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Zumiez Inc

Zumiez IncZUMZEarnings & Financial Report

Nasdaq · Consumer Discretionary · Retail-Apparel & Accessory Stores

Zumiez Inc. is an American multinational specialty clothing store founded by Thomas Campion and Gary Haakenson in 1978, and publicly traded since 2005. The company is a specialty retailer of apparel, footwear, accessories and hardgoods for young men and women. Zumiez markets clothing for action sports, particularly skateboarding, snowboarding, and motocross. Zumiez is based in Lynnwood, Washington. The current president and CEO is Richard Brooks.

What changed in Zumiez Inc's 10-K — 2022 vs 2023

Top changes in Zumiez Inc's 2023 10-K

139 paragraphs added · 146 removed · 113 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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As a result of this seasonality, any factors negatively affecting us during the last half of the year, including unfavorable economic conditions, adverse weather or our ability to acquire seasonal merchandise inventory, could have a material adverse effect on our financial condition and results of operations for the entire year.
As a result of this seasonality, any factors negatively affecting us during the last half of the year, including unfavorable economic conditions, adverse weather or our ability to acquire seasonal merchandise inventory, could have a material adverse effect on our financial condition and results of operations for the entire year.
We seek to attract knowledgeable sale associates who identify with our brand and are able to offer superior customer service, advice and product expertise. We believe that our distinctive shopping experience enhances our image as a leading source for apparel and equipment for action sports, streetwear and other unique lifestyles. 4 Disciplined Operating Philosophy .
We seek to attract knowledgeable sale associates who identify with our brand and are able to offer superior customer service, advice and product expertise. We believe that our distinctive shopping experience enhances our image as a leading source for apparel and equipment for action sports, streetwear and other unique lifestyles. Disciplined Operating Philosophy .
With store closures withstanding, consumer fears about becoming ill with the virus may persist, adversely affecting traffic to our stores. Consumer spending may also be negatively impacted by general economic downturn and decreased consumer confidence resulting from the COVID-19 global pandemic. This may negatively impact sales in our stores and our ecommerce channel.
With store closures not withstanding, consumer fears about becoming ill with the virus may persist, adversely affecting traffic to our stores. Consumer spending may also be negatively impacted by general economic downturn and decreased consumer confidence resulting from the COVID-19 global pandemic. This may negatively impact sales in our stores and our ecommerce channel.
We believe that this, combined with our inventory planning and allocation processes and systems, helps us better manage markdown and fashion risk. High-Impact, Integrated Marketing Approach . We seek to build relationships with our customers through a multi-faceted marketing approach that is designed to integrate our brand images with the lifestyles we represent.
We believe that this, combined with our inventory planning and allocation processes and systems, helps us better manage markdown and fashion risk. 4 High-Impact, Integrated Marketing Approach . We seek to build relationships with our customers through a multi-faceted marketing approach that is designed to integrate our brand images with the lifestyles we represent.
Our goal in opening stores is to not have one more store than needed to serve all our customers within a trade area. 5 Merchandising and Purchasing Our goal is to be viewed by our customers as the definitive source of merchandise for their unique lifestyles across all channels in which we operate.
Our goal in opening stores is to not have one more store than needed to serve all our customers within a trade area. Merchandising and Purchasing Our goal is to be viewed by our customers as the definitive source of merchandise for their unique lifestyles across all channels in which we operate.
The extent of the impact of the COVID-19 global pandemic on our business remains uncertain and difficult to predict, given the innumerable unknowns regarding the duration and severity of the pandemic. 11 Failure to anticipate, identify and respond to changing fashion trends, customer preferences and other fashion-related factors could have a material adverse effect on us.
The extent of the impact of the COVID-19 global pandemic on our business remains uncertain and difficult to predict, given the innumerable unknowns regarding the duration and severity of the pandemic. Failure to anticipate, identify and respond to changing fashion trends, customer preferences and other fashion-related factors could have a material adverse effect on us.
Our merchandise mix may vary by region, country and season, reflecting the preferences and seasons in each market. We believe that offering an extensive selection of current and relevant brands in sports, fashion, music and art is integral to our overall success.
Our merchandise mix may vary by region, country and season, reflecting the preferences and seasons in each market. 5 We believe that offering an extensive selection of current and relevant brands in sports, fashion, music and art is integral to our overall success .
We utilize a localized fulfillment strategy to fulfill the majority of our ecommerce orders through our stores to enhance customer experience, maximize inventory productivity and reduce shipping time.
We utilize a localized fulfillment strategy to fulfill the vast majority of our ecommerce orders through our stores to enhance customer experience, maximize inventory productivity and reduce shipping time.
Seasonality Historically, our operations have been seasonal, with the largest portion of net sales and net income occurring in the third and fourth fiscal quarters, reflecting increased demand during the back-to-school and winter holiday selling seasons. During fiscal 2021, approximately 54% of our net sales occurred in the third and fourth quarters combined.
Seasonality Historically, our operations have been seasonal, with the largest portion of net sales and net income occurring in the third and fourth fiscal quarters, reflecting increased demand during the back-to-school and winter holiday selling seasons. During fiscal 2022, approximately 54% of our net sales occurred in the third and fourth quarters combined.
We maintain 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, 2023, and up to $35.0 million after December 1, 2023 and through December 1, 2024.
We maintain a secured credit agreement with Wells Fargo Bank, N.A., which provides 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.
Our training programs have been developed internally and are almost exclusively taught internally by Zumiez employees to Zumiez employees. The training programs have been developed to empower our managers to make good retail decisions. We believe Zumiez is a place where people have a voice, will be heard, and have bias-free opportunities.
Our training programs have been developed internally and are almost exclusively taught internally by Zumiez employees to Zumiez employees. The training programs have been developed to empower our employees to make good business decisions. We believe Zumiez is a place where people have a voice, will be heard, and have bias-free opportunities.
To take advantage of what we believe to be a compelling economic store model, we plan to open approximately 34 new stores in fiscal 2022, including stores in our existing markets and in new markets internationally. The number of anticipated store openings may increase or decrease due to market conditions and other factors.
To take advantage of what we believe to be a compelling economic store model, we plan to open approximately 23 new stores in fiscal 2023, including stores in our existing markets and in new markets internationally. The number of anticipated store openings may increase or decrease due to market conditions and other factors.
Attractive Lifestyle Retailing Concept . We target a large population of young men and women, many of whom we believe are attracted to action sports, streetwear and other unique lifestyles and desire to express their personal independence and style through the apparel, footwear and accessories they wear and the equipment they use.
We target a large population of young men and women, many of whom we believe are attracted to action sports, streetwear and other unique lifestyles and desire to express their personal independence and style through the apparel, footwear and accessories they wear and the equipment they use.
At January 29, 2022 , our stores averaged approximately 2,951 square feet. All references in this Annual Report on Form 10-K to square footage of our stores refers to gross square footage, including retail selling, storage and back-office space. Expansion Opportunities and Site Selection .
At January 28, 2023 , our stores averaged approximately 2,914 square feet. All references in this Annual Report on Form 10-K to square footage of our stores refers to gross square footage, including retail selling, storage and back-office space. Expansion Opportunities and Site Selection .
Since being declared a pandemic by the World Health Organization in March 2020, COVID-19 has negatively impacted global economies, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. The COVID-19 global pandemic could continue to have a material impact on our business, including our results of operations, financial condition and liquidity.
The novel coronavirus (COVID-19) global pandemic could continue to have a material impact on our business. Since being declared a pandemic by the World Health Organization in March 2020, COVID-19 has negatively impacted global economies, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets.
During the last three fiscal years, we have opened 51 new stores consisting of 23 stores in fiscal 2021, 12 stores in fiscal 2020 and 16 stores in fiscal 2019. We have successfully opened stores in diverse markets throughout the U.S. and internationally, which we believe demonstrates the portability and growth potential of our concepts.
During the last three fiscal years, we have opened 67 new stores consisting of 32 stores in fiscal 2022, 23 stores in fiscal 2021 and 12 stores in fiscal 2020. We have successfully opened stores in diverse markets throughout the U.S. and internationally, which we believe demonstrates the portability and growth potential of our concepts.
Current and increased competition could have a material adverse effect on our business, results of operations and financial condition. U.S. and global economic and political uncertainty, coupled with cyclical economic trends in retailing, could have a material adverse effect on our results of operations. Our retail market historically has been subject to substantial cyclicality.
U.S. and global economic and political uncertainty, coupled with cyclical economic trends in retailing, could have a material adverse effect on our results of operations. Our retail market historically has been subject to substantial cyclicality.
At January 29, 2022, we operated 739 stores in the following locations: United States and Puerto Rico - 604 Stores Alabama 4 Indiana 10 Nebraska 3 Rhode Island 2 Alaska 3 Iowa 4 New Hampshire 6 South Carolina 4 Arizona 11 Kansas 3 New Jersey 20 South Dakota 2 Arkansas 2 Kentucky 4 New Mexico 5 Tennessee 9 California 90 Louisiana 6 New York 33 Texas 50 Colorado 19 Maine 3 Nevada 10 Utah 14 Connecticut 10 Maryland 11 North Carolina 14 Vermont 1 Delaware 4 Massachusetts 10 North Dakota 4 Virginia 14 Florida 35 Michigan 13 Ohio 14 Washington 23 Georgia 14 Minnesota 11 Oklahoma 6 West Virginia 2 Hawaii 7 Mississippi 4 Oregon 13 Wisconsin 13 Idaho 6 Missouri 7 Pennsylvania 22 Wyoming 2 Illinois 17 Montana 5 Puerto Rico 5 Canada - 52 Stores Alberta 8 New Brunswick 1 Saskatchewan 2 British Columbia 12 Nova Scotia 2 Manitoba 2 Ontario 25 Europe - 66 Stores Austria 17 Germany 30 Switzerland 10 Netherlands 3 Norway 1 Finland 5 Australia - 17 Stores Victoria 8 Queensland 4 South Australia 2 New South Wales 3 The following table shows the number of stores (excluding temporary stores that we operate from time to time for special or seasonal events) opened, acquired and permanently closed in each of our last three fiscal years: Fiscal Year Stores Opened Stores Closed (1) Total Number of Stores End of Year 2021 23 5 739 2020 12 9 721 2019 16 5 718 (1) Store closures above do not include short-term closures in fiscal 2021 and 2020 due to the impact of the novel coronavirus (“COVID-19”) pandemic. 7 Store Design and Environment.
At January 28, 2023, we operated 758 stores in the following locations: United States and Puerto Rico - 608 Stores Alabama 4 Indiana 10 Nebraska 3 Rhode Island 2 Alaska 3 Iowa 4 New Hampshire 6 South Carolina 6 Arizona 11 Kansas 3 New Jersey 19 South Dakota 2 Arkansas 2 Kentucky 4 New Mexico 5 Tennessee 9 California 92 Louisiana 6 New York 31 Texas 48 Colorado 19 Maine 3 Nevada 10 Utah 14 Connecticut 9 Maryland 11 North Carolina 14 Vermont 1 Delaware 4 Massachusetts 10 North Dakota 4 Virginia 14 Florida 38 Michigan 14 Ohio 14 Washington 22 Georgia 17 Minnesota 11 Oklahoma 6 West Virginia 2 Hawaii 7 Mississippi 4 Oregon 13 Wisconsin 13 Idaho 6 Missouri 7 Pennsylvania 22 Wyoming 2 Illinois 17 Montana 5 Puerto Rico 5 Canada - 51 Stores Alberta 8 New Brunswick 1 Saskatchewan 2 British Columbia 12 Nova Scotia 2 Manitoba 2 Ontario 24 Europe - 78 Stores Austria 18 Netherlands 4 Switzerland 12 Finland 7 Norway 3 Germany 32 Sweden 2 Australia - 21 Stores New South Wales 4 Queensland 6 South Australia 2 Victoria 9 The following table shows the number of stores (excluding temporary stores that we operate from time to time for special or seasonal events) opened, acquired and permanently closed in each of our last three fiscal years: Fiscal Year Stores Opened Stores Closed (1) Total Number of Stores End of Year 2022 32 13 758 2021 23 5 739 2020 12 9 721 (1) Store closures above do not include short-term closures due to the impact of the novel coronavirus (“COVID-19”) pandemic. 7 Store Design and Environment.
Some of these facilities are located in regions that may be affected by natural disasters, public health concerns, or emergencies, such as COVID-19 and other communicable diseases or viruses, political instability or other conditions that could cause a disruption in trade.
Most of our merchandise is produced by manufacturers around the world. Some of these facilities are located in regions that may be affected by natural disasters, public health concerns, or emergencies, such as COVID-19 and other communicable diseases or viruses, political instability or other conditions that could cause a disruption in trade.
These shared values include empowered managers, teaching and learning, competition, recognition, and fairness and honesty. Our culture strives to integrate quality teaching and learning experiences throughout the organization. We do this through a comprehensive training program, which primarily focuses on sales and customer service training.
These shared values include empowered managers, teaching and learning, competition, recognition, and fairness and honesty. Our culture strives to integrate quality teaching and learning experiences throughout the organization. We do this through a comprehensive training program, which primarily focuses on sales, management and customer service training in our stores and is more focused on professional development in our home office.
Due to the seasonality of our business, widespread closures during peak shopping periods could disproportionally impact financial results. The inability to effectively adapt to changes in consumer behavior could result in excess inventory and adversely impact financial results. We may experience adverse effects of prolonged operating restrictions related to in-person marketing and training events.
The inability to effectively adapt to changes in consumer behavior could result in excess inventory and adversely impact financial results. We may experience adverse effects of prolonged operating restrictions related to in-person marketing and training events.
A rise in the spread of COVID-19 also has the potential to significantly impact our supply chain if manufacturers of our products, distribution centers where we manage our inventory, or operations of our logistics and other service providers are disrupted, temporarily closed or experience worker shortages.
A rise in the spread of COVID-19 also has the potential to significantly impact our supply chain if manufacturers of our products, distribution centers where we manage our inventory, or operations of our logistics and other service providers are disrupted, temporarily closed or experience worker shortages. 11 Due to the seasonality of our business, widespread closures during peak shopping periods could disproportionally impact financial results.
Accordingly, our work place is built upon the foundation of equity and inclusion where its people are diverse in their backgrounds, communities, and points of view, yet all share the same core cultural values of working hard, giving back and empowering others. In this regard, the Company aims to be an inclusive reflection of its customers, employees, and business partners.
Accordingly, our work place is built upon the foundation of inclusion and equity where its people are diverse in their backgrounds, communities, and points of view, yet all share the same core cultural values of working hard, giving back and empowering others.
We also own numerous domain names, which have been registered with the Corporation for Assigned Names and Numbers. 9 Employees At January 29, 2022, we employed approximately 2,500 full-time and approximately 7,000 part-time employees globally.
We also own numerous domain names, which have been registered with the Corporation for Assigned Names and Numbers. 9 Employees At January 28, 2023, we employed approximately 2,600 full-time and approximately 6,800 part-time employees globally.
As a retailer that sells approximately 87% branded merchandise, this trend may negatively affect our business, as we generally will have to charge more than vertically integrated private label retailers or we may be forced to rely on promotional sales to compete in our market which could have a material adverse effect on our financial position.
As a retailer that sells a substantial majority of branded merchandise, this could disproportionately impact us more than vertically integrated private label retailers or we may be forced to rely on promotional sales to compete in our market which could have a material adverse effect on our financial position.
We operate under the names Zumiez, Blue Tomato and Fast Times. We operate ecommerce websites at zumiez.com, zumiez.ca, blue-tomato.com and fasttimes.com.au. At January 29, 2022, we operated 739 stores; 604 in the United States (“U.S.”), 52 in Canada, 66 in Europe and 17 in Australia. We acquired Blue Tomato in fiscal 2012.
We operate under the names Zumiez, Blue Tomato and Fast Times. We operate ecommerce websites at zumiez.com, zumiez.ca, blue-tomato.com and fasttimes.com.au. At January 28, 2023, we operated 758 stores; 608 in the United States (“U.S.”), 51 in Canada, 78 in Europe and 21 in Australia. We acquired Blue Tomato in fiscal 2012.
We utilize a broad vendor base that allows us to shift our merchandise purchases as required to react quickly to changing consumer demands and market conditions.
We have developed a disciplined approach to buying and a dynamic inventory planning and allocation process to support our merchandise strategy. We utilize a broad vendor base that allows us to shift our merchandise purchases as required to react quickly to changing consumer demands and market conditions.
Most of our merchandise is produced by foreign manufacturers; therefore, the availability, quality and costs of our merchandise may be negatively affected by risks associated with international trade and other international conditions. Most of our merchandise is produced by manufacturers around the world.
Current and increased competition could have a material adverse effect on our business, results of operations and financial condition. Most of our merchandise is produced by foreign manufacturers; therefore, the availability, quality and costs of our merchandise may be negatively affected by risks associated with international trade and other international conditions.
The COVID-19 pandemic’s impact on macroeconomic conditions could alter the functioning of financial and capital markets, foreign currency exchange rates, commodity prices, and interest rates. After the COVID-19 global pandemic has settled, we may continue to experience adverse impacts to our business as a result of any economic recession that has occurred or may occur in the future.
After the COVID-19 global pandemic has settled, we may continue to experience adverse impacts to our business as a result of evolving macroeconomic factors, including general economic uncertainty, unemployment rates, high inflation, recessionary pressures and any actual economic recession that has occurred or may occur in the future.
We believe that our ability to maintain an image consistent with the unique lifestyles of our customers is important to our key vendors. Given our scale and market position, we believe that many of our key vendors view us as an important retail partner.
Given our scale and market position, we believe that many of our key vendors view us as an important retail partner. This position helps ensure our ability to procure a relevant product assortment and quickly respond to the changing fashion interests of our customers.
As the U.S. and global economic and political conditions change, the trends in discretionary consumer spending become unpredictable and discretionary consumer spending could be reduced due to uncertainties about the future. When disposable income decreases or discretionary consumer spending is reduced due to a decline in consumer confidence, purchases of apparel and related products may decline.
When disposable income decreases or discretionary consumer spending is reduced due to a decline in consumer confidence, purchases of apparel and related products may decline. A deterioration in macroeconomic conditions or consumer confidence or uncertainty in the U.S. and global economies and political environment could have a material adverse impact on our results of operations and financial position.
Any of the following risks could harm our business, operating results or financial condition and could result in a complete loss of your investment. The novel coronavirus (COVID-19) global pandemic could continue to have a material impact on our business.
The COVID-19 global pandemic could continue to have a material impact on our business, including our results of operations, financial condition and liquidity.
This position helps ensure our ability to procure a relevant product assortment and quickly respond to the changing fashion interests of our customers. Additionally, we believe we are presented with a greater variety of products and styles by some of our vendors, as well as certain specially designed items that we exclusively distribute.
Additionally, we believe we are presented with a greater variety of products and styles by some of our vendors, as well as certain specially designed items that we exclusively distribute. We supplement our merchandise assortment with a select offering of private label products across many of our product categories.
We supplement our merchandise assortment with a select offering of private label products across many of our product categories. Our private label products complement the branded products we sell, and some of our private label brands allow us to cater to the more value-oriented customer.
Our private label products complement the branded products we sell, and some of our private label brands allow us to cater to the more value-oriented customer. For fiscal 2022, 2021 and 2020, our private label merchandise represented 18.4%, 13.3%, and 11.4% of our net sales, respectively.
No single third-party brand that we carry accounted for more than 7.9%, 9.4% and 13.9% of our net sales in fiscal 2021, 2020 and 2019, respectively. We believe that our strategic mix of apparel, footwear, accessories and hardgoods allows us to strengthen the potential of the brands we sell and affirms our credibility with our customers.
We believe that our strategic mix of apparel, footwear, accessories and hardgoods allows us to strengthen the potential of the brands we sell and affirms our credibility with our customers. We believe that our ability to maintain an image consistent with the unique lifestyles of our customers is important to our key vendors.
In addition, we supplement our merchandise mix with a select offering of private label apparel and products as a value proposition that we believe complements our overall merchandise selection. Over our 43-year history, we have developed a corporate culture based on a passion for serving our customers through the lens of action sports, streetwear and other unique lifestyles.
In addition, we supplement our merchandise mix with a select offering of private label apparel and products as a value proposition that we believe complements our overall merchandise selection. Competitive Strengths We believe that the following competitive strengths differentiate us from our competitors and are critical to our continuing success. Attractive Lifestyle Retailing Concept .
Pay equity, employees being paid equally for equal work, without regard for race or gender, is a base line component of this focus on equity and inclusion.
In this regard, we strive for our employees within a trade area to be reflective of the communities they serve. Pay equity, meaning pay parity between employees performing similar job duties, without regard for race or gender, is a base line component of this focus on inclusion and equity and something we evaluate as part of our pay practice procedures.
Removed
We have increased our diluted earnings per share from $1.04 in fiscal 2016 to $4.85 in fiscal 2021, representing a 36.1% compound annual growth rate; and been profitable in every fiscal year of our 43-year history. Competitive Strengths We believe that the following competitive strengths differentiate us from our competitors and are critical to our continuing success.
Added
No single third-party brand that we carry accounted f or more than 6.3 %, 7.9% and 9.4% of our net sal es in fiscal 2022, 202 1 and 20 20 , respectively .
Removed
For fiscal 2021, 2020 and 2019, our private label merchandise represented 13.3%, 11.4%, and 11.3% of our net sales, respectively. We have developed a disciplined approach to buying and a dynamic inventory planning and allocation process to support our merchandise strategy.
Added
Any of the following risks could harm our business, operating results or financial condition and could result in a complete loss of your investment. Additional risks and uncertainties that are not yet identified or that we currently think are immaterial may also harm our business and financial condition in the future.
Removed
Uncertainty in the U.S. and global economies and political environment could have a material adverse impact on our results of operations and financial position. In response to a decline in disposable income and consumer confidence, we believe the “value” message has become more important to consumers.
Added
As the U.S. and global economic and political conditions change, the trends in discretionary consumer spending become unpredictable and discretionary consumer spending could be reduced due to uncertainties about the future. Economic and consumer confidence can also be affected by a variety of factors, including housing prices, unemployment rates and inflation.
Added
In times when there is a decline in disposable income and consumer confidence, there could be a trend to consumers seeking more inexpensive or value-oriented merchandise.
Added
The COVID-19 pandemic’s impact on macroeconomic conditions could alter the functioning of financial and capital markets, foreign currency exchange rates, commodity prices, and interest rates.

Item 2. Properties

Properties — owned and leased real estate

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Item 2. PROPERTIES All of our stores are occupied under operating leases and encompassed approximately 2.2 million total square feet at January 29, 2022. We own approximately 356,000 square feet of land in Lynnwood, Washington on which we own a 63,071 square foot home office.
Item 2. PROPERTIES All of our stores are occupied under operating leases and encompassed approximately 2.2 million total square feet at January 28, 2023. We own approximately 356,000 square feet of land in Lynnwood, Washington on which we own a 63,071 square foot home office.
We lease a 112,112 square feet distribution and ecommerce fulfillment center in Graz, Austria that supports our Blue Tomato ecommerce and store operations in Europe. We lease a 10,010 square feet distribution and ecommerce fulfillment center in Melbourne, Australia that supports our Fast Times ecommerce and store operations in Australia.
We lease 112,112 square feet to serve as a distribution and ecommerce fulfillment center and office space in Graz, Austria that supports our Blue Tomato ecommerce and store operations in Europe.
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We lease a 21,754 square feet building that serves as a distribution and ecommerce fulfillment center and office space in Melbourne, Australia that supports our Fast Times ecommerce and store operations in Australia.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The number of shareholders of record is based upon the actual number of shareholders registered at such date and does not include holders of shares in “street names” or persons, partnerships, associates, corporations or other entities identified in security position listings maintained by depositories.
The number of shareholders of record is based upon the actual number of shareholders registered at such date and does not include holders of shares in “street names” or persons, partnerships, associates, corporations or other entities identified in security position listings maintained by depositories such as the Depository Trust Company.
Performance Measurement Comparison The following graph shows a comparison for total cumulative returns for Zumiez, the Nasdaq Composite Index and the Nasdaq Retail Trade Index during the period commencing on January 28, 2017 and ending on January 29, 2022.
Performance Measurement Comparison The following graph shows a comparison for total cumulative returns for Zumiez, the Nasdaq Composite Index and the Nasdaq Retail Trade Index during the period commencing on February 3, 2018 and ending on January 28, 2023.
The comparison assumes $100 was invested on January 28, 2017 in each of Zumiez, the Nasdaq Composite Index and the Nasdaq Retail Trade Index, and assumes the reinvestment of all dividends, if any.
The comparison assumes $100 was invested on February 3, 2018 in each of Zumiez, the Nasdaq Composite Index and the Nasdaq Retail Trade Index, and assumes the reinvestment of all dividends, if any.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “ZUMZ.” At January 29, 2022, there were 21,215,359 shares of common stock outstanding.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “ZUMZ.” At January 28, 2023, there were 19,488,709 shares of common stock outstanding.
Recent Sales of Unregistered Securities None Issuer Purchases of Equity Securities The following table presents information of our common stock made during the thirteen weeks ended January 29, 2022 (in thousands, except average price paid per share): Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Dollar Value of Shares that May Yet be Repurchased Under the Plans or Programs (1) October 31, 2021—November 27, 2021 315 $ 48.08 315 $ 71,176 November 28, 2021—January 1, 2022 (2) 882 46.28 881 123,200 January 2, 2022—January 29, 2022 903 44.20 903 83,288 Total 2,100 2,099 (1) The share repurchase program is conducted under authorizations made from time to time by our Board of Directors.
Recent Sales of Unregistered Securities None Issuer Purchases of Equity Securities The following table presents information of our common stock made during the thirteen weeks ended January 28, 2023 (in thousands, except average price paid per share): Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Dollar Value of Shares that May Yet be Repurchased Under the Plans or Programs (1) October 30, 2022—November 26, 2022 — $ — — $ — November 27, 2022—December 31, 2022 (2) 426 21.15 — — January 1, 2023—January 28, 2023 — — — — Total 426 — (1) The share repurchase program is conducted under authorizations made from time to time by our Board of Directors.
(2) During the thirteen weeks ended January 29, 2022, 1,277 shares were purchased by us in order to satisfy employee tax withholding obligations upon the vesting of restricted stock. These shares were not acquired pursuant to any publicly announced purchase plan or program. Item 6. [Reserved] 23
There was no authorized share repurchase program during the thirteen weeks ended January 28, 2023. (2) During the thirteen weeks ended January 28, 2023, 426 shares were purchased by us in order to satisfy employee tax withholding obligations upon the vesting of restricted stock. These shares were not acquired pursuant to any publicly announced purchase plan or program.
The comparison in the following graph and table is required by the SEC and is not intended to be a forecast or to be indicative of future Company common stock performance. 1/28/17 2/3/18 2/2/19 2/1/20 1/30/21 1/29/22 Zumiez 100.00 109.02 133.37 165.36 228.54 229.44 NASDAQ Composite 100.00 133.43 132.52 168.35 242.57 265.98 NASDAQ Retail Trade 100.00 152.24 161.79 187.53 298.48 281.88 22 Holders of the Company’s Capital Stock We had approximately 11 shareholders of record as of March 7, 2022.
The comparison in the following graph and table is required by the SEC and is not intended to be a forecast or to be indicative of future Company common stock performance. 2/3/18 2/2/19 2/1/20 1/30/21 1/29/22 1/28/23 Zumiez 100.00 122.34 151.68 209.64 210.46 125.30 NASDAQ Composite 100.00 99.32 126.17 181.79 199.33 163.55 NASDAQ Retail Trade 100.00 106.44 124.08 195.39 185.75 145.31 22 Holders of the Company’s Capital Stock We had approximately 12 shareholders of record as of March 12, 2023.
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In December 2021, our Board of Directors authorized us to repurchase up to $150 million of our common stock. The repurchase program is expected to continue through the fiscal year 2022 that will end on January 28, 2023, unless the time period is extended or shortened by the Board of Directors.
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The repurchase program supersedes all previously approved and authorized stock repurchase programs, including the repurchase programs previously approved by the Board of Directors on September 16, 2021 and December 2, 2020. At January 29, 2022, there remains $83.3 million available for share repurchase under the current share repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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The increase in net sales was driven by an increase in transactions and 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.
The decrease in net sales was driven by a decrease in transactions and a decrease in dollars per transaction. The decrease in dollars per transaction was driven by a decrease in units per transaction, partially offset by an increase in average unit retail.
Results of Operations In December 2019, a novel strain of coronavirus (COVID-19) was first identified, and in March 2020, the World Health Organization categorized COVID-19 as a pandemic. In the best interest of our customers and employees and in line with governmental regulations, all stores were closed by March 19, 2020.
Results of Operations In December 2019, a novel strain of coronavirus (COVID-19) was first identified, and in 2020, the World Health Organization categorized COVID-19 as a pandemic. In the best interest of our customers and employees and in line with governmental regulations, all stores were closed by March 19, 2020.
Investing Activities 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.
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.
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.
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. 25 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.
We began gradually re-opening physical stores at the end of the first fiscal quarter and into the second fiscal quarter, with the majority of our stores open through the third and fourth quarter. In certain regions, COVID-19 related short-term closures have continued into fiscal 2021, primarily in Europe, Canada, and Australia.
We began gradually re-opening physical stores at the end of the first fiscal quarter and into the second fiscal quarter, with the majority of our stores open through the third and fourth quarter. In certain regions, COVID-19 related short-term closures continued into fiscal 2021, primarily in Europe, Canada, and Australia.
We consider net sales to be an important indicator of our current performance. Net sales results are important to achieve 26 leveraging of our costs, including store payroll and store occupancy. Net sales also have a direct impact on our operating profit, cash and working capital. Gross profit.
We consider net sales to be an important indicator of our current performance. Net sales results are important to achieve leveraging of our costs, including store payroll and store occupancy. Net sales also have a direct impact on our operating profit, cash and working capital. Gross profit.
A 1% increase in the estimated gift card redemption rate would have decreased net income by $0.1 million in fiscal 2021. 34 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Accounting for Income Taxes As part of the process of preparing the consolidated financial statements, income taxes are estimated for each of the jurisdictions in which we operate.
A 1% increase in the estimated gift card redemption rate would have decreased net income by $0.1 million in fiscal 2022. 34 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Accounting for Income Taxes As part of the process of preparing the consolidated financial statements, income taxes are estimated for each of the jurisdictions in which we operate.
There can be no assurance that the number of stores that we actually open in fiscal 2022 will not be different from the number of stores we plan to open, or that actual fiscal 2022 capital expenditures will not differ from this expected amount.
There can be no assurance that the number of stores that we actually open in fiscal 2023 will not be different from the number of stores we plan to open, or that actual fiscal 2023 capital expenditures will not differ from this expected amount.
All reporting units had a fair value substantially in excess of the carrying value.
All reporting units had a fair value in excess of the carrying value.
Financing Activities 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 for tax withholding obligations upon vesting of restricted stock partially offset by $3.0 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 .
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 January 29, 2022 and January 30, 2021, cash, cash equivalents and current marketable securities were $294.5 million and $375.5 million.
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 January 28, 2023 and January 29, 2022, cash, cash equivalents and current marketable securities were $173.5 million and $294.5 million.
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 2021. A 10% increase in our sales return reserve at January 29, 2022 would have decreased net income by $0.3 million in fiscal 2021.
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 $0.4 million in fiscal 2022. A 10% increase in our sales return reserve at January 28, 2023 would have decreased net income by $0.3 million in fiscal 2022.
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 January 29, 2022 and January 30, 2021, we had valuation allowances on our deferred tax assets of $10.0 million and $8.7 million, respectively.
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 January 28, 2023 and January 29, 2022, we had valuation allowances on our deferred tax assets of $12.8 million and $10.0 million, respectively.
The following table presents selected items on the consolidated statements of income as a percent of net sales: Fiscal 2021 Fiscal 2020 Fiscal 2019 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 61.4 % 64.7 % 64.6 % Gross profit 38.6 % 35.3 % 35.4 % Selling, general and administrative expenses 25.3 % 25.5 % 27.1 % Operating profit 13.3 % 9.8 % 8.3 % Interest and other income (expense), net 0.3 % 0.5 % 0.5 % Earnings before income taxes 13.6 % 10.3 % 8.8 % Provision for income taxes 3.5 % 2.6 % 2.3 % Net income 10.1 % 7.7 % 6.5 % 27 Fiscal 2021 Results Compared With Fiscal 2020 Net Sales Net sales were $1,183.9 million for fiscal 2021 compared to $990.7 million for fiscal 2020, an increase of $193.2 million or 19.5%.
The following table presents selected items on the consolidated statements of income as a percent of net sales: Fiscal 2022 Fiscal 2021 Fiscal 2020 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 66.1 % 61.4 % 64.7 % Gross profit 33.9 % 38.6 % 35.3 % Selling, general and administrative expenses 30.7 % 25.3 % 25.5 % Operating profit 3.2 % 13.3 % 9.8 % Interest and other income, net 0.2 % 0.3 % 0.5 % Earnings before income taxes 3.4 % 13.6 % 10.3 % Provision for income taxes 1.2 % 3.5 % 2.6 % Net income 2.2 % 10.1 % 7.7 % 27 Fiscal 2022 Results Compared With Fiscal 2021 Net Sales Net sales were $958.4 million for fiscal 2022 compared to $1,183.9 million for fiscal 2021, a decrease of $225.5 million or 19.0%.
Total undiscounted future payments for lease liabilities were $288.5 million at January 29, 2022. If the incremental borrowing rate increased 10 basis points from the rate in effect at January 29, 2022, the lease liability balance would decrease by $0.3 million. Revenue Recognition Revenue is recognized upon purchase at our retail store locations.
Total undiscounted future payments for lease liabilities were $272.8 million at January 28, 2023. If the incremental borrowing rate increased 10 basis points from the rate in effect at January 28, 2023, the lease liability balance would decrease by $0.3 million. Revenue Recognition Revenue is recognized upon purchase at our retail store locations.
In fiscal 2022, we expect to spend approximately $30 million to $32 million on capital expenditures, a majority of which will relate to leasehold improvements and fixtures for the approximately 34 new stores we plan to open in fiscal 2022 and remodels or relocations of existing stores.
In fiscal 2023, we expect to spend approximately $21 million to $23 million on capital expenditures, a majority of which will relate to leasehold improvements and fixtures for the approximately 23 new stores we plan to open in fiscal 2023 and remodels or relocations of existing stores.
Fiscal 2022—A Look At the Upcoming Year In fiscal 2022, our focus remains on serving the customer with strategic investments largely focused on enhancing the customer experience while increasing market share and creating operational efficiencies to drive long-term operating margin expansion.
Fiscal 2023—A Look At the Upcoming Year In fiscal 2023, our focus remains on serving the customer with strategic investments largely tied to enhancing the customer experience while increasing market share and creating operational efficiencies to drive long-term operating margin back to historical levels.
Stores closed due the impacts of COVID-19 are excluded from our comparable sales calculation if they were closed for longer than seven days. Our ecommerce business has remained open during the COVID-19 pandemic and therefore remains reported in our comparable sales calculation.
Stores closed due the impacts of COVID-19 ar e excluded from our comparable sales calculation if they were closed for longer than se ven days. O ur ecommerce business has remained open during the COVID-19 pandemic and therefore remains reported in our comparable sales calculation.
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 increased by $1.3 million in fiscal 2021. A 10% decrease in the sales price of our inventory at January 29, 2022 would have decreased net income by less than $0.1 million in fiscal 2021.
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 $0.8 million in fiscal 2022. A 10% decrease in the sales price of our inventory at January 28, 2023 would have decreased net income by $0.6 million in fiscal 2022.
We are continuing to deliver almost all of our online orders in North America from our stores, which has provided substantial improvements in the speed of delivery to our customers and eliminated the need to manage two pools of inventory separately for digital and physical demand.
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.
Net cash provided by operating activities increased by $32.3 million in fiscal 2020 to $138.4 million from $106.1 million in fiscal 2019. 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.
Net cash provided by operating activities decreased by $3.5 million in fiscal 2021 to $135.0 million from $138.4 million in fiscal 2020. 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.
We believe that we still have meaningful expansion opportunities internationally. 24 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 of our platforms. We remain committed to serving the customer launching over 10 0 new brands in 2021.
We believe that we still have meaningful expansion opportunities internationally in both existing and new markets. 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 of our platforms.
Our gift card breakage reserve has increased by $1.5 million in fiscal 2021.
Our gift card breakage reserve has increased by $1.8 million in fiscal 2022.
The following table summarizes our cash flows from operating, investing and financing activities (in thousands): Fiscal 2021 Fiscal 2020 Fiscal 2019 Total cash provided by (used in) Operating activities $ 134,950 $ 138,412 $ 106,070 Investing activities 101,643 (110,541 ) (102,931 ) Financing activities (191,409 ) (9,694 ) 2,010 Effect of exchange rate changes on cash and cash equivalents (1,822 ) 3,522 (429 ) Increase in cash and cash equivalents $ 43,362 $ 21,699 $ 4,720 Operating Activities Net cash provided by operating activities decreased by $3.5 million in fiscal 2021 to $135.0 million from $138.4 million in fiscal 2020.
The following table summarizes our cash flows from operating, investing and financing activities (in thousands): Fiscal 2022 Fiscal 2021 Fiscal 2020 Total cash (used in) provided by Operating activities $ (379 ) $ 134,950 $ 138,412 Investing activities 54,209 101,643 (110,541 ) Financing activities (87,257 ) (191,409 ) (9,694 ) Effect of exchange rate changes on cash and cash equivalents (2,172 ) (1,822 ) 3,522 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (35,599 ) $ 43,362 $ 21,699 Operating Activities 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.
Net Income Net income for fiscal 2021 was $119.3 million, or $4.85 per diluted share, compared with net income of $76.2 million, or $3.00 per diluted share, for fiscal 2020.
Net Income Net income for fiscal 2021 was $119.3 million, or $4.85 per diluted share, compared with net income of $76.2 million, or $3.00 per diluted share, for fiscal 2020. Our effective income tax rate for fiscal 2021 was 25.7% compared to 25.6% for fiscal 2020.
A 10% increase in actual physical inventory shrinkage rate at January 29, 2022 would have decreased net income by $0.2 million in fiscal 2021.
A 10% increase in actual physical inventory shrinkage rate at January 28, 2023 would have decreased net income by less than $0.1 million in fiscal 2022.
These factors include the impact of the COVID-19 pandemic on our operations and financial results; foreign currency rates; changes in laws, including U.S. tax law changes; fluctuations in variable costs, and changes in general economic conditions in the markets in which we operate.
These factors include the impact of the COVID-19 pandemic on our operations and financial results; foreign currency rates; changes in laws, including U.S. tax law changes; fluctuations in variable costs, and changes in general economic conditions in the markets in which we operate. Additionally, we have experienced increased costs during 2021 and 2022 that are expected to continue into 2023.
Net sales include our store sales and our ecommerce sales. We record the sale of gift cards as a current liability and recognize revenue when a customer redeems a gift card.
General Net sales constitute gross sales, net of actual and estimated returns and deductions for promotions, and shipping revenue. Net sales include our store sales and our ecommerce sales. We record the sale of gift cards as a current liability and recognize revenue when a customer redeems a gift card.
Trends and Uncertainties Affecting Our Results and Comparability We have been, and we expect to continue to be affected by a number of factors that may cause actual results to differ from our historical results or current expectations.
We view diluted earnings per share as a key indicator of our success in increasing shareholder value. Trends and Uncertainties Affecting Our Results and Comparability We have been, and we expect to continue to be affected by a number of factors that may cause actual results to differ from our historical results or current expectations.
However, if actual results are not consistent with our estimates and assumptions, our operating results could be adversely affected. Declines in projected cash flow of the assets could result in impairment.
However, if actual results are not consistent with our estimates and assumptions, our operating results could be adversely affected. Declines in projected cash flow of the assets could result in impairment. We recognized impairment losses of $2.1 million related to long-lived assets in fiscal 2022.
Working capital, the excess of current assets over current liabilities, was $263.2 million at the end of fiscal 2021, a decrease of 22.5% from $339.8 million at the end of fiscal 2020.
Working capital, the excess of current assets over current liabilities, was $194.4 million at the end of fiscal 2022, a decrease of 26.2% from $263.2 million at the end of fiscal 2021.
Future capital requirements will depend on many factors, including the pace of new store openings, the availability of suitable locations for new stores and the nature of arrangements negotiated with landlords.
Capital Expenditures Our capital requirements include construction and fixture costs related to the opening of new stores and remodel and relocation expenditures for existing stores. Future capital requirements will depend on many factors, including the pace of new store openings, the availability of suitable locations for new stores and the nature of arrangements negotiated with landlords.
A goodwill impairment analysis was performed for each of our reporting units as of November 1, 2021. Based on this analysis the implied fair value of each of our reporting units was substantially in excess of its carrying value. A 10% decrease in the estimated fair value of any of our reporting units would not have resulted in different conclusion.
A goodwill impairment analysis was performed for each of our reporting units as of November 1, 2022. Based on this analysis the implied fair value of each of our reporting units was in excess of its carrying value.
Our stores were open, on an aggregate basis, approximatel y 97.0% of the possible days during fiscal 2021 compared to 78.4% of the possible days during fiscal 2020.
Due to the COVID-19 pandemic, our stores were open, on an aggregate basis, approximatel y 100%, 97% and 78% of the possible days during fiscal 2022, fiscal 2021, and fiscal 2020, respectively.
At January 29, 2022, we did not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
At January 28, 2023, we did not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. 31 Sources of Liquidity Our most significant sources of liquidity continue to be funds generated by operating activities and available cash, cash equivalents and current marketable securities.
During fiscal 2019, we spent $18.8 million on capital expenditures, which consisted of $13.7 million of costs related to investment in 16 new stores and 17 remodeled or relocated stores, $1.2 million associated with improvements to our websites and the Customer Engagement Suite and $3.9 million in other improvements.
During fiscal 2022, we spent $25.6 million on capital expenditures which consisted of $13.8 million of costs related to investment in 32 new stores and 2 remodeled or relocated stores, $6.6 million associated with improvements to our websites and $5.2 million in other improvements.
Significant judgment is required in determining our incremental borrowing rate and the expected lease term, both of which impact the determination of lease classification and the present value of lease payments.
We include renewal options that we are reasonably certain to exercise in the measurement our lease liabilities and right-of-use assets. Significant judgment is required in determining our incremental borrowing rate and the expected lease term, both of which impact the determination of lease classification and the present value of lease payments.
Operating profit. We view operating profit as a key indicator of our success. Operating profit is the difference between gross profit and selling, general and administrative expenses. The key drivers of operating profit are net sales, gross profit, our ability to control selling, general and administrative expenses and our level of capital expenditures affecting depreciation expense. Diluted earnings per share.
The key drivers of operating profit are net sales, gross profit, our ability to control selling, general and administrative expenses and our level of capital expenditures affecting depreciation expense. Diluted earnings per share. Diluted earnings per share is based on the weighted average number of common shares and common share equivalents outstanding during the period.
Net cash used in investing activities was $102.9 million in fiscal 2019 related to $84.1 million in net purchases of marketable securities and $18.8 million of capital expenditures primarily for new store openings and existing store remodels or relocations.
Investing Activities 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.
Excluding the impact of changes in foreign exchange rates, North America sales decreased $48.5 million or 5.3% and other international sales increased $0.5 million or 0.3% during fiscal 2020 compared to fiscal 2019. Gross Profit Gross profit was $350.0 million for fiscal 2020 compared to $366.6 million for fiscal 2019, a decrease of $16.6 million, or 4.5%.
Excluding the impact of changes in foreign exchange rates, North America sales decreased $226.1 million or 21.9% and other international sales increased $18.4 million or 12.0% during fiscal 2022 compared to fiscal 2021. Gross Profit Gross profit was $324.7 million for fiscal 2022 compared to $456.7 million for fiscal 2021, a decrease of $132.1 million, or 28.9%.
Net sales for the year ended January 30, 2021 included a $4.6 million increase due to the change in foreign exchange rates, which consisted of $4.3 million in Europe, $0.5 million in Australia offset by a $0.2 million decrease in Canada.
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 million in Australia.
Gross profit measures whether we are optimizing the price and inventory levels of our merchandise. Gross profit is the difference between net sales and cost of goods sold. Any inability to obtain acceptable levels of initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of operations.
Any inability to obtain acceptable levels of initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of operations. 26 Operating profit. We view operating profit as a key indicator of our success. Operating profit is the difference between gross profit and selling, general and administrative expenses.
Net cash used in investing activities was $110.5 million in fiscal 2020 related to $101.4 million in net purchases of marketable securities and $9.1 million of capital expenditures primarily for new store openings and existing store remodels or relocations.
Net cash used in investing activities was $110.5 million in fiscal 2020 related to $101.4 million in net purchases of marketable securities and $9.1 million of capital expenditures primarily for new store openings and existing store remodels or relocations. 30 Financing Activities 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.
Our retail store leases are generally for an initial period of 5-10 years, with some of our international leases structured to include renewal options at our election. We include renewal options that we are reasonably certain to exercise in the measurement our lease liabilities and right-of-use assets.
Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term, net of lease incentives received and initial direct costs paid. Our retail store leases are generally for an initial period of 5-10 years, with some of our international leases structured to include renewal options at our election.
Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements found in Part IV Item 15 of this Form 10-K. 36
A 10% decrease in the estimated fair value of the Blue Tomato reporting unit based on a future cash flow valuation model, would not have resulted in a different conclusion. Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements found in Part IV Item 15 of this Form 10-K. 36
The decrease in cash, cash equivalents and current marketable securities in fiscal 2021 was due repurchases of common stock of $193.8 million and $15.7 million of capital expenditures primarily related to the opening of 23 new stores and 3 remodels and relocations, partially offset by $135.0 million of cash provided by operating activities.
The decrease in cash, cash equivalents and current marketable securities in fiscal 2022 was due to repurchases of common stock of $87.9 million and $25.6 million of capital expenditures primarily related to the opening of 32 new stores and 2 remodels and relocations.
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. 31 As of January 29, 2022 , 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, 2023, and up to $35.0 million after December 1, 2023 and through December 1, 2024.
As of January 28, 2023, 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, 2023, and up to $35.0 million after December 1, 2023 and through December 1, 2024.
Net Income Net income for fiscal 2020 was $76.2 million, or $3.00 per diluted share, compared with net income of $66.9 million, or $2.62 per diluted share, for fiscal 2019. Our effective income tax rate for fiscal 2020 was 25.6% compared to 26.5% for fiscal 2019.
Net Income Net income for fiscal 2022 was $21.0 million, or $1.08 per diluted share, compared with net income of $119.3 million, or $4.85 per diluted share, for fiscal 2021. Our effective income tax rate for fiscal 2022 was 35.2% compared to 25.7% for fiscal 2021.
There were no borrowings or open commercial letters of credit outstanding under the secured credit facility at January 29, 2022 . Additionally, we maintain a credit facility with UBS Switzerland AG of up to 15.0 million Euro ($16.7 million), which may be used to guarantee payment of letters of credit. The credit facility bears interest at 1.25%.
There were no borrowings or open commercial letters of credit outstanding under the secured credit facility at January 28, 2023. We had $0.6 million in issued, but undrawn, standby letters of credit at January 28, 2023. Additionally, on October 12, 2020, we entered into a credit facility with UBS Switzerland AG of up to 15.0 million Euro.
There were no borrowings outstanding under the credit agreement at January 29, 2022. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
The credit facility bore interest at 1.25%. This credit facility was closed on December 30, 2022. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
This was partially offset by an 80 basis point decrease in inventory shrinkage and a 70 basis point increase in product margin. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses were $253.1 million for fiscal 2020 compared to $280.8 million for fiscal 2019, a decrease of $27.7 million, or 9.9%.
These increases were partially offset by a 30 basis point decrease in annual incentive compensation. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses were $293.6 million for fiscal 2022 compared to $298.9 million for fiscal 2021, a decrease of $5.3 million, or 1.8%.
Additionally, while there was not a significant impact from inflation on our operations during the past three fiscal years, we experienced increased costs during 2021 that are expected to continue into 2022. Our ability to raise our selling prices depends on market conditions and there may be periods during which we are unable to fully recover increases in our costs.
Our ability to raise our selling prices depends on market conditions and there may be periods during which we are unable to fully recover increases in our costs or experience an adverse impact on demand due to pricing actions.
Our effective income tax rate for fiscal 2021 was 25.7% compared to 25.6% for fiscal 2020. 28 Fiscal 20 20 Results Compared With Fiscal 201 9 Net Sales Net sales were $990.7 million for fiscal 2020 compared to $1,034.1 million for fiscal 2019, a decrease of $43.4 million or 4.2%.
The increase in the valuation allowance in fiscal 2022 resulted in $3.0 million of income tax expense or 9.3% when compared to fiscal 2021 of $2.2 million or 1.4%. 28 Fiscal 20 2 1 Results Compared With Fiscal 20 20 Net Sales Net sales were $1,183.9 million for fiscal 2021 compared to $990.7 million for fiscal 2020, an increase of $193.2 million or 19.5%.
Fiscal 2021—A Review of This Past Year Fiscal 2021 was marked by record sales and earnings for the Company including net sales growth of 19.5% and growth in diluted earnings per share of 61.7% to $4.85. This was up from our previous diluted earnings per share record in the prior year of $3.00.
Fiscal 2022—A Review of This Past Year After a record year of sales and earnings in fiscal 2021 fueled by domestic government stimulus yielding 19.5% growth in net sales and 61.6% growth in diluted earnings per share, fiscal 2022 was much more challenging.
We recognized impairment losses of $2.2 million related to long-lived assets in fiscal 2021. 33 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Right-of-use Assets and Lease Liabilities We determine if a contract contains a lease at inception. Our operating leases primarily consist of retail store locations, distribution centers and corporate office space.
A 10 basis point decrease in forecasted sales assumptions would have resulted in an additional impairment charge of $0.1 million in fiscal 2022. 33 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Right-of-use Assets and Lease Liabilities We determine if a contract contains a lease at inception.
This decrease was partially offset by a 13.6% increase in comparable sales driven by the increase in ecommerce sales as well as the strong performance of our physical stores upon re-opening. The 13.6% increase in comparable sales was primarily driven by an increase in comparable transactions and an increase in dollars per transaction.
The decrease in net sales was driven by a decrease in transactions and a decrease in dollars per transaction. The decrease in dollars per transaction was driven by a decrease in units per transaction, partially offset by an increase in average unit retail.
The decrease in the effective tax rate for fiscal 2020 compared to fiscal 2019 was primarily related to a reduction in net losses in certain jurisdictions where there is uncertainty as to the realization of deferred tax assets and the proportion of earnings or loss before income taxes across jurisdictions.
The increase in effective income tax rate for fiscal 2022 compared to fiscal 2021 was primarily related to an increase in foreign losses in certain jurisdictions, 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.
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.
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. 24 The following table shows net sales, operating profit, operating margin and diluted earnings per share for fiscal 202 2 compared to fiscal 20 2 1 : Fiscal 2022 Fiscal 2021 % Change Net sales (in thousands) (1) $ 958,380 $ 1,183,867 -19.0 % Operating profit (in thousands) $ 31,100 $ 157,810 -80.3 % Operating margin 3.2 % 13.3 % Diluted earnings per share $ 1.08 $ 4.85 -77.7 % (1) The decrease in net sales was primarily driven by continued inflationary pressures on the consumer and the benefits from domestic stimulus in the prior year when consumers were less likely to spend on travel and in-person entertainment due to COVID-19.
By region, North America sales decreased $48.7 million or 5.3% and other international sales increased $5.3 million or 4.4% during fiscal 2020 compared to fiscal 2019.
For the year, the men’s category was our largest declining category followed by hardgoods, accessories, women’s, and footwear. By region, North America sales decreased $228.3 million or 22.2% and other international sales increased $2.8 million or 1.8% during fiscal 2022 compared to fiscal 2021.
We have made investments over several years to integrate the digital and physical channels creating a seamless shopping experience for our customer and one channel expense structure. We believe this has been a critical asset during the pandemic in 2020 and recovery in 2021 marked by significant shifts in demand between physical and digital channels.
We remain committed to serving the customer through introducing newness in our product offering launching over 100 new brands in 2022. We made investments over several years to integrate the digital and physical channels creating a seamless shopping experience for our customer.
As a percentage of net sales, gross profit decreased 10 basis points in fiscal 2020 to 35.3%.
SG&A expenses as a percent of net sales increased 540 basis points in fiscal 2022 to 30.7%.
This will have a larger impact on 2022 weighted average diluted share counts as most of these shares were repurchased in the back half of the year. We added 7 new stores in North America in fiscal 2021, 12 new Blue Tomato stores in Europe and 4 new Fast Times store in Australia.
Our earnings per diluted share of $1.08 in fiscal 2022 was down from an all-time high in fiscal 2021 of $4.85. We added 32 new stores in fiscal 2022 including 16 in North America, 12 new Blue Tomato stores in Europe and 4 new Fast Times store in Australia.
We do not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term, net of lease incentives received and initial direct costs paid.
Our operating leases primarily consist of retail store locations, distribution centers and corporate office space. We do not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.
Removed
Our stores were open for approximately 97.0% of the possible operating days in fiscal 2021, while due to COVID-19 related store closures in fiscal 2020, our stores were open for approximately 78.4% of the possible operating days in the prior year.
Added
During the front half of fiscal 2022 we were facing difficult year-over-year sales comparisons from the record US government stimulus in early fiscal 2021. In addition, there was significant inflationary pressure on discretionary spending in our customer base and more competition for discretionary dollars from categories such as travel and entertainment.
Removed
The majority of the improvement in open store days was related to the United States, while we experienced continued impacts of store closures in Europe, Canada and Australia. We also benefitted from domestic government stimulus early in fiscal 2021 resulting in sales growth of 102.6% for first quarter of fiscal 2021 compared with the prior year.
Added
This resulted in a 19% decrease in net sales for the full year fiscal 2022. The lower sales level combined with inflation in our cost structure resulted in a decrease in earnings per diluted share of 77.7%.
Removed
Throughout the remainder of the year we drove quarterly year-over-year sales growth in the mid to high single digits resulting in the highest sales in Company history and growth of 14.5% over pre-pandemic fiscal 2019 sales. Fiscal 2021 represented our sixth straight year of product margin gains.
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After six straight years of product margin gains, fiscal 2022 Product margin decreased 50 basis points from the prior year driven primarily by the difficult sales environment during the back-to-school and holiday peaks necessitating discounting to maintain a healthy inventory position at year end.
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Product margins grew by 110 basis points in 2021 as our teams remained focused on providing our customers with a diverse product offering and continued newness.
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Regardless of this decrease, fiscal 2022 product margin is at the second highest level in our history and we believe current levels represent structural gains rather than short-term, pandemic related improvements.
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While the year was full of challenges associated with labor shortages, closures, inflation and supply chain, we were able to manage through the issues growing sales and product margin in each quarter of the year.
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In a more normalized sales environment, we anticipate that we can recover what was lost in fiscal 2022 and continue to grow product margins through existing initiatives in the business over time. Total gross margin decreased by 470 basis points in fiscal 2022.
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Overall gross margin was also positively impacted by 140 basis points of leverage in our occupancy costs with significant sales growth, as well as a reduction in web fulfillment and web shipping to customers of 100 basis points as sales shifted back to physical stores with fewer closures overall during the year and a resurgence of our customers coming back to malls represented by a store penetration level that was closer to 2019 than 2020.
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Beyond the product margin impact discussed above, the 19.0% decrease in net sales created deleverage of significant fixed costs included in gross margin such as occupancy, distribution center, and merchandising expenses. While we were able to reduce total selling, general and administrative expenses in 2022, these costs deleveraged due to the sales decline.
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Total gross margin improved 330 basis points from the prior year to 38.6% of sales. In fiscal 2021 we began to see expenses that were eliminated or reduced due to the pandemic in 2020 reintroduced into the business.
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For the year, the men’s category was our largest declining category followed by hardgoods, accessories, women’s and footwear.
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The most significant of these was store payroll as we had a higher percentage of open stores and many of our stores started shifting back to normal operating hours. Though not fully back to pre-pandemic levels, we also began to reintroduce expenses such as training, travel and other discretionary expenses.
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Though 2022 was a highly challenging year, the balance sheet remains strong with $173.5 million in cash and marketable securities at the end of fiscal 2022 and a current asset level that is much larger than current liabilities.
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These increases combined with a year-over-year reduction in COVD-19 related government subsidies and an increase in incentive compensation due to performance, led to growth in selling, general and administrative expenses of 18.1% from the prior year. With annual sales growth of 19.5%, we did leverage selling general and administrative expenses by 20 basis points from the prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Foreign Exchange Rate Risk Our international subsidiaries operate with functional currencies other than the U.S. dollar, including the Canadian dollar, Euro, Australian dollar, Norwegian krone, and Swiss franc. Therefore, we must translate revenues, expenses, assets and liabilities from functional currencies into U.S. dollars at exchange rates in effect during, or at the end of, the reporting period.
Foreign Exchange Rate Risk Our international subsidiaries operate with functional currencies other than the U.S. Dollar, including the Canadian Dollar, Euro, Australian Dollar, Norwegian Krone, Swedish Krona, and Swiss Franc. Therefore, we must translate revenues, expenses, assets and liabilities from functional currencies into U.S. dollars at exchange rates in effect during, or at the end of, the reporting period.
If our current portfolio average yield rate decreased by 10% in fiscal 2021, our net income would have decreased by $0.3 million. This amount is determined by considering the impact of the hypothetical yield rates on our cash, cash equivalents, short-term marketable securities and assumes no changes in our investment structure.
If our current portfolio average yield rate decreased by 10% in fiscal 2022, our net income would have decreased by $0.2 million. This amount is determined by considering the impact of the hypothetical yield rates on our cash, cash equivalents, short-term marketable securities and assumes no changes in our investment structure.
As a result, the fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of revenues, expenses, assets and liabilities. Assuming a 10% change in foreign exchange rates in fiscal 2021 our net income would have decreased or increased by $0.7 million.
As a result, the fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of revenues, expenses, assets and liabilities. Assuming a 10% change in foreign exchange rates in fiscal 2022 our net income would have decreased or increased by $1.0 million.
During different times of the year, due to the seasonality of our business, we may borrow under our revolving credit facility. To the extent we borrow under this revolving credit facility, we are exposed to the market risk related to changes in interest rates. At January 29, 2022, we had no borrowings outstanding under the secured revolving credit facility.
During different times of the year, due to the seasonality of our business, we may borrow under our revolving credit facility. To the extent we borrow under this revolving credit facility, we are exposed to the market risk related to changes in interest rates. At January 28, 2023, we had no borrowings outstanding under the secured revolving credit facility.

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