscal 2023 was $0.7 million related to proceeds from the issuance and exercise of stock-based awards.

Net cash used in financing activities in fiscal 2022 was $87.3 million related to $87.9 million used in the repurchase of common stock and $0.5 million in payments for tax withholding obligations upon vesting of restricted stock partially offset by $1.1 million in proceeds from the issuance and exercise of stock-based awards

Net cash used in financing activities in fiscal 2021 was $191.4 million related to $193.8 million used in the repurchase of common stock and $0.6 million in payments on tax withholding obligation upon vesting of restricted stock partially offset by $3.0 million in proceeds from the issuance and exercise of stock-based awards.

Capital Expenditures

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However, there can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our then-current shareholders.

As of February 3, 2024, we maintained a secured credit agreement with Wells Fargo Bank, N.A., which provided us with a senior secured credit facility (“credit facility”) of up to $25.0 million through December 1, 2024.

The credit facility is available for working capital and other general corporate purposes.

The credit facility provides for the issuance of standby letters of credit in an amount not to exceed $17.5 million outstanding at any time and with a term not to exceed 365 days beyond the maturity of the credit facility.

The commercial line of credit provides for the issuance of commercial letters of credit in an amount not to exceed $10.0 million and with terms not to exceed 120 days beyond the maturity of the credit facility.

On December 20, 2024, we entered into a credit agreement with PNC Bank, National Association (the “bank”).

The Credit Agreement provides for a revolving credit facility of up to $25 million (the “credit facility”) and is available for general corporate purpose.

This Credit Facility also provides for the issuances of standby letters of credit in an amount not to exceed $17.5 million, commercial letters of credit in an amount not to exceed $10 million and borrowings in foreign currency with a borrowing sublimit not to exceed $15 million in equivalent U.S.

The amount of borrowing available at any time under the Credit Facility is reduced by the amount of standby and commercial letters of credit outstanding at that time.

This credit facility replaced our previously maintained agreement with Wells Fargo Bank, N.A.

which we terminated on May 3, 2024.

The new Credit Facility is secured by cash and marketable securities that are in an account held and monitored by the Bank.

The value of this collateral must always be greater than or equal to the new Credit Facility commitment amount of $25 million.

Amounts borrowed under the new Credit Facility bear interest at the rate of SOFR plus 1.00% per annum.

The Credit Agreement does not provide for any financial covenants but does include standard and customary covenants consistent with credit facilities of this nature.

The new Credit Facility does not carry any ongoing or unused balance fees.

The Credit Facility will mature on December 20, 2025.

The credit facility is secured by a first-priority security interest in substantially all personal property (but not the real property) of the borrowers and guarantors.

There were no borrowings or open commercial letters of credit outstanding under the secured credit facility at February 3, 2024 and January 28, 2023.

We had $3.5 million and $0.6 million in issued, but undrawn, standby letters of credit at February 3, 2024 and January 28, 2023, respectively.

On November 30, 2023, we entered a third amendment to our credit facility with Wells Fargo Bank, N.A.

The amendment, among other things, (a) amended the credit limit to $25 million through December 1, 2024;

(b) amended the EBITDA covenant to not less than $9 million for the quarter ending October 28, 2023, not less than $2.5 million for the quarter ending February 3, 2024, not less than $9 million in the quarter ending May 4, 2024, not less than $12 million for the quarter ending August 3, 2024, and not less than $20 million for the quarter ending November 2, 2024;

(d) introduced an unused commitment fee of 0.50% per annum;

and (e) disallows distribution of dividends or execution of stock buybacks through December 1, 2024 without bank approval.

There were no borrowings or open commercial letters of credit outstanding under the secured credit facility at February 1, 2025 and February 3, 2024.

We had $2.7 million and $3.5 million in issued, but undrawn, standby letters of credit at February 1, 2025 and February 3, 2024, respectively

Critical Accounting Estimates

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However, if actual results are not consistent with our estimates, we may be exposed to losses or gains that could be material.

Our inventory reserves have decreased by $0.3 million in fiscal 2023.

Our inventory reserves have increased by $0.4 million in fiscal 2024.

A 10% decrease in the sales price of our inventory at February 1, 2025 would have decreased net income by $0.6 million in fiscal 2024.

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However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material .

Our sales return reserve has decreased by $0.1 million in fiscal 2023.

Our sales return reserve has increased by $0.2 million in fiscal 2024.

A 10% increase in our sales return reserve at February 1, 2025 would have decreased net income by $0.3 million in fiscal 2024.

Our gift card breakage reserve has increased by $1.8 million in fiscal 2024.

A 1% increase in the estimated gift card redemption rate would have decreased net income by $0.1 million in fiscal 2023.

A 1% increase in the estimated gift card redemption rate would have decreased net income by less than $0.1 million in fiscal 2024.

Accounting for Income Taxes

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Although management believes that the income tax related judgments and estimates are reasonable, actual results could differ and we may be exposed to losses or gains that could be material.

At February 3, 2024 and January 28, 2023, we had valuation allowances on our deferred tax assets of $25 million and $12.8 million, respectively.

At February 1, 2025 and February 3, 2024, we had valuation allowances on our deferred tax assets of $28.8 million and $25.0 million, respectively.

Significant changes in performance or estimated taxable income may result in a change in our assessment of the valuation allowance.

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See Note 11, “Commitments and Contingencies,” in the Notes to the consolidated financial statements found in Part IV Item 15 of this Form 10-K.

Goodwill and Indefinite-lived Intangible Assets

We assess goodwill and indefinite-lived intangible assets for impairment on an annual basis or more frequently if indicators of impairment arise.

We perform this analysis at the reporting unit level.

We have an option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If we choose not to perform the qualitative test or we determine that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, we compare the carrying value of the reporting unit to its estimated fair value, which is based on the perspective of a market-participant.

If the fair value of the reporting unit is lower than the carrying value, an impairment loss is recorded for the amount in which the carrying value exceeds the estimated fair value.

The goodwill and indefinite-lived intangible assets impairment tests require management to make assumptions and judgments.

Our quantitative goodwill analysis of fair value is determined using a combination of the income and market approaches.

Key assumptions in the income approach include estimating future cash flows, long-term growth rates and weighted average cost of capital.

Our ability to realize the future cash flows used in our fair value calculations is affected by factors such as changes in economic conditions, operating performance and our business strategies.

Key assumptions in the market approach include identifying companies and transactions with comparable business factors, such as earnings growth, profitability, business and financial risk.

The fair value of the trade names and trademarks is determined using the relief from royalty method, which requires assumptions including forecasting future sales, discount rates and royalty rates.

Based on the results of our annual impairment test for goodwill and indefinite-lived intangible assets, an impairment was recorded related to the goodwill from Blue Tomato acquisition of $41.1 million.

No impairment was recorded for indefinite-lived intangible assets.

If actual results are not consistent with our estimates or assumptions, or there are significant changes in any of these estimates, projections and assumptions, could have a material effect of the fair value of these assets in future measurement periods and result in an additional impairment, which could materially affect our results of operations.

See Note 7 Goodwill and Intangible Assets for the details of the impairment.

Recent Accounting Pronouncements

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To the extent we borrow under this revolving credit facility, we are exposed to the market risk related to changes in interest rates.

Effective as of May 3, 2024, we terminated our Credit Agreement with Wells Fargo Bank and standby letters of credit were transitioned to restricted deposits.

On December 20, 2024, we entered a new Credit Agreement with PNC Bank, National Association.

See Note 9 Revolving Credit Facilities and Debt for more details of termination and new credit agreement.

At February 1, 2025, we had no borrowings outstanding under the secured revolving credit facility.

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Changes in Internal Control Over Financial Reporting .

There has been no change in our internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)) during the quarter ended February 3, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There has been no change in our internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)) during the quarter ended February 1,

2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting .

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Notes to Consolidated Financial Statements

Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

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We have audited the accompanying consolidated balance sheets of Zumiez Inc.

(the “Company”) as of February 3, 2024 and January 28, 2023, the related consolidated statements of (loss) income, comprehensive (loss) income, changes in shareholders’ equity and cash flows for each of the three years in the period ended February 3, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of February 1, 2025 and February 3, 2024, the related consolidated statements of (loss) income, comprehensive (loss) income, changes in shareholders’ equity and cash flows for each of the three years in the period ended February 1, 2025, and the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of February 3, 2024 and January 28, 2023, and the consolidated results of its operations and its cash flows for each of the three years in the period ended February 3, 2024, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of February 1, 2025 and February 3, 2024, and the consolidated results of its operations and its cash flows for each of the three years in the period ended February 1, 2025, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and

evaluating the design and operating effectiveness of internal control based on the assessed risk.

operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the

audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill and Intangible Assets Impairment

As described in Note 7 to the consolidated financial statements, the Company’s consolidated goodwill and intangible assets balances were $15.4 million and $14.2 million, respectively, as of February 3, 2024.

For the year ended February 3, 2024, the Company recorded a full impairment of the Europe reporting unit goodwill, as disclosed in Notes 7 and 12, amounting to $41.1 million.

As described in Note 2 to the consolidated financial statements, the Company has an option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than it’s carrying amount.

If management chooses not to perform the qualitative test or determines that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, the Company’s evaluation of impairment of goodwill and intangible assets requires a comparison of the reporting unit’s and intangible asset’s fair value to their carrying value.

If the fair value of the reporting unit or intangible asset is lower than the carrying value, then the Company records an impairment in the amount equal to the excess, not to exceed the carrying value.

The determination of the fair value of the reporting unit and intangible assets requires management to make significant estimates, complex judgments, and assumptions.

These assumptions include forecasts of future cash flows, long-term growth rates, weighted average cost of capital, valuation ratios derived from market transactions of similar companies, and royalty rates.

Given the Company’s evaluation of impairment of goodwill and intangible assets requires management to make significant assumptions, performing audit procedures to evaluate whether management appropriately determined the fair value of the reporting unit and intangible assets required a high degree of auditor judgment.

In addition, our audit effort included the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

The primary procedures we performed to address this critical audit matter included:

• Testing the effectiveness of internal controls relating to management’s goodwill and intangible assets impairment tests, including controls over the determination of the fair value of the Europe reporting unit and related intangible assets.

• Testing management’s process for determining the fair value of the Europe reporting unit and related intangible assets.

We evaluated the reasonableness of management’s forecasts of future cash flows, including store growth, and long-term growth rates by comparing these forecasts to historical operating results of the Company and performing a retrospective review of the accuracy of management’s prior forecasts.

• Utilizing a valuation specialist to assist in testing management’s income and market approach models for the Europe reporting unit and relief from royalty method for intangible assets and certain related significant assumptions.

• Evaluating whether the assumptions used were reasonable by considering the past performance of the reporting unit and third-party market data, and whether such assumptions were consistent with evidence obtained in other areas of the audit.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Store Assets Impairment

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If the carrying amount exceeds the estimated undiscounted future cash flows, an analysis is performed to estimate the fair value of the assets.

An impairment is recorded if the fair value of the store’s assets is less than the carrying amount.

An impairment is recorded if the

fair value of the store’s assets is less than the carrying amount.

The evaluation of store assets for possible indications of impairment and the determination of the fair value of a store requires management to make significant estimates, complex judgments, and assumptions.

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Given the Company’s evaluation of impairment of store assets requires management to make significant assumptions, performing audit procedures to evaluate whether management appropriately identified events or changes in circumstances indicating that the carrying amounts of store assets may not be recoverable and determine store fair value required a high degree of auditor judgment.

In addition, our audit effort included the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

The primary procedures we performed to address this critical audit matter included:

• Testing the effectiveness of internal controls relating to management’s identification of indicators of impairment, the assessment of the projected undiscounted cash flows to be generated by stores with indicators of impairment, the determination of the fair value of the stores, and the measurement of any resulting impairment.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included evaluating the design and testing the operating effectiveness of internal controls related to management’s identification of indicators of impairment, the assessment of the projected undiscounted cash flows to be generated by stores with indicators of impairment, the determination of the fair value of the stores, and the measurement of any resulting impairment.

Our audit procedures included the following, among others:

• Evaluating management’s store asset impairment analysis, including inspecting the Company’s analysis of historical results by store to determine if contrary evidence existed as to the completeness of the population of potentially impaired stores.

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• Evaluating management’s assumptions used to estimate the fair value of the stores by performing a sensitivity analysis to evaluate the changes in the fair value of the individual stores that would result from changes in the underlying assumptions.

• Utilizing a valuation specialist to assist in our evaluation of the current market rents and market participant real estate data, and related assumptions used to estimate store fair value.

/s/ Moss Adams LLP

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February 1, 2025

January 28, 2023

February 3, 2024

Current assets

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and outstanding at February 1, 2025 and 19,833 shares issued

and outstanding at January 28, 2023

and outstanding at February 3, 2024

Accumulated other comprehensive loss

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Selling, general and administrative expenses

Operating (loss) profit

Operating profit (loss)

Interest income, net

Other expense, net

(Loss) Earnings before income taxes

Earnings (loss) before income taxes

Provision for income taxes

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Diluted (loss) earnings per share

Weighted average shares used in computation of earnings

Weighted average shares used in computation of (loss) earnings per share

See accompanying notes to consolidated financial statements.

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Net (loss) income

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

Other comprehensive (loss) income, net of tax:

Foreign currency translation

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

debt securities

Other comprehensive income (loss), net

Net change in fair value of marketable debt securities

Other comprehensive (loss) income

Comprehensive (loss) income

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Comprehensive

Income (Loss)

Balance at January 29, 2022

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Balance at January 28, 2023

Other comprehensive loss, net

Other comprehensive income, net

Issuance and exercise of stock-based awards

Stock-based compensation expense

Repurchase of common stock

Balance at January 28, 2023

Other comprehensive income, net

Balance at February 3, 2024

Other comprehensive loss, net

Issuance and exercise of stock-based awards

Stock-based compensation expense

Repurchase of common stock

Balance at February 1, 2025

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Net (loss) income

Adjustments to reconcile net income to net cash

provided (used in) by operating activities:

Adjustments to reconcile (loss) income to net cash used in operating activities:

Depreciation, amortization and accretion

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Impairment of goodwill and long-lived assets

Foreign currency transaction loss

Changes in operating assets and liabilities:

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Sales and maturities of marketable securities and other

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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Common stock repurchased

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

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

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net change in cash, cash equivalents, and restricted cash

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

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Cash paid during the period for income taxes

Accrual for repurchase of common stock

Accrual for purchases of fixed assets

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The fiscal year ended February 1, 2025 has 52-week period.

The fiscal years ended January 28, 2023 and January 29, 2022 were 52-week periods.

The fiscal years ended February 3, 2024 has a 53-week period and January 29, 2022 has a 52-week period.

Basis of Presentation— The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

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The amount was recorded as a reduction to expense in selling, general and administrative expenses on the consolidated statement of (loss) income in the first quarter of fiscal 2022.

Reclassification— Certain prior period amounts have been reclassified to be consistent with current year presentation within our consolidated statement of cash flows and Note 15, Income Taxes.

Summary of Significant Accounting Policies

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Deposits in these financial institutions may exceed the amount of federal deposit insurance provided on such deposits.

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 consolidated balance sheets.

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 current and other long-term assets on our consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balanc e sheets that sum to the total of the same such amounts shown in the consolidated statement of cash flows (in thousands):

February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

Cash and cash equivalents

Restricted cash included in other long-term assets

Restricted cash included in other current assets and other long-term assets

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

Restricted cash included in other long-term assets represents amounts held as insurance collateral and collateral for bank guarantees on certain store operating leases.

Restricted cash included in other current and other long-term assets represents amounts held as insurance collateral and collateral for bank guarantees on certain store operating leases.

Marketable Securities —Our marketable securities primarily consist of U.S treasury and government agency securities, corporate debt securities, state and local municipal securities and variable-rate demand notes.

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Shrinkage refers to a reduction in inventory due to shoplifting, employee theft and other matters.

We estimate an inventory shrinkage reserve for anticipated losses and a write down for our merchandise inventories at February 3, 2024 and January 28, 2023 in the amounts of $ 2.8 million and $ 2.5 million, respectively.

We estimate an inventory shrinkage reserve for anticipated losses and a write down for our merchandise inventories at February 1, 2025 and February 3, 2024 in the amounts of $ 3.2 million and $ 2.8 million, respectively.

Fixed Assets— Fixed assets primarily consist of leasehold improvements, fixtures, land, buildings, computer equipment, software and store equipment.

Fixed assets a re stated at cost less accumulated depreciation utilizing the straight-line method over the assets’ estimated useful lives.

Fixed assets a re stated at cost less accumulated depreciation utilizing the

straight-line method over the assets’ estimated useful lives.

The useful lives of our major classes of fixed assets are as follows:

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Lesser of 10 years or the term of the lease

3 to 7 year s

Buildings, land, and building and land improvements

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Our AROs are associated with leasehold improvements that, at the end of a lease, we are contractually obligated to remove in order to comply with certain lease agreements.

The ARO balance at February 3, 2024 and January 28, 2023 was $ 4.8 million and $ 3.4 million and is recorded in other liabilities and other long-term liabilities on the consolidated balance sheets and will be subsequently adjusted for changes in fair value.

The associated estimated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and depreciated over its useful life.

The ARO balance at February 1, 2025 and February 3, 2024 was $ 4.8 million and $ 4.8 million, respectively, and is recorded in other liabilities and other long-term liabilities on the consolidated balance sheets and will be subsequently adjusted for changes in fair value.

The associated estimated asset ret irement costs are capitalized as part of the carrying amount of the long-lived asset and depreciated over its useful life.

Valuation of Long-Lived Assets— We review the carrying value of long-lived assets or asset groups (generally defined as a store, corporate facility or distribution center) for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable.

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Key assumptions in the market approaches include identifying companies and transactions with comparable business factors, such as earnings growth, profitability, business and financial risk.

We recorded a full impairment of Blue Tomato goodwill amounting to $ 41.1 million.

At February 1, 2025, there was no goodwill impairment recorded.

At February 3, 2024 , we recorded a full impairment of Blue Tomato goodwill amounting to $ 41.1 million.

See Note 7 Goodwill and Intangible Assets for the details of the impairment.

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We test our indefinite-lived assets by estimating the fair value of the asset and comparing that to the carrying value, an impairment loss is recorded for the amount that carrying value exceeds the estimated fair value.

The fair value of the trade names and trademarks is determined

using the relief from royalty method.

The fair value of the trade names and trademarks is determined using the relief from royalty method.

This method assumes that the trade name and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them.

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We accrue for estimated sales returns by customers based on historical return experience.

The allowance for sales returns at February 3, 2024 and January 28, 2023 was $ 3.0 million and $ 3.1 million, respectively.

We record the sale of gift cards as a current liability and recognize revenue when a customer redeems a gift card.

The current liability for gift cards w as $ 4.3 million at February 3, 2024 and $ 4.9 million at January 28, 2023.

The allowance for sales returns at February 1, 2025 and February 3, 2024 was $ 3.2 million and $ 3.0 million, respectively.

We record the sale of gift cards as a current liability and recognize revenue w hen a customer redeems a gift card.

The current liability for gift cards was $ 3.6 million at February 1, 2025 and $ 4.3 million at February 3, 2024.

Additionally, the portion of gift cards that will not be redeemed (“gift card breakage”) is recognized in proportion of the patterns used by the customer based on our historical redemption patterns.

For the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022, we recorded net sales related to gift card breakage income of $ 1.8 million, $ 1.9 million and $ 1.7 million, respectively.

For the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023, we recorded net sales related to gift card breakage income of $ 2.0 million, $ 1.8 million and $ 1.9 million, respectively.

Loyalty Program— We have a customer loyalty program, the Zumiez STASH, which allows members to earn points for purchases or performance of certain activities.

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Points earned for the performance of activities are recorded as a current liability based on the estimated cost of the points and as marketing expense when redeemed.

The deferred revenue related to our customer loyalty program at February 3, 2024 and January 28, 2023 wa s $ 1.0 million an d $ 1.2 million, respectively.

The deferred revenue related to our customer loyalty program at February 1, 2025 and February 3, 2024 was $ 1.1 million and $ 1.0 million, respectively.

Cost of Goods Sold— Cost of goods sold consists of branded merchandise costs and our private label merchandise costs including design, sourcing, importing and inbound freight costs.

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Advertising expenses are net of sponsorships and vendor reimbursements.

Advertising expense was $ 11.5 million, $ 10.4 million and $ 13.5 million for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022 , respectively.

Advertising expense was $ 9.2 million, $ 11.5 million and $ 10.4 million for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023 , respectively.

Stock-Based Compensation— We account for stock-based compensation by recording the estimated fair value of stock-based awards granted as compensation expense over the vesting period, net of estimated forfeitures.

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Interest and penalties related to income tax matters are classified as a component of income tax expense.

Unrecognized tax benefits of $ 2.6 million and $ 2.5 million are recorded in other long-term liabilities on the consolidated balance sheets at February 3, 2024 and January 28, 2023, respectively.

Unrecognized tax benefits of $ 1.9 million and $ 2.6 million are recorded in other long-term liabilities on the consolidated balance sheets at February 1, 2025 and February 3, 2024, respectively.

Our tax provision for interim periods is determined using an estimate of our annual effective rate, adjusted for discrete items, if any, that are taken into account in the relevant period.

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Recent Accounting Standards—

In November 2024, the FASB issued Accounting Standards Update ("ASU") 2024-03, Comprehensive Income (Topic 220):

Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement in response to longstanding requests from investors for more information about an entity’s expenses.

The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

The Company is currently evaluating the effect that the new ASU will have on its disclosures.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

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This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an

explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

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Early adoption is also permitted.

This ASU will likely result in us including the additional required disclosures when adopted.

We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.

We adopted this ASU for the fiscal year ending February 1, 2025, which resulted in additional disclosures to Note 18, Segment Reporting.

In December 2023, the FASB issued ASU No.

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This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

The Company plans to adopt ASU 2023-09 effective for fiscal 2025.

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

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United States

Net sales for the year ended February 1, 2025 included a $ 3.1 million increase due to the change in foreign exchange rates, which consisted of $ 1.7 million in Europe, $ 1.1 million in Canada, and $ 0.3 million in Australia.

Net sales for the year ended February 3, 2024 included a $ 2.5 million increase due to the change in foreign exchange rates, which consisted of $ 4.7 million in Europe, which was offset by decrease of $ 1.2 million in Canada, and decrease of $ 1.0 million in Australia.

Net sales for the year ended January 28, 2023 included a $ 17.7 million decrease due to the change in foreign exchange rates, which consisted of $ 13.7 million in Europe, $ 2.2 million in Canada, and $ 1.8 in Australia.

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):

The following tables summarize the estimated fair value of our cash, cash equivalents and marketable securities and the gross unrealized holdin g gains and losses (in thousands):

February 1, 2025

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Money market funds

Treasury and agency securities

Corporate debt securities

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Certificates of deposit

State and local government securities

Variable-rate demand notes

Total marketable securities

January 28, 2023

February 3, 2024

Cash and cash equivalents:

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Corporate debt securities

Certificates of deposit

State and local government securities

Variable-rate demand notes

Total marketable securities

All of ou r available-for-sale debt securities have an effective maturity date of five years or less and may be liquidated, at our discretion, prior to maturity.

All of ou r marketable securities have an effective maturity date or weighted average life of five years or less at the time of purchase and may be liquidated, at our discretion, prior to maturity.

The following tables summarize the gross unrealized holding losses and fair value for investments in an unrealized loss position, and the length of time that individual securities have been in a continuous loss position (in thousands):

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12 Months or Greater

Cash and cash equivalents:

Corporate debt securities

Total cash and cash equivalents

Marketable securities:

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Corporate debt securities

State and local government securities

Total marketable securities

January 28, 2023

February 3, 2024

Less Than Twelve Months

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Total marketable securities

We did no t record a realized loss for other-than-temporary impairments during the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022 .

We did no t record a realized loss for other-than-temporary impairments during the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023 .

Receivables consisted of the following (in thousands):

February 1, 2025

January 28, 2023

February 3, 2024

Credit cards receivable

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Tax-related receivable

Tenant allowances receivable

Interest receivable

Other receivables

Tenant allowances receivable

Fixed assets consisted of the following (in thousands):

February 1, 2025

January 28, 2023

February 3, 2024

Leasehold improvements

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Fixed assets, net

Depreciation expense on fixed assets is recognized on our consolidated income statement as follows (in thousands):

Depreciation expense on fixed assets is recognized on our consolidated income statement of (loss) income as follows (in thousands):

Fiscal Year Ended

February 1, 2025

January 29, 2022

February 3, 2024

January 28, 2023

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Depreciation expense

Impairment of Fixed Assets— We recorded $ 1.6 million, $ 1.7 million and $ 0.1 million of impa irment of fixed assets in selling, general and administrative expenses on the consolidated statements of (loss) income for the years ended February 3, 2024, January 28, 2023 and January 29, 2022 .

Impairment of Fixed Assets— We recorded $ 0.9 million, $ 1.6 million and $ 1.7 million of impa irment of fixed assets in selling, general and administrative expenses on the consolidated statements of (loss) income for the years ended February 1, 2025, February 3, 2024 and January 28, 2023 , respectively.

Goodwill and Intangible Assets

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Effects of foreign currency translation

Balance as of January 28, 2023

Balance as of February 3, 2024

Effects of foreign currency translation

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We recorded a full impairment of Blue Tomato goodwill amounting to $ 41.1 million for the fiscal year ended February 3, 2024.

Though sales at Blue Tomato continued a trend of year-over-year growth, the trend has been more closely tied to store growth than comparable sales trends needed to keep up with the cost of doing business.

As such, we have experienced increasing operating losses with the current fiscal year having the largest loss at Blue Tomato since acquisition.

The macroeconomic climate conditions continue to indicate economic instability.

For our fiscal year 2023, sales at Blue Tomato continued a trend of year-over-year growth.

The trend has been more closely tied to store growth than comparable sales trends needed to keep up with the cost of doing business.

As such, we have experienced increasing operating losses with the prior fiscal year having the largest loss at Blue Tomato since acquisition.

The macroeconomic climate conditions indicated economic instability.

Factors include consumer trends, higher costs of doing business, lingering COVID-19 impacts, war in Ukraine, energy challenges and inflation/interest rate pressures.

These pressures and the continued lack of scalability in the business lead the Board and Company management to prioritize positive cash flow and operating profit in the annual budget cycle and the resulting 5 and 10-year plans that reduced expected store count by 50 % to align with lower levels of capital and attempt to focus on profitability rather than growth.

This change in store growth directly impacts the future revenue expectations of the business and related present value valuation technique used in our annual impairment test.

These pressures and the continued lack of scalability in the business lead the Board and Company management to prioritize positive cash flow and operating profit in the annual

budget cycle and the resulting 5 and 10-year plans that reduced expected store count by 50 % to align with lower levels of capital and attempt to focus on profitability rather than growth.

This change in store growth directly impacted the future revenue expectations of the business and related present value valuation technique used in our annual impairment test.

Furthermore, we have reduced growth rates going forward to more closely align with historical trends as well as factor in the impact of less maturing stores.

There was no impairment of goodwill for the fiscal years ended January 28, 2023 and January 29, 2022.

There was no impairment of goodwill for the fiscal years ended February 1, 2025 and January 28, 2023.

The following table summarizes the gross carrying amount, accumulated amortization and the net carrying amount of intangible assets (in thousands):

February 1, 2025

January 28, 2023

February 3, 2024

Gross Carrying Amount

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Total intangible assets

There was no impairment of intangible assets for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022.

There was no impairment of intangible assets for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023.

All amounts in the tables above are denominated in a foreign currency and subject to foreign exchange fluctuation.

We re corded no amortization expense for intangible assets for the year ended February 3, 2024 and January 28, 2023.

We recorded $ 0.1 million of amortization expense for intangible assets for the year ended January 29, 2022 .

We recorded no amortization expense for intangible assets for the years ended February 1, 2025, February 3, 2024 and January 28, 2023.

Amortization expense of intangible assets is recorded in selling, general and administrative expense on the consolidated statements of (loss) income .

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February 1, 2025

January 28, 2023

February 3, 2024

Accrued indirect taxes

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Revolving Credit Facilities and Debt

On October 14, 2021, we amended our credit agreement with Wells Fargo Bank, N.A.

(previously entered into December 7, 2018), which provided us with a senior secured credit facility (“credit facility”) of up to $ 25.0 million through December 1, 2023, and up to $ 35.0 million after December 1, 2023 and through December 1, 2024.

The secured revolving credit facility is available for working capital and other general corporate purposes.

The senior secured credit facility provides for the issuance of standby letters of credit in an amount not to exceed $ 17.5 million outstanding at any time and with a term not to exceed 365 days.

The commercial line of credit provides for the issuance of commercial letters of credit in an amount not to exceed $ 10.0 million and with terms not to exceed 120 days.

The amount of borrowings available at any time under our credit facility is reduced by the amount of standby and commercial letters of credit outstanding at that time.

On December 20, 2024, we entered into a credit agreement with PNC Bank, National Association (the “bank”).

The Credit Agreement provides for a revolving credit facility of up to $ 25 million (the “credit facility”) and is available for general corporate purpose.

This Credit Facility also provides for the issuances of standby letters of credit in an amount not to exceed $ 17.5 million, commercial letters of credit in an amount not to exceed $ 10 million and borrowings in foreign currency with a borrowing sublimit not to exceed $ 15 million in equivalent U.S.

The amount of borrowing available at any time under the Credit Facility is reduced by the amount of standby and commercial letters of credit outstanding at that time.

This credit facility replaced our previously maintained agreement with Wells Fargo Bank, N.A.

which we terminated on May 3, 2024.

The new Credit Facility is secured by cash and marketable securities that are in an account held and monitored by the Bank.

The value of this collateral must always be greater than or equal to the new Credit Facility commitment amount of $ 25 million.

Amounts borrowed under the new Credit Facility bear interest at the rate of SOFR plus 1.00 % per annum.

The Credit Agreement does not provide for any financial covenants but does include standard and customary covenants consistent with credit facilities of this nature.

The new Credit Facility does not carry any ongoing or unused balance fees.

The Credit Facility will mature on December 20, 2025.

All obligations under the credit facility are joint and several with Zumiez Services and guaranteed by certain of our subsidiaries.

The credit facility is secured by a first-priority security interest in substantially all of the personal property (but not the real property) of the borrowers and guarantors.

Amounts borrowed under the credit facility bear interest at a daily simple SOFR rate plus a margin of 1.35 % per annum.

The credit facility contains various representations, warranties and restrictive covenants that, among other things and subject to specified circumstances and exceptions, restrict our ability to incur indebtedness (including guarantees), grant liens, make investments, pay dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers, dispose of certain assets or change the nature of their business.

The credit facility contains certain financial maintenance covenants that generally require the Registrant to have net income after taxes of at least $ 5.0 million on a trailing four-quarter basis and a quick ratio of 1.25 :1.0 at the end of each fiscal quarter.

The credit facility contains certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance, and providing additional guarantees and collateral in certain circumstances.

The credit facility includes customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross-default to other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, material judgments and change of control.

On November 30, 2023, we entered into a third amendment to our credit facility with Wells Fargo Bank, N.A.

The amendment, among other things, (a) amended the credit limit to $ 25 million through December 1, 2024;

(b) amended the EBITDA covenant to not less than $ 9 million for the quarter ending October 28, 2023, not less than $ 2.5 million for the quarter ending February 3, 2024, not less than $ 9 million in the quarter ending May 4, 2024, not less than $ 12 million for the quarter ending August 3, 2024, and not less than $ 20 million for the quarter ending November 2, 2024;

(d) introduced an unused commitment fee of 0.50 % per annum;

and (e) disallows distribution of dividends or execution of stock buybacks through December 1, 2024 without bank approval.

The re were no borrowings outstanding under the credit facility at February 3, 2024 or January 28, 2023 .

We had no open commercial letters of credit outstanding under our secured revolving credit facility at February 3, 2024 or January 28, 2023 .

We had $ 3.4 million in issued, but undrawn, standby letters of credit at February 3, 2024 , and $ 0.6 million in issued, but undrawn, standby letters of credit at January 28, 2023 .

There were no borrowings outstanding under the credit facilities at February 1, 2025 or February 3, 2024 .

We had no open commercial letters of credit outstanding under our secured revolving credit facilities at February 1, 2025 or February 3, 2024.

We had $ 2.7 million and $ 3.5 million in issued, but undrawn, standby letters of credit at February 1, 2025 and February 3, 2024, respectively.

At February 1, 2025, we had operating leases for our retail stores, certain distribution and fulfillment facilities, vehicles and equipment.

Our remaining lease terms vary from one month to eleven years , with varying renewal and termination options.

At February 3, 2024 and January 28, 2023, the weighted-average of the remaining lease term was 5.0 years and the weighted-average operating lease discount rate was 3.4 % and 2.5 %, respectively.

At February 1, 2025 and February 3, 2024, the weighted-average of the remaining lease term was 4.8 years and 5.0 years, respectively, and the weighted-average operating lease discount rate was 4.6 % and 3.4 % , respectively.

The following table presents components of lease expense (in thousands):

February 1, 2025

February 3, 2024

January 28, 2023

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February 1, 2025

January 28, 2023

February 3, 2024

Cash paid for amounts included in the measurement of lease liabilities:

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Commitments and Contingencies

Purchase Commitments— At February 3, 2024 and January 28, 2023, we had outstanding purchase orders to acquire merchandise from vendors of $ 180.9 million and $ 174.3 million, respectively.

Purchase Commitments— At February 1, 2025 and February 3, 2024, we had outstanding purchase orders to acquire merchandise from vendors of $ 173.0 million and $ 180.9 million, respectively.

We have an option to cancel these commitments with no notice prior to shipment, except for certain private label, packaging supplies and international purchase orders in which we are obligated to repay contractual amounts upon cancellation.

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We maintain reserves for our self-insured losses, which are estimated based on actuarial based analysis of historical claims experience.

The self-insurance reserve, which is recorded under Accrued payroll and payroll taxes in the consolidated balance sheets, was $ 1.7 million and $ 2.8 million for fiscal years ended February 3, 2024 and January 28, 2023, respectively .

The self-insurance reserve, which is recorded under Accrued payroll and payroll taxes in the consolidated balance sheets, was $ 1.5 million and $ 1.7 million for fiscal years ended February 1, 2025 and February 3, 2024 , respectively.

Fair Value Measurements

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Money market funds

treasury and government agency securities

Corporate debt securities

3 unchanged sentences

Certificates of deposit

State and local government securities

Variable-rate demand notes

Long-term other assets:

Money market funds

January 28, 2023

February 3, 2024

Cash equivalents:

4 unchanged sentences

Corporate debt securities

Certificates of deposit

State and local government securities

Variable-rate demand notes

Long-term other assets:

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We recorded impairment charges for operating lease right-of-use assets of $ 0.6 million in cost of sales.

We recorded impairment charges for fixed asset of $ 0.9 million in selling, general and administrative expenses on the consolidated statement of (loss) income for the year ended February 1, 2025.

We recorded impairment charges for operating right-of-use assets of $ 1.3 million in costs of sales.

We recorded impairment charges for fixed assets and goodwill of $ 1.6 million and $ 41.1 million, respectively, in selling, general and administrative expenses on the consolidated statement of (loss) income for the year ended February 3, 2024 .

We recorded impairment charges for operating right-of-use assets of $ 0.4 million in costs of sales and impairment charges for fixed assets of $ 1.7 million in selling, general and administrative expenses on the consolidated statement of (loss) income for the year ended January 28, 2023 .

Stockholders’ Equity

Share Repurchase— In December 2021, our Board of Directors approved the repurchase of up to an aggregate of $ 150 million of common stock.

This repurchase program superseded all previously approved and authorized stock repurchase programs.

The December 2021 stock repurchase program was completed in March 2022.

Share Repurchase— On June 5, 2024, Zumiez Inc.

approved the repurchase of up to an aggregate of $ 25 million of its Common Stock (the “Repurchase Program”).

As of February 1, 2025 , we have used all of $ 25 million approved amount to repurchase common stock under the share repurchase program.

The following table summarizes common stock repurchase activity (in thousands, except per share amounts):

1 unchanged sentence

February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

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Total cost of shares repurchased

Accumulated Other Comprehensive (Loss) Income — The component of accumulated other comprehensive (loss) income and the adjustments to other comprehensive income (loss) for amounts reclassified from accumulated other comprehensive (loss) income into net income is as follows (in thousands):

Accumulated Other Comprehensive Loss — The component of accumulated other comprehensive loss and the adjustments to other comprehensive (loss) income for amounts reclassified from accumulated other comprehensive loss into net (loss) income is as follows (in thousands):

adjustments (4)

Net unrealized

gains (losses) on

available-for-

sale investments

gains (losses)

on marketable

debt securities

Accumulated other

comprehensive (loss) income

Balance at January 30, 2021

Other comprehensive loss, net (3)

comprehensive

Balance at January 29, 2022

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Balance at February 3, 2024

(1) Other comprehensive loss before reclassifications was $ 1.8 million, net of taxes for net unrealized losses on available-for-sale investments for the fiscal year ended February 3, 2024 .

Other comprehensive (loss) income, net (1)

Balance at February 1, 2025

(1) Other comprehensive income before reclassifications was $ 0.8 million, net of taxes for net unrealized income on marketable debt securities for the fiscal year ended February 1, 2025.

There were no unrealized losses, net of taxes reclassified from accumulated other comprehensive loss for the year ended February 1, 2025.

(2) Other comprehensive loss before reclassifications was $ 3.8 million, net of taxes for net unrealized losses on available-for-sale investments for the fiscal year ended January 28, 2023.

There were $ 0.1 million net unrealized losses, net of taxes reclassified from accumulated other comprehensive loss for the year ended January 28, 2023.

(3) Other comprehensive loss be fore reclassification was $ 4.4 million, net of taxes for net unrealized losses on available-for-sale securities for the fiscal year ended January 29, 2022 .

(2) Other comprehensive income before reclassifications was $ 1.8 million, net of taxes for net unrealized income on marketable debt securities for the fiscal year ended February 3, 2024.

There were no unrealized losses, net of taxes reclassified from accumulated other comprehensive income for the year ended February 3, 2024.

(3) Other comprehensive loss before reclassifications was $ 3.8 million, net of taxes for net unrealized losses on marketable debt securities for the fiscal year ended January 28, 2023.

There were $ 0.1 million net unrealized losses, net of taxes reclassified from accumulated other comprehensive loss for the year ended January 28, 2023.

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General— We maintain several equity incentive plans under which we may grant incentive stock options, nonqualified stock options, stock bonuses, restricted stock awards, restricted stock units and stock appreciation rights to employees (including officers), non-employee directors and consultants.

Stock-Based Compensation— Total stock-based compensation expense is recognized on our consolidated income statements as follows (in thousands):

Stock-Based Compensation— Total stock-based compensation expense is recognized on our consolidated statements of (loss) income as follows (in thousands):

Fiscal Year Ended

February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

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Restricted Equity Awards — The following table summarizes the activity of restricted stock awards and restricted stock units, collectively defined as “restricted equity awards” (in thousands, except grant date weighted-average fair value):

Restricted Equity Awards

Outstanding at January 30, 2021

Equity Awards

Outstanding at January 29, 2022

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Outstanding at February 3, 2024

Outstanding at February 1, 2025

The following table summarizes additional information related to restricted equity awards activity (in thousands):

1 unchanged sentence

February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

Vest date fair value of restricted stock vested

Stock Options —We h ad 0.4 million stock options outstanding at February 3, 2024 , and 0.4 million stock options outstanding at January 28, 2023 and January 29, 2022 with a grant date weighted average exercise price of $ 26.51 , $ 29.30 and $ 26.37 , respectively.

Stock Options —We had 0.4 million stock options outstanding at February 1, 2025, 0.3 million stock options outstanding at February 3, 2024 and 0.4 million stock options outstanding at January 28, 2023 with a grant date weighted average exercise price of $ 21.24 , $ 26.51 and $ 29.30 , respectively.

Employee Stock Purchase Plan— We offer an Employee Stock Purchase Plan (“ESPP”) for eligible employees to purchase our common stock at a 15 % discount of the lesser of fair market value of the stock on the first business day or the last business day of the offering period, subject to maximum contribution thresholds.

The number of shares issued under our ESPP was less than 0.1 million for each of the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022 .

The components of earnings before income taxes are (in thousands):

The number of shares issued under our ESPP was less than 0.1 million for each of the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023 .

On December 20, 2021, the Organization for Economic Co-operation and Development ("OECD") has published a proposal to establish a new global minimum corporate tax rate of 15 %, commonly referred to as Pillar Two.

While the U.S.

has not yet adopted the Pillar Two framework into law, several countries in which we operate have enacted tax legislation based on the Pillar Two framework with certain components of the minimum tax rules effective beginning in fiscal year 2024 and further rules becoming effective beginning in fiscal year 2025.

These rules are not expected to materially impact the Company’s Consolidated Financial Statements, considering the Co mpany does not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum rate.

We considered the applicable tax law changes on Pillar Two implementation in the relevant countries, and there is no material impact to our tax provision for the year ended February 1, 2025.

We will continue to evaluate the impact of these tax law changes on future reporting periods.

The components of earnings (loss) before income taxes are (in thousands):

Fiscal Year Ended

United States

Total earnings before income taxes

Total earnings (loss) before income taxes

The components of the provision for income taxes are (in thousands):

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Stock-based compensation

Uncertain Tax Positions

Goodwill impairment

Foreign tax audit

Permanent Taxable Differences

Adjustments to Prior Year Taxes

Effective tax rate

1 unchanged sentence

February 1, 2025

February 3, 2024

Deferred tax assets:

Lease Liability

Operating lease liability

Net operating losses

4 unchanged sentences

Deferred tax liabilities:

Right of Use Asset

Goodwill and other intangibles

Operating lease right-of-use-assets

Goodwill and intangible assets

Prepaid expenses

3 unchanged sentences

Net deferred tax assets

At February 3, 2024 and January 28, 2023, we had foreign net operating loss carryovers that could be utilized to reduce future years’ tax liabilities of $ 111.2 million and $ 88.1 million, respectively.

The tax-effected foreign net operating loss carryovers were $ 25.6 million and $ 20.3 million at February 3, 2024 and January 28, 2023, respectively.

At February 1, 2025 and February 3, 2024, we had foreign net operating loss carryovers that could be utilized to reduce future years’ tax liabilities of $ 130.8 million and $ 111.2 million, respectively.

The tax-effected foreign net operating loss carryo vers were $ 30.0 million and $ 25.6 million at February 1, 2025 and February 3, 2024, respectively.

The net operating loss carryovers have an indefinite carryforward period and currently will not expire.

At February 3, 2024 and January 28, 2023 , we had state net operating loss carryovers that could be utilized to reduce future year's tax liabilities of $ 16.8 million and $ 0 , respectively, which, if unused will expire in years 2028 through 2043 .

The tax-effected state net operating loss carryovers were $ 0.3 million and $ 0 at February 3, 2024 and January 28, 2023, respectively.

At February 3, 2024 and January 28, 2023, we had tax credit carryovers that could be utilized to reduce future year's tax liabilities of $ 0.7 million and $ 0.3 million, respectively, which if unused will expire in years 2028 through 2043 .

At February 3, 2024 and January 28, 2023, we had capital loss and charitable deduction limitation carryovers that could be utilized to reduce future year's tax liabilities of $ 0.7 million and $ 0.4 million, which if unused will expire in years 2026-2028 .

At February 3, 2024 and January 28, 2023, we had valuation allowances on our deferred tax assets of $ 25.0 million and $ 12.8 million, respectively, primarily due to the uncertainty of the realization of certain deferred tax assets related to foreign net operating loss carryovers.

At February 1, 2025 and February 3, 2024, we had state net operating loss carryovers that could be utilized to reduce future year's tax liabilities of $ 21.4 million and $ 16.8 , respectively, which, if unused will expire in years 2033 through 2043 .

The tax-effected state net operating loss carryovers were $ 0.3 million and $ 0.3 at February 1, 2025 and February 3, 2024, respectively.

At February 1, 2025 and February 3, 2024, we had tax credit carryovers that could be utilized to reduce future year's tax liabilities of $ 0.3 million and $ 0.7 million, respectively, which if unused will expire in years 2028 through 2034 .

At February 1, 2025 and February 3, 2024, we had capital loss and charitable deduction limitation carryovers that could be utilized to reduce future year's tax liabilities of $ 0.4 million and $ 0.7 million, which if unused will expire in years 2026-2029.

At February 1, 2025 and February 3, 2024, we had valuation allowances on our deferred tax assets of $ 28.8 million and $ 25.0 million, respectively, prima rily due to the uncertainty of the realization of certain deferred tax assets related to foreign net operating loss carryovers.

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

2 unchanged sentences

Increase related to prior year tax positions

Decrease in tax positions of prior periods

Increase related to current year tax positions

2 unchanged sentences

At February 1, 2025 we had $ 1.9 million of gross unrecognized tax benefits of which $ 1.2 million, if recognized, would affect our effective tax rate.

We recognized an expense of $ 0.01 million, an expense of $ 0.12 million and an expense of $ 0.09 million of interest and penalties in income tax expense, prior to the benefit of the federal tax deduction, for fiscal 2023, 2022 and 2021, respectively.

As of February 3, 2024 and January 28, 2023, we had accrued interest and penalties of $ 0.3 million and $ 0.3 million, respectively, within our consolidated balance sheets.

We recognized a benefit of $ 0.07 million, an expense of $ 0.01 million, an expense of $ 0.1 million of interest and penalties in income tax expense, prior to the benefit of the federal tax deduction, for fiscal 2024, 2023 and 2022, respectively.

As of February 1, 2025 and February 3, 2024, we had accrued interest and penalties of $ 0.2 million and $ 0.3 million, respectively, within our consolidated balance sheets.

We file income tax returns in the U.S.

1 unchanged sentence

federal income tax returns are no longer subject to examination for years before fiscal 2021, and we are no longer subject to U.S.

state and local examinations for years before fiscal 2019.

We are no longer subject to examination for all foreign income tax returns before fiscal 2018.

Earnings per Share, Basic and Diluted

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

state and local examinations for years before fiscal 2020 We are no longer subject to examination for all foreign income tax returns before fiscal 2018

(Loss) Earnings per Share, Basic and Diluted

The following table sets forth the computation of basic and diluted (loss) earnings per share (in thousands, except per share amounts):

Fiscal Year Ended

February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

Net (loss) income

Weighted average common shares for basic earnings per share

Weighted average common shares for basic (loss) earnings per share

Dilutive effect of stock options and restricted stock

Weighted average common shares for diluted earnings per

Weighted average common shares for diluted (loss) earnings per

Basic (loss) earnings per share

Diluted (loss) earnings per share

Total anti-dilutive common stock options not included in the calculation of diluted earnings per share was 0.5 million for the fiscal year ended February 3, 2024 and 0.1 million for fiscal years ended January 28, 2023 and January 29, 2022 .

Total anti-dilutive common stock options not included in the calculation of diluted earnings per share were

0.5 million for the fiscal years ended February 1, 2025 and February 3, 2024,and 0.1 million and for the fiscal years ended January 28, 2023 .

Related Party Transactions

1 unchanged sentence

Our Chairman of the Board is also the President of the Zumiez Foundation.

We committed charitable contributions to the Zumiez Foundation of $ 0.1 million , $ 0.9 million and $ 1.6 million for the fiscal years ended February 3, 2024, January 28, 2023, and January 29, 2022, respectively.

There were no accruals for charitable contributions payable to the Zumiez Foundation as of February 3, 2024.

Accrued charitable contributions payable to the Zumiez Foundation amounted to $ 0.5 million as of January 28, 2023.

We committed charitable contributions to the Zumiez Foundation of less than $ 0.1 million, $ 0.1 million and $ 0.9 million for the fiscal years ended February 1, 2025, February 3, 2024, and January 28, 2023, respectively.

There were no accruals for charitable contributions payable to the Zumiez Foundation as of February 1, 2025 and February 3, 2024.

Accrued charitable contributions payable to the Zumiez Foundation amounted to $ 0.5 m illion as of January 28, 2023.

Segment Reporting

We identify our operating segments according to how our business activities are managed and evaluated.

As of February 1, 2025 , our operating segments included our United States operations, Canadian operations, European operations, and Australian operations.

Our operating segments have been aggregated and are reported as one reportable segment based on the similar nature of products sold, production, merchandising and distribution processes involved, target customers and economic characteristics .

We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.

We identified our CEO as our CODM as the CEO allocates resources and evaluates the performance of our operating segments based on our key performance indicators as outlined in Part II Item 7 of this Form 10-K.

The CODM uses these measures to monitor trends in year over year performance comparisons, sequential quarter performance comparisons, compare actual results to forecasts and to make investment decisions.

The following table is a summary of significant segment expenses and results of operations:

Fiscal Years Ended

Product COGS (1)

Other COGS (2)

Store SG&A (3)

Corporate SG&A (4)

Operating profit (loss)

(1) Product COGS consists of branded merchandise costs and our private label merchandise costs including design, sourcing, importing, and inbound freight costs.

(2) Other COGS consists of buying, occupancy, ecommerce fulfillment, distribution and warehousing costs (including associated depreciation) freight costs for store merchandise transfers, inventory shrinkage and impairment of operating lease right-of-use-assets.

(3) Store SG&A consists of store personnel wages and benefits, freight costs for merchandise shipments from the distribution centers to the stores, store supplies, store depreciation, the cost of our website and supporting teams, and other costs allocated to the operations of our stores.

(4) Corporate SG&A consists of administrative staff wages and benefits, information technology expenses, depreciation on fixed assets at the home office, facility expenses, impairment costs, training expenses, advertising and marketing costs.

The following table is a summary of product categories as a percentage of merchandise sales:

1 unchanged sentence

February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

4 unchanged sentences

February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

3 unchanged sentences

February 1, 2025

January 29, 2022

February 3, 2024

Long-lived assets (2):

5 unchanged sentences

(2) Long-lived assets include fixed assets, net and operating lease right-of-use assets.

Subsequent Event

On March 12, 2025, Zumiez Inc.

approved the repurchase of up to an aggregate of $ 25 million of its Common Stock (the “Repurchase Program”).

The repurchases will be made from time to time on the open market at prevailing market prices.

The Repurchase Program is expected to continue through March 31, 2026, unless the time period is extended or shortened by the Board of Directors.

EXHIBIT INDEX

32 unchanged sentences

and Wells Fargo Bank, National Association.

Credit Agreement dated as of December 20, 2024 by and among Zumiez Inc., Zumiez Services Inc.

and PNC Bank, National Association.

[Incorporated by reference to Exhibit 10.37 to the Form 8-K filed by the Company on December 24, 2024]

Insider Trading Policy

Subsidiaries of the Company.

6 unchanged sentences

The following materials from Zumiez Inc.’s Annual Report on Form 10-K for the annual period ended February 1, 2025, formatted in iXBRL (Inline eXtensible Business Reporting Language):

(i) Consolidated Balance Sheets at February 3, 2024 and January 28, 2023;

(ii) Consolidated statements of (loss) income for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022;

(iii) Consolidated statement of comprehensive (loss) income for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022;

(iv) Consolidated Statements of Changes in Shareholders’ Equity for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022;

(v) Consolidated Statements of Cash Flows for the fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022;

(i) Consolidated Balance Sheets at February 1, 2025 and February 3, 2024;

(ii) Consolidated statements of (loss) income for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023;

(iii) Consolidated statement of comprehensive (loss) income for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023;

(iv) Consolidated Statements of Changes in Shareholders’ Equity for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023;

(v) Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023;

and (vi) Notes to Consolidated Financial Statements.

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March 13, 2025

/ S / G UY H ARKLESS

/ S / G UY M.

March 13, 2025

Liliana Gil Valletta, Director

Guy Harkless, Director

Harkless, Director

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis