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What changed in Zumiez Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Zumiez Inc's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+197 added−221 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-20)

Top changes in Zumiez Inc's 2024 10-K

197 paragraphs added · 221 removed · 147 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

67 edited+19 added−26 removed145 unchanged
Biggest changeThe credit facility contains certain financial maintenance covenants that generally require us 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.
Biggest changeThe credit facility contains certain financial maintenance covenants that generally require us to have EBITDA on a trailing four quarter basis of 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 for 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 and a quick ratio of 1.25:1.0 at the end of each fiscal quarter.
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.
If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our credit facility or from other sources, we may not be able to pay our operating lease expenses, grow our business, respond to competitive challenges or fund our other liquidity and capital needs, which could have a material adverse effect on our business.
If our business does not 17 generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our credit facility or from other sources, we may not be able to pay our operating lease expenses, grow our business, respond to competitive challenges or fund our other liquidity and capital needs, which could have a material adverse effect on our business.
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.
Accordingly, our workplace 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.
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.
To take advantage of what we believe to be a compelling economic store model, we plan to open approximately 10 new stores in fiscal 2024, 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.
Although none of our employees are currently covered by collective bargaining agreements, we cannot guarantee that our employees will not elect to be represented by labor unions in the future, which could increase our labor costs and could subject us to the risk of work stoppages and strikes.
Although none of our North America and Australia employees are currently covered by collective bargaining agreements, we cannot guarantee that they will not elect to be represented by labor unions in the future, which could increase our labor costs and could subject us to the risk of work stoppages and strikes.
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.
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 2023, approximately 57% of our net sales occurred in the third and fourth quarters combined.
We plan to continue to open new stores in the Canadian, European and Australian markets. We may continue to expand internationally into other markets, either organically or through additional acquisitions. International markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing U.S. market.
We plan to continue to open new stores in the European and Australian markets. We may continue to expand internationally into other markets, either organically or through additional acquisitions. International markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing North America market.
We also expect to incur additional costs in complying with applicable foreign laws and regulations as they pertain to both our products and our operations. Accordingly, for the reasons noted above, our plans for international expansion include risks that could have a negative impact on our results of operations. Our sales and inventory levels fluctuate on a seasonal basis.
We also expect to incur additional costs in complying with applicable foreign laws and regulations as they pertain to both our products and our operations. Accordingly, for the reasons noted above, our plans for international expansion include risks that could have a negative impact on our results of operations.
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.
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, 2024.
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.
At February 3, 2024, we operated 756 stores in the following locations: United States and Puerto Rico - 597 Stores Alabama 4 Indiana 10 Nebraska 2 Rhode Island 2 Alaska 3 Iowa 4 New Hampshire 6 South Carolina 6 Arizona 11 Kansas 3 New Jersey 17 South Dakota 2 Arkansas 2 Kentucky 4 New Mexico 5 Tennessee 9 California 89 Louisiana 5 New York 30 Texas 48 Colorado 20 Maine 3 Nevada 10 Utah 14 Connecticut 7 Maryland 11 North Carolina 15 Vermont 1 Delaware 3 Massachusetts 10 North Dakota 4 Virginia 15 Florida 38 Michigan 14 Ohio 14 Washington 20 Georgia 17 Minnesota 12 Oklahoma 6 West Virginia 2 Hawaii 7 Mississippi 4 Oregon 12 Wisconsin 13 Idaho 6 Missouri 7 Pennsylvania 22 Wyoming 2 Illinois 16 Montana 5 Puerto Rico 5 Canada - 47 Stores Alberta 8 New Brunswick 1 Saskatchewan 2 British Columbia 12 Nova Scotia 2 Manitoba 2 Ontario 20 Europe - 87 Stores Austria 20 Sweden 2 Germany 31 Italy 4 Switzerland 12 Belgium 1 Netherlands 5 Norway 4 Finland 8 Australia - 25 Stores Victoria 9 Queensland 8 South Australia 2 New South Wales 6 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 2023 19 21 756 2022 32 13 758 2021 23 5 739 (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.
A reduction in consumer traffic to our stores or websites could have a material adverse effect on our business, results of operations and financial condition. Our growth strategy depends on our ability to grow customer engagement in our current markets and expand into new markets, which could strain our resources and cause the performance of our existing business to suffer.
A reduction in consumer traffic to our stores or websites could have a material adverse effect on our business, results of operations and financial condition. 12 Our North America growth strategy depends on our ability to grow customer engagement in our current markets, which could strain our resources and cause the performance of our existing business to suffer.
As a result, unforeseen events, including war, terrorism, other political instability or conflicts, riots, public health issues (including widespread/pandemic illnesses such as coronavirus and other communicable diseases or viruses), a natural disaster or other catastrophic event that affects one of the regions where we operate these centers or our home office could significantly disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.
As a result, unforeseen events, including war, terrorism, other political instability or conflicts, riots, public health issues (including widespread/pandemic illnesses such as coronavirus and other communicable diseases or viruses), a natural disaster or other catastrophic event that affects one of the regions where we operate these centers or our home office could significantly disrupt our operations and have a material adverse effect on our business, results of operations and financial condition. 18 The effects of war, acts of terrorism, threat of terrorism, or other types of mall violence, could adversely affect our business.
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.
During the last three fiscal years, we have opened 74 new stores consisting of 19 stores in fiscal 2023, 32 stores in fiscal 2022 and 23 stores in fiscal 2021. 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.
However, the number of part-time employees fluctuates depending on our seasonal needs and generally increases during peak selling seasons, particularly the back-to-school and the winter holiday seasons. None of our employees are represented by a labor union and we believe that our relationship with our employees is positive.
However, the number of part-time employees fluctuates depending on our seasonal needs and generally increases during peak selling seasons, particularly the back-to-school and the winter holiday seasons. None of our employees in North America and Australia are represented by labor unions and we believe that our relationship with our employees is positive.
Furthermore, a controlling shareholder may take actions with which other shareholders do not agree, including actions that delay, defer or prevent a change of control of the company and that could cause the price that investors are willing to pay for the company’s stock to decline. 20 Item 1B. UNRESOLV ED STAFF COMMENTS None.
Furthermore, a controlling shareholder may take actions with which other shareholders do not agree, including actions that delay, defer or prevent a change of control of the company and that could cause the price that investors are willing to pay for the company’s stock to decline.
Customer tastes and fashion trends in our market are volatile and tend to change rapidly. Our success depends on our ability to effectively anticipate, identify and respond to changing fashion tastes and consumer preferences, and to translate market trends into appropriate, saleable product offerings in a timely manner.
Our success depends on our ability to effectively anticipate, identify and respond to changing fashion tastes and consumer preferences, and to translate market trends into appropriate, saleable product offerings in a timely manner.
We operate a distribution center located in Delta, British Columbia, Canada to distribute our merchandise to our Canadian stores. We operate a distribution and ecommerce fulfillment center located in Melbourne, Australia to distribute our merchandise to our Australian stores. Additionally, we are headquartered in Lynnwood, Washington.
We operate a distribution and ecommerce fulfillment center located in Melbourne, Australia to distribute our merchandise to our Australian stores. Additionally, we are headquartered in Lynnwood, Washington.
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 .
At February 3, 2024, our stores averaged approximately 2,909 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 .
Any violations of such laws or regulations could have an adverse effect on our reputation, results of operations, financial condition and cash flows. Furthermore, changes in the regulations, the imposition of additional regulations, or the enactment of any new legislation, particularly in the U.S. and Europe, could adversely affect our results of operations or financial condition.
Any 19 violations of such laws or regulations could have an adverse effect on our reputation, results of operations, financial condition and cash flows. Furthermore, changes in the regulations, the imposition of additional regulations, or the enactment of any new legislation, particularly in the North America and International businesses, could adversely affect our results of operations or financial condition.
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.
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.
If we fail to maintain or adequately maintain security systems, devices and activity monitoring to prevent unauthorized access to our network, systems and databases containing confidential, proprietary and personally identifiable information, we may be subject to additional risk of adverse publicity, litigation or significant expense.
Information systems are susceptible to an increasing threat of continually evolving cybersecurity risks. If we fail to maintain or adequately maintain security systems, devices, and activity monitoring to prevent unauthorized access to our network, systems and databases containing confidential, proprietary and personally identifiable information, we may be subject to additional risk of adverse publicity, litigation or significant expense.
Decreased sales could have a material adverse effect on our business, financial condition and results of operations. Our inability or failure to protect our intellectual property or our infringement of other’s intellectual property could have a negative impact on our operating results. We believe that our trademarks and domain names are valuable assets that are critical to our success.
Our inability or failure to protect our intellectual property or our infringement of other’s intellectual property could have a negative impact on our operating results. We believe that our trademarks and domain names are valuable assets that are critical to our success.
Our business could be adversely affected by disruptions in the supply chain, such as strikes, work stoppages, or port closures. 12 A decrease in consumer traffic could cause our sales to be less than expected. We depend heavily on generating customer traffic to our stores and websites.
Our business could be adversely affected by disruptions in the supply chain, such as strikes, work stoppages, or port closures. A decrease in consumer traffic could cause our sales to be less than expected. We depend heavily on generating customer traffic to our stores and websites. This includes locating many of our stores in prominent locations within successful shopping malls.
We plan to continue to expand our integrated marketing efforts by promoting more events and activities in our existing and new markets. We also benefit from branded vendors’ marketing. Opening or Acquiring New Store Locations . We believe our brand has appeal that provides select store expansion opportunities, particularly within our international markets.
We focus on utilizing an integrated marketing approach by promoting events and activities in our existing and new markets. We also benefit from branded vendors’ marketing. Opening or Acquiring New Store Locations . We believe our brand has appeal that provides select store expansion opportunities, particularly within our international markets.
Due to the costs of defending against such litigation, the size of judgments that may be awarded against us, and the loss of significant management time devoted to such litigation, we cannot provide assurance that such litigation will not disrupt our business or impact our financial results. 19 We are involved, from time to time, in litigation incidental to our business including complaints filed by investors.
Due to the costs of defending against such litigation, the size of judgments that may be awarded against us, and the loss of significant management time devoted to such litigation, we cannot provide assurance that such litigation will not disrupt our business or impact our financial results.
Changes to foreign or domestic tax laws could have a material impact on our financial condition, results of operations or cash flows. We may fail to meet analyst expectations, which could cause the price of our stock to decline. Our common stock is traded publicly and various securities analysts follow our financial results and issue reports on us.
Changes to foreign or domestic tax laws could have a material impact on our financial condition, results of operations or cash flows. We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.
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.
We also own numerous domain names, which have been registered with the Corporation for Assigned Names and Numbers. 9 Employees On February 3, 2024, we employed approximately 2,600 full-time and approximately 6,300 part-time employees globally.
Competition for qualified employees in these areas could require us to pay higher wages to attract a sufficient number of suitable employees. 17 If we are unable to hire and retain store managers and store associates capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and knowledge of our merchandise, our ability to open new stores may be impaired and the performance of our existing and new stores could be materially adversely affected.
If we are unable to hire and retain store managers and store associates capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and knowledge of our merchandise, our ability to open new stores may be impaired and the performance of our existing and new stores could be materially adversely affected.
If we experience difficulties in integrating acquisitions or if such acquisitions do not provide the benefits that we expect to receive, we could experience increased costs and other operating inefficiencies, which could have an adverse effect on our results of operations and overall financial performance. 13 Our plans for international expansion include risks that could have a negative impact on our results of operations.
If we experience difficulties in integrating acquisitions or if such acquisitions do not provide the benefits that we expect to receive, we could experience increased costs and other operating inefficiencies, which could have an adverse effect on our results of operations and overall financial performance. Our sales and inventory levels fluctuate on a seasonal basis.
These reports include information about our historical financial results as well as the analysts' estimates of our future performance. The analysts' estimates are based upon their own independent opinions and can be different from our estimates or expectations. If our operating results are below the estimates or expectations of public market analysts and investors, our stock price could decline.
The analysts' and investors' estimates are based upon their own independent opinions and can be different from our estimates or expectations. If our operating results are below the estimates or expectations of public market analysts and investors, our stock price could decline.
In addition, our proposed expansion will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of our individual stores and our overall business.
These increased demands could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of our individual stores and our overall business.
Any such failure to meet our staffing needs, any material increases in employee turnover rates, any increases in labor costs or any work stoppages, interruptions or strikes could have a material adverse effect on our business or results of operations. A decline in cash flows from operations could have a material adverse effect on our business and growth plans.
Any such failure to meet our staffing needs, any material increases in employee turnover rates, any increases in labor costs or any work stoppages, interruptions or strikes could have a material adverse effect on our business or results of operations. Our business could suffer if a manufacturer fails to use acceptable labor and environmental practices.
As a result, operations in international markets may be less successful than our operations in the U.S. Additionally, consumers in international markets may not be familiar with us or the brands we sell, and we may need to build brand awareness in the markets.
Additionally, consumers in international markets may not be familiar with us or the brands we sell, and we may need to build brand awareness in the markets.
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 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 February 3, 2024, we operated 756 stores; 597 in the United States (“U.S.”), 47 in Canada, 87 in Europe and 25 in Australia. We acquired Blue Tomato in fiscal 2012.
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.
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.
The effects of war, acts of terrorism, threat of terrorism, or other types of mall violence, could adversely affect our business. Most of our stores are located in shopping malls. Any threat of terrorist attacks or actual terrorist events, or other types of mall violence, such as shootings or riots, could lead to lower consumer traffic in shopping malls.
Most of our stores are located in shopping malls. Any threat of terrorist attacks or actual terrorist events, or other types of mall violence, such as shootings or riots, could lead to lower consumer traffic in shopping malls. In addition, local authorities or mall management could close shopping malls in response to security concerns.
To manage the anticipated growth of our operations and personnel, we may need to continue to improve our operational and financial systems, transaction processing, procedures and controls, and in doing so could incur substantial additional expenses that could impact our financial results.
To manage the anticipated growth of our operations and personnel, we may need to continue to improve our operational and financial systems, transaction processing, procedures, and controls, and in doing so could incur substantial additional expenses that could impact our financial results. 14 If we fail to meet the requirements to adequately maintain the privacy and security of personal data and business information, we may be subjected to adverse publicity, litigation, and significant expenses.
In addition, successful execution of our growth strategy may require that we obtain additional financing, and we may not be able to obtain that financing on acceptable terms or at all. Failure to successfully integrate any businesses that we acquire could have an adverse impact on our results of operations and financial performance.
In addition, successful execution of our growth strategy may require that we obtain additional financing, and we may not be able to obtain that financing on acceptable terms or at all. Our plans for international expansion include risks that could have a negative impact on our results of operations.
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.
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. 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.
We believe that we generally are able to obtain attractive pricing and terms from vendors because we are perceived as a desirable customer, and deterioration in our relationship with our vendors could have a material adverse effect on our business.
We believe that we generally are able to obtain attractive pricing and terms from vendors because we are perceived as a desirable customer, and deterioration in our relationship with our vendors could have a material adverse effect on our business. 16 However, there can be no assurance that our current vendors or new vendors will provide us with an adequate supply or quality of products or acceptable pricing.
In addition, local authorities or mall management could close shopping malls in response to security concerns. Mall closures, as well as lower consumer traffic due to security concerns, could result in decreased sales. Additionally, the threat, escalation or commencement of war or other armed conflict elsewhere, could significantly diminish consumer spending, and result in decreased sales.
Mall closures, as well as lower consumer traffic due to security concerns, could result in decreased sales. Additionally, the threat, escalation or commencement of war or other armed conflict elsewhere, could significantly diminish consumer spending, and result in decreased sales. Decreased sales could have a material adverse effect on our business, financial condition and results of operations.
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.
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.
Additionally, we cannot be assured that our borrowing relationship with our lenders will continue or that our lenders will remain able to support their commitments to us in the future.
Additionally, we cannot be assured that our borrowing relationship with our lenders will continue or that our lenders will remain able to support their commitments to us in the future. If our lenders fail to do so, then we may not be able to secure alternative financing on commercially reasonable terms, or at all.
However, there can be no assurance that our current vendors or new vendors will provide us with an adequate supply or quality of products or acceptable pricing. Our vendors could discontinue selling to us, raise the prices they charge, sell through direct channels or allow their merchandise to be discounted by other retailers.
Our vendors could discontinue selling to us, raise the prices they charge, sell through direct channels or allow their merchandise to be discounted by other retailers. There can be no assurance that we will be able to acquire desired merchandise in sufficient quantities on terms acceptable to us in the future.
In the U.S., we rely on a single distribution center located in Corona, California to receive, store and distribute the vast majority of our merchandise to our domestic stores. Internationally, we operate a combined distribution and ecommerce fulfillment center located in Graz, Austria that supports our Blue Tomato ecommerce and store operations in Europe.
Internationally, we operate a combined distribution and ecommerce fulfillment center located in Graz, Austria that supports our Blue Tomato ecommerce and store operations in Europe. We operate a distribution center located in Delta, British Columbia, Canada to distribute our merchandise to our Canadian stores.
Our stores benefit from the ability of a mall’s “anchor” tenants, generally large department stores and other area attractions, to generate consumer traffic in the vicinity of our stores and the continuing popularity of malls as shopping destinations. In addition, some malls that were in prominent locations when we opened our stores may cease to be viewed as prominent.
Sales at these stores are derived, in part, from the volume of traffic in those malls. Our stores benefit from the ability of a mall’s “anchor” tenants, generally large department stores and other area attractions, to generate consumer traffic in the vicinity of our stores and the continuing popularity of malls as shopping destinations.
Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could have a material adverse effect on our business, results of operations and financial condition.
Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could have a material adverse effect on our business, results of operations and financial condition. 13 Our quarterly results of operations are affected by a variety of other factors, including calendar shifts of holiday or seasonal periods, timing of promotional events, general economic conditions, and numerous other items set forth on these risk factors.
Failure to comply with federal, state, local or foreign laws and regulations, or changes in these laws and regulations, could have an adverse impact on our results of operations and financial performance.
Risks associated with legal liability are often difficult to assess or quantify, and their existence and magnitude can remain unknown for significant periods of time. Failure to comply with federal, state, local or foreign laws and regulations, or changes in these laws and regulations, could have an adverse impact on our results of operations and financial performance.
There can be no assurance that such vendors will not decide to discontinue supplying their products to us, supply us only less popular or lower quality items, raise the prices they charge us or focus on selling their products directly. 16 In addition, a number of our vendors are smaller, less capitalized companies and are more likely to be impacted by unfavorable general economic and market conditions than larger and better capitalized companies.
There can be no assurance that such vendors will not decide to discontinue supplying their products to us, supply us only less popular or lower quality items, raise the prices they charge us or focus on selling their products directly.
There can be no assurance that we will be able to acquire desired merchandise in sufficient quantities on terms acceptable to us in the future. In addition, certain vendors sell their products directly to the retail market and therefore compete with us directly and other vendors may decide to do so in the future.
In addition, certain vendors sell their products directly to the retail market and therefore compete with us directly and other vendors may decide to do so in the future.
There is no assurance that future health care legislation will not adversely impact our results or operations. Our business could suffer if a manufacturer fails to use acceptable labor and environmental practices.
There is no assurance that future health care legislation will not adversely impact our results or operations.
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.
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.
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.
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.
We may, from time to time, acquire businesses, such as our acquisition of Blue Tomato and Fast Times.
Failure to successfully integrate any businesses that we acquire could have an adverse impact on our results of operations and financial performance. We may, from time to time, acquire businesses, such as our acquisition of Blue Tomato and Fast Times.
If we are unable to hire qualified temporary personnel, our results of operations could be adversely impacted.
If we are unable to hire qualified temporary personnel, our results of operations could be adversely impacted. A decline in cash flows from operations could have a material adverse effect on our business and growth plans.
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.
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. 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.
We intend to continue to open new stores in future years, while remodeling a portion of our existing store base such that we have the optimum number of stores in any given trade area. The expansion into new markets may present competitive, merchandising, hiring and distribution challenges that are different from those currently encountered in our existing markets.
Our North America growth largely depends on our ability to optimize our customer engagement. We intend to continue to open new stores in future years, while remodeling a portion of our existing store base such that we have the optimum number of stores in any given trade area.
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.
Our retail market historically has been subject to substantial cyclicality. 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.
RISK FACTORS Investing in our securities involves a high degree of risk. The following risk factors, issues and uncertainties should be considered in evaluating our future prospects. In particular, keep these risk factors in mind when you read “forward-looking” statements elsewhere in this report. Forward-looking statements relate to our expectations for future events and time periods.
In particular, keep these risk factors in mind when you read “forward-looking” statements elsewhere in this report. Forward-looking statements relate to our expectations for future events and time periods. Generally, the words “anticipates,” “expects,” “intends,” “may,” “should,” “plans,” “believes,” “predicts,” “potential,” “continue” and similar expressions identify forward-looking statements.
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.
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.
If this trend continues or if the popularity of mall shopping continues to decline generally among our customers, our sales may decline, which would impact our results of operations. Additionally, we may experience other risks associated with operating leases, such as lease termination or impairment of operating lease right-of-use assets.
In addition, some malls that were in prominent locations when we opened our stores may cease to be viewed as prominent. If this trend continues or if the popularity of mall shopping continues to decline generally among our customers, our sales may decline, which would impact our results of operations.
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.
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. Customer tastes and fashion trends in our market are volatile and tend to change rapidly.
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 .
No single third-party brand that we carry accounted for more than 5.9%, 6.3% and 7.9% of our net sales in fiscal 2023, 2022 and 2021, 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.
This litigation could result in substantial costs, and could divert management's attention and resources, which could harm our business. Risks associated with legal liability are often difficult to assess or quantify, and their existence and magnitude can remain unknown for significant periods of time.
We are involved, from time to time, in litigation incidental to our business including complaints filed by investors. This litigation could result in substantial costs, and could divert management's attention and resources, which could harm 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.
Pandemics and other health crises, including COVID-19, could affect our business, financial condition and results of operations in many respects. The emergence, severity, magnitude and duration of global or regional health crises are uncertain and difficult to predict.
Generally, the words “anticipates,” “expects,” “intends,” “may,” “should,” “plans,” “believes,” “predicts,” “potential,” “continue” and similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements.
Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements. Any of the following risks could harm our business, operating results or financial condition and could result in a complete loss of your investment.
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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.
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For fiscal 2023, 2022 and 2021, our private label merchandise represented 23.0%, 18.4%, and 13.3% 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.
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In addition, the public may read and copy any materials Zumiez files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. 10 Item 1A.
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In addition, the SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 10 Item 1A. RISK FACTORS Investing in our securities involves a high degree of risk. The following risk factors, issues and uncertainties should be considered in evaluating our future prospects.
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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.
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Economic and consumer confidence can also be affected by a variety of factors, including housing prices, unemployment rates and inflation. 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.
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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.
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Current and increased competition could have a material adverse effect on our business, results of operations and financial condition. 11 We could incur charges due to impairment of goodwill, intangible assets and other long-term assets.
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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.
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We have recorded goodwill, which is the premium paid over the fair market value of the acquired tangible and intangible assets paid in an acquisition, as part of our prior year acquisitions.
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The duration and severity of the COVID-19 pandemic will determine its ongoing impact on our business, including our ability to execute business strategies and initiatives in their expected time frame, the effect on our suppliers and disruptions to the global supply chain, and the ability of our customers to pay for our services and products.
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Goodwill and intangible assets, which consist of tradenames and trademarks, are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Any event that impacts our results negatively could lead to impairment of these assets which could have negative impacts on our earnings.
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A resurgence in the spread of COVID-19, or its variants, could force the closure of our retail stores globally, as we saw in the first quarter of 2020. We could also experience store closures on a regional basis, like we have seen in 2020 and 2021.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 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.
Biggest changeItem 2. PR OPERTIES All of our stores are occupied under operating leases and encompassed approximately 2.2 million total square feet at February 3, 2024. 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 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.
We lease 114,571 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 11, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements found in Part IV Item 15 of this Form 10-K, for additional information related to legal proceedings. Item 4. MINE SAFETY DISCLOSURES Not applicable. 21 PART II
Biggest changeSee Note 11, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements found in Part IV Item 15 of this Form 10-K, for additional information related to legal proceedings. Item 4. MINE SAF ETY DISCLOSURES Not applicable. 24 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance 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.
Biggest changePerformance Measurement Comparison The following graph shows a comparison for total cumulative returns for Zumiez, the Nasdaq Composite Index, the Nasdaq Retail Trade Index, the S&P Midcap 400, and the S&P 400 apparel retail during the period commencing on February 2, 2019 and ending on February 3, 2024.
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.
The comparison assumes $100 was invested on February 2, 2019 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 28, 2023, there were 19,488,709 shares of common stock outstanding.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER 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 February 3, 2024, there were 19,833,198 shares of common stock outstanding.
Dividends No cash dividends have been declared on our common stock to date nor have any decisions been made to pay a dividend in the foreseeable future. Payment of dividends is evaluated on a periodic basis.
Dividends No cash dividends have been declared on our common stock to date nor have any decisions been made to pay a dividend at this time. Payment of dividends is evaluated on a periodic basis. Recent Sales of Unregistered Securities None.
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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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Holders of the Company’s Capital Stock We had approximately 12 shareholders of record as of March 7, 2024.
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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.
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Issuer Purchases of Equity Securities There were no issuer purchases of our common stock during the thirteen weeks ended February 3, 2024.
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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.
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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. 25 For the year ended February 3, 2024, the Company elected to change the relative benchmark groups from NASDAQ Composite Index and NASDAQ Retail Trade Index, to S&P Midcap 400 and S&P 400 apparel retail.
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Our vendor has discontinued their in-house calculation for NASDAQ as they fell out of the requirements of using indexes that are publicly accessible to shareholders. 2/2/19 2/1/20 1/30/21 1/29/22 1/28/23 2/3/24 Zumiez 100.00 123.99 171.36 172.04 102.43 68.30 S&P MidCap 400 100.00 111.27 131.81 150.33 153.84 161.19 S&P 400 Apparel Retail 100.00 72.90 92.58 103.17 86.20 85.34 Item 6. [Reserved] 26

Item 7. Management's Discussion & Analysis

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

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Biggest changeNet 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.
Biggest changeInvesting Activities 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.
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.
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.
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 impairment, which could materially affect our results of operations.
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.
In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.
GAAP. In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.
Changes to our operating cash flows have historically been driven primarily by changes in operating income, which is impacted by changes to non-cash items such as depreciation, amortization and accretion, deferred taxes, and changes to the components of working capital.
Changes to our operating cash flows have historically been driven primarily by changes in operating income, which is impacted by changes to non-cash items such as depreciation, impairment, amortization and accretion, deferred taxes, and changes to the components of working capital.
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.
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. 28 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.
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.
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. 29 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 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 credit facility will mature on December 1, 2024.
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. The credit facility will mature on December 1, 2024.
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.
There can be no assurance that the number of stores that we actually open in fiscal 2024 will not be different from the number of stores we plan to open, or that actual fiscal 2024 capital expenditures will not differ from this expected amount.
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.
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 $2.9 million related to long-lived assets in fiscal 2023.
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.
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.
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.
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. A 10% increase in our sales return reserve at February 3, 2024 would have decreased net income by $0.3 million in fiscal 2023.
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.
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.
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.
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.
Liquidity and Capital Resources Our cash requirements are subject to change as business conditions warrant and opportunities arise. Our primary uses of cash are for operational expenditures, inventory purchases, common stock repurchases and capital investments, including new stores, store remodels, store relocations, store fixtures and ongoing infrastructure improvements.
Liquidity and Capital Resources Our cash requirements are subject to change as business conditions warrant and opportunities arise. Our primary uses of cash are for operational expenditures, inventory purchases, common stock repurchases and capital investments, including new stores, store remodels, store relocations, store fixtures and ongoing infrastructure improvements. Historically, our main source of liquidity has been cash flows from operations.
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.
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. A 10% decrease in the sales price of our inventory at February 3, 2024 would have decreased net income by $0.7 million in fiscal 2023.
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%.
Results of Operations The following table presents selected items on the consolidated statements of (loss) income as a percent of net sales: Fiscal 2023 Fiscal 2022 Fiscal 2021 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 67.9 % 66.1 % 61.4 % Gross profit 32.1 % 33.9 % 38.6 % Selling, general and administrative expenses 39.5 % 30.7 % 25.3 % Operating profit -7.4 % 3.2 % 13.3 % Interest and other income, net 0.3 % 0.2 % 0.3 % Earnings before income taxes -7.1 % 3.4 % 13.6 % Provision for income taxes 0.1 % 1.2 % 3.5 % Net income -7.2 % 2.2 % 10.1 % Fiscal 2023 Results Compared With Fiscal 2022 Net Sales 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 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, no impairment was recorded.
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.
Dollars per transaction increased due to an increase in average unit retail partially offset by a decrease in units per transaction. For the year, the men’s category was our largest growth category followed by accessories, footwear, and women’s. Our only negative category for the year was hardgoods.
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.
During fiscal 2020, we spent $9.1 million on capital expenditures, which consisted of $6.6 million of costs related to investment in 12 new stores and 3 remodeled or relocated stores, $2.1 million associated with improvements to our websites and $0.4 million in other improvements.
During fiscal 2023, we spent $20.4 million on capital expenditures which consisted of $8.1 million of costs related to investment in 19 new stores and 4 remodeled or relocated stores, $8.0 million associated with improvements to our websites and $4.3 million in other improvements.
A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution. Accounting for Contingencies We are subject to various claims and contingencies related to lawsuits, insurance, regulatory and other matters arising out of the normal course of business.
A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution. 36 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Accounting for Contingencies We are subject to various claims and contingencies related to lawsuits, insurance, regulatory and other matters arising out of the normal course of business.
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.
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.
Net cash used in financing activities in fiscal 2020 was $9.7 million related to $13.4 million used in the repurchase of common stock and $0.2 million in payments on tax withholding obligation upon vesting of restricted stock partially offset by $3.9 million in 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.
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. 35 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions 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.
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.
Historically, our main source of liquidity has been cash flows from operations. 29 The significant components of our working capital are inventories and liquid assets such as cash, cash equivalents, current marketable securities and receivables, reduced by accounts payable and accrued expenses.
The significant components of our working capital are inventories and liquid assets such as cash, cash equivalents, current marketable securities and receivables, reduced by accounts payable and accrued expenses.
Net sales for the year ended January 29, 2022 included a $4.2 million increase due to the change in foreign exchange rates, which consisted of $3.0 million in Canada, $1.0 million in Australia, and $0.3 million in Europe.
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.
Cash received from our customers generally corresponds to our net sales. Because our customers primarily use credit cards or cash to buy from us, our receivables from customers settle quickly.
Because our customers primarily use credit and debit cards or cash to buy from us, our receivables from customers settle quickly.
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.
The following table summarizes our cash flows from operating, investing and financing activities (in thousands): Fiscal 2023 Fiscal 2022 Fiscal 2021 Total cash (used in) provided by Operating activities $ 14,755 $ (379 ) $ 134,950 Investing activities (8,548 ) 54,209 101,643 Financing activities 704 (87,257 ) (191,409 ) Effect of exchange rate changes on cash and cash equivalents (1,080 ) (2,172 ) (1,822 ) Net (decrease) increase in cash, cash equivalents, and restricted cash $ 5,831 $ (35,599 ) $ 43,362 31 Operating Activities 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.
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.
Working capital, the excess of current assets over current liabilities, was $182.5 million at the end of fiscal 2023, a decrease of 6.1% from $194.4 million at the end of fiscal 2022.
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.
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.
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%.
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 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 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.
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 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 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.
SG&A expenses as a percent of net sales increased 540 basis points in fiscal 2022 to 30.7%.
SG&A expenses as a percent of net sales increased 880 basis points in fiscal 2023 to 39.5%.
During fiscal 2021, we spent $15.7 million on capital expenditures which consisted of $11.5 million of costs related to investment in 23 new stores and 3 remodeled or relocated stores, $1.1 million associated with improvements to our websites and $3.1 million in other improvements.
During fiscal 2021, we spent $15.7 million on capital expenditures which consisted of $11.5 million of costs related to investment in 23 new stores and 3 remodeled or relocated stores, $1.1 million associated with improvements to our websites and $3.1 million in other improvements. 32 In fiscal 2024, we expect to spend approximately $14 million to $16 million on capital expenditures, a majority of which will relate to leasehold improvements and fixtures for the approximately 10 new stores we plan to open in fiscal 2024 and remodels or relocations of existing stores.
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.
At February 3, 2024, 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.
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.
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.
The increase was primarily driven by 260 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, 140 basis points due to store costs not tied to wages primarily impacted by deleverage on lower sales, 100 basis points in non-store wages, 70 basis points in corporate costs and 70 basis points in our training events as we got back to our normal cadence.
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.
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.
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. Cash received from our customers generally corresponds to our net sales.
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.
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. The increase in the valuation allowance in fiscal 2023 resulted in $12.3 million of income tax expense when compared to fiscal 2022 of $3.0 million .
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.
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.
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.
A 10 basis point decrease in forecasted sales assumptions would have resulted in an additional impairment charge of $0.1 million in fiscal 2023. 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.
This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included on the consolidated balance sheets. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
These differences result in deferred tax assets and liabilities, which are included on the consolidated balance sheets. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The fair value of the asset is based on the future discounted cash flow of current market rents that we could receive as sublease income. Events that may result in an impairment include the decision to close a store or facility or a significant decrease in the operating performance of a long-lived asset group.
Events that may result in an impairment include the decision to close a store or facility or a significant decrease in the operating performance of a long-lived asset group.
As a percentage of net sales, gross profit decreased 470 basis points in fiscal 2022 to 33.9%, as we saw significant deleverage on lower sales across our fixed costs as well as rate increases in numerous areas.
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.
We believe that the following accounting estimates involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our consolidated financial statements. 32 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Valuation of Merchandise Inventories We value our inventory at the lower of average cost or net realizable value through the establishment of write-down and inventory loss reserves.
Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Valuation of Merchandise Inventories We value our inventory at the lower of average cost or net realizable value through the establishment of write-down and inventory loss reserves.
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.
If the incremental borrowing rate increased 10 basis points from the rate in effect at February 3, 2024, the lease liability balance would decrease by $0.2 million. 35 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Revenue Recognition Revenue is recognized upon purchase at our retail store locations.
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.
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 of our lease liabilities and right-of-use assets.
This gives us the security to manage through potential difficulties while also investing in important strategic initiatives to drive shareholder value over the long-term. Exiting a difficult year for sales and earnings in fiscal 2022, the macro-economic environment in 2023 remains unclear.
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.
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%.
These decreases were partially offset by a 20 basis points of efficiencies in distribution costs. 30 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%.
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.
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.
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.
The footwear category was our largest declining category followed by women’s, accessories, hardgoods and men’s. Fiscal 2024—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.
Valuation of Long-Lived Assets We review the carrying value of our long-lived assets, including fixed assets and operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying value of such asset or asset group may not be recoverable.
A 10% increase in actual physical inventory shrinkage rate at February 3, 2024 would have decreased net income by less than $0.1 million in fiscal 2023. 34 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Valuation of Long-Lived Assets We review the carrying value of our long-lived assets, including fixed assets and operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying value of such asset or asset group may not be recoverable.
By region, North America sales increased $165.1 million or 19.1% and other international sales increased $28.1 million or 22.5% during fiscal 2021 compared to fiscal 2020.
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.
Our gift card breakage reserve has increased by $1.8 million in fiscal 2022.
Our gift card breakage reserve has increased by $1.8 million in fiscal 2023. A 1% increase in the estimated gift card redemption rate would have decreased net income by $0.1 million in fiscal 2023.
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 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.
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
See Note 7 Goodwill and Intangible Assets for the details of the impairment. 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. 37
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed in “Item 1A Risk Factors.” See the cautionary note regarding forward-looking statements set forth at the beginning of Part I of the Annual Report on Form 10-K.
This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in the section titled” Risk Factors” and in other parts of this Annual Report on Form 10-K.
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 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.
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.
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.
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.
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.
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.
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.
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.
We view diluted earnings per share as a key indicator of our success in increasing shareholder value.
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.
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.
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.
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.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and related notes included elsewhere in this document. This discussion contains forward-looking statements that involve risks and uncertainties.
Item 7. 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.
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.
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. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.
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.
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.
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The following Management’s Discussion and Analysis of Financial Condition and Result of Operations (“MD&A”) is intended to help the reader understand the financial condition, results of operations, and the certainty of cash flows of Zumiez Inc. and its wholly-owned subsidiaries.
Added
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.
Removed
This discussion focuses on known material events and uncertainties that are reasonably likely to cause reported financial information not to be necessarily indicative of future operating results or of future financial condition.
Added
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.
Removed
This includes descriptions and amounts of matters that have had a material impact on reported operations, as well as matters that are reasonably likely, based on our assessment, to have a material impact on future operations.
Added
See also the section titled “Note Regarding Forward-Looking Statements” in this report. For Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) related to the year ended January 29, 2022, refer to this same section in our 2022 annual report on Form 10-K as filed with the Securities and Exchange Commission on March 20, 2023.
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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.
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Fiscal 2023—A Review of This Past Year After achieving record sales in fiscal 2021, we have now experienced two challenging years in a row.
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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.
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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.
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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%.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDuring 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.
Biggest changeDuring 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 February 3, 2024, we had no borrowings outstanding under the secured revolving credit facility.
As a result, any significant or sudden change in the financial, banking or currency policies and practices of these countries could have a material adverse impact on our financial position, results of operations and cash flows.
As a result, any significant or sudden change in the financial, banking or currency policies and practices of these countries could have a material adverse impact on our financial position, results of operations and cash flows. Item 8.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our earnings are affected by changes in market interest rates as a result of our short-term and long-term marketable securities, which are primarily invested in state and local municipal securities and variable-rate demand notes, which have long-term nominal maturity dates but feature variable interest rates that reset at short-term intervals.
QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our earnings are affected by changes in market interest rates as a result of our short-term and long-term marketable securities, which are primarily invested in state and local municipal securities and variable-rate demand notes, which have long-term nominal maturity dates but feature variable interest rates that reset at short-term intervals.
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.
If our current portfolio average yield rate decreased by 10% in fiscal 2023, 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.
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.
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 2023 our net income would have decreased or increased by $0.2 million.
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FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA Information with respect to this item is set forth in “Index to the Consolidated Financial Statements,” found in Part IV Item 15 of this Form 10-K. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOU NTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.

Other ZUMZ 10-K year-over-year comparisons