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What changed in Zumiez Inc's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Zumiez Inc's 2024 and 2025 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 2025 report.

+160 added−165 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-14)

Top changes in Zumiez Inc's 2025 10-K

160 paragraphs added · 165 removed · 123 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

38 edited+17 added−11 removed182 unchanged
Biggest changeAt 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.
Biggest changeAt February 1, 2025, we operated 730 stores in the following locations: United States and Puerto Rico - 570 Stores Alabama 4 Indiana 9 Nebraska 2 Rhode Island 2 Alaska 3 Iowa 4 New Hampshire 6 South Carolina 6 Arizona 12 Kansas 3 New Jersey 16 South Dakota 2 Arkansas 2 Kentucky 4 New Mexico 5 Tennessee 9 California 86 Louisiana 5 New York 26 Texas 47 Colorado 20 Maine 3 Nevada 10 Utah 13 Connecticut 6 Maryland 9 North Carolina 15 Vermont 1 Delaware 3 Massachusetts 9 North Dakota 3 Virginia 15 Florida 36 Michigan 11 Ohio 14 Washington 19 Georgia 17 Minnesota 10 Oklahoma 7 West Virginia 2 Hawaii 7 Mississippi 4 Oregon 12 Wisconsin 11 Idaho 6 Missouri 6 Pennsylvania 21 Wyoming 2 Illinois 15 Montana 5 Puerto Rico 5 Canada - 46 Stores Alberta 8 New Brunswick 1 Saskatchewan 2 British Columbia 12 Nova Scotia 2 Manitoba 2 Ontario 19 Europe - 87 Stores Austria 20 Sweden 3 Germany 31 Italy 4 Switzerland 11 Belgium 1 Netherlands 5 Norway 4 Finland 8 Australia - 27 Stores Victoria 10 Queensland 8 South Australia 3 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 Total Number of Stores End of Year 2024 7 33 730 2023 19 21 756 2022 32 13 758 7 Store Design and Environment.
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 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.
If our business does not generate 17 sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under a 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.
Additionally, some of our competitors may offer more options for free and/or expedited shipping for ecommerce sales. Direct competition with these and other retailers may increase significantly in the future, which could require us, among other things, to lower our prices and could result in the loss of our customers.
Additionally, some of our competitors may offer more options 11 for free and/or expedited shipping for ecommerce sales. Direct competition with these and other retailers may increase significantly in the future, which could require us, among other things, to lower our prices and could result in the loss of our customers.
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.
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 North America and International businesses, could adversely affect our results of operations or financial condition.
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.
Furthermore, a controlling shareholder may take actions with which other shareholders do not agree, including actions that delay, defer or 19 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.
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.
Due to the costs of defending 18 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.
Many of these opportunities are provided to our part-time sales associates, who on average are approximately 19 years of age, and are often furthering their career through concurrent education and/or additional employment opportunities. The Zumiez culture is built on a set of shared values that have been in place since the inception of the business.
Many of these opportunities are provided to our part-time sales associates, who on average are approximately 20 years of age, and are often furthering their career through concurrent education and/or additional employment opportunities. The Zumiez culture is built on a set of shared values that have been in place since the inception of the business.
Our employees, customers, various types of investors, and other stakeholders are also increasingly focused on ESG practices and in recent years have placed increasing importance on the non-financial impacts. If our ESG practices do not meet stakeholder expectations, which continue to evolve, we may incur additional costs and our brand may be harmed. Item 1B.
Our employees, customers, various types of investors, and other stakeholders are also increasingly focused on ESG practices and in recent years have placed increasing importance on the non-financial impacts. If our ESG practices do not meet stakeholder expectations, which continue to evolve, we may incur additional costs and our brand may be harmed.
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.
No single third-party brand that we carry accounted for more than 5.4%, 5.9% and 6.3% of our net sales in fiscal 2024, 2023 and 2022, respectively. We believe that our strategic mix of apparel, footwear, accessories and hardgoods allows us to strengthen the potential of the brands we sell and affirms our credibility with our customers.
We also use our STASH loyalty program to increase brand engagement and enhance brand creditability. We believe that our marketing efforts have also been successful in generating and promoting interest in our product offerings. In addition, we use our ecommerce presence to further increase our brand awareness.
We also use our STASH loyalty program and Zumiez digital app to increase brand engagement and enhance brand creditability. We believe that our marketing efforts have also been successful in generating and promoting interest in our product offerings. In addition, we use our ecommerce presence to further increase our brand awareness.
Increased scrutiny and changing expectations from stakeholders with respect to the Company’s ESG practices may result in additional costs or risks. Companies across many industries are facing increasing scrutiny related to their environmental, social and governance practices.
Increased scrutiny and changing expectations from stakeholders with respect to ESG matters may result in additional costs or risks. Companies across many industries are facing increasing scrutiny related to their environmental, social and governance practices.
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.
To take advantage of what we believe to be a compelling economic store model, we plan to open approximately 9 new stores in fiscal 2025, 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.
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.
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 2024, approximately 56% of our net sales occurred in the third and fourth quarters combined.
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.
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.
Events and activities such as these provide opportunities for our customers to develop a strong identity with our culture and brands. Our STASH loyalty program allows us to learn more about our customer and serve their needs better.
Events and activities such as these provide opportunities for our customers to develop a strong identity with our culture and brands. Our STASH loyalty program and Zumiez digital app allow us to learn more about our customer and serve their needs better.
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 .
At February 1, 2025, our stores averaged approximately 2,921 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 .
If actual results fall short of our estimates and assumptions used in estimating revenue growth, future cash flows and asset fair values, we could incur further impairment charges for goodwill, intangible assets, or long-term assets, which could have an adverse effect on our results of operations.
If actual results fall short of our estimates and assumptions used in estimating revenue growth, future cash flows and asset fair values, we could incur further impairment charges for goodwill, intangible assets, or long-term assets, which could have an adverse effect on our results of operations. Item 1B. UNRESOLV ED STAFF COMMENTS None.
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.
During the last three fiscal years, we have opened 58 new stores consisting of 7 stores in fiscal 2024, 19 stores in fiscal 2023 and 32 stores in fiscal 2022. 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.
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.
For fiscal 2024, 2023 and 2022, our private label merchandise represented 27.8%, 23.0%, and 18.4% 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.
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.
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.
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.
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. This includes rising geopolitical tensions and U.S. policies related to global trade and tariffs.
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.
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.
If a service provider fails to provide the data quality, communications, capacity or services we require, the failure could interrupt our services and could have a material adverse effect on our business, financial condition and results of operations.
Additionally, we rely on third-party service providers for certain information systems functions. If a service provider fails to provide the data quality, communications, capacity or services we require, the failure could interrupt our services and could have a material adverse effect on our business, financial condition and results of operations.
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.
We could incur charges due to impairment of goodwill, intangible assets and other long-term assets. 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.
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 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 1, 2025, we operated 730 stores; 570 in the United States (“U.S.”), 46 in Canada, 87 in Europe and 27 in Australia. We acquired Blue Tomato in fiscal 2012.
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.
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, including the implementation of increased tariffs or other restrictions placed on foreign imports. Most of our merchandise is produced by manufacturers around the world, including China.
Our merchandising staff remains in tune with the fashion, music, art and culture of action sports, streetwear and other unique lifestyles by participating in lifestyles we support, attending relevant events and concerts, watching related programming and reading relevant publications and social network channels.
Our merchandising staff remains in tune with the fashion, music, art and culture of action sports, streetwear and other unique lifestyles by participating in lifestyles we support, traveling to select markets, attending relevant events and concerts, watching related programming and reading relevant publications, reviewing social network channels and connecting with our store associates who are connected locally with our customers.
If our information systems, including hardware and software, do not work effectively, this could adversely impact the promptness and accuracy of our transaction processing, financial accounting and reporting and our ability to manage our business and properly forecast operating results and cash requirements. Additionally, we rely on third-party service providers for certain information systems functions.
If our information technology systems, including hardware and software, do not work effectively, this could adversely impact our ability to operate and manage our business, including the promptness and accuracy of our transaction processing, financial accounting and reporting and our ability to properly forecast operating results and cash requirements.
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.
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.
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.
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.
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.
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.
Trademarks The “Zumiez”, “Blue Tomato” and “Fast Times” trademarks and certain other trademarks, have been registered, or are the subject of pending trademark applications, with the U.S. Patent and Trademark Office and with the registries of certain foreign countries. We regard our trademarks as valuable and intend to maintain such marks and any related registrations and vigorously protect our trademarks.
Trademarks The “Zumiez”, “Blue Tomato” and “Fast Times” trademarks and certain other trademarks, including those associated with our private label brands, have been registered, or are the subject of pending trademark applications, with the U.S. Patent and Trademark Office and with the registries of certain foreign countries.
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.
We regard our trademarks as valuable and intend to maintain such marks and any related registrations and vigorously protect our 9 trademarks. We also own numerous domain names, which have been registered with the Corporation for Assigned Names and Numbers. Employees On February 1, 2025, we employed approximately 2,400 full-time and approximately 6,300 part-time employees globally.
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.
Current and increased competition could have a material adverse effect on our business, results of operations and financial condition. 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.
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, we may suffer margin erosion or be required to raise our prices, which may result in the loss of customers, negatively impact our results of operations, or otherwise harm our business. 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.
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, remediation of any problems with our information technology systems could result in significant, unplanned expenses. 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.
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.
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.
Removed
Trade restrictions such as increased tariffs or quotas, or both, could also increase the cost and reduce the supply of merchandise available to us. Any reduction in merchandise available to us or any increase in its cost due to tariffs, quotas or local issues that disrupt trade could have a material adverse effect on our results of operations.
Added
The deterioration of economic relations between countries, such as changes in or terminations of existing trade agreements, or the imposition of tariffs (including recent U.S. tariffs imposed or threatened to be imposed on Canada, Mexico, and other countries, and any retaliatory actions taken by such countries) or otherwise, could impact our profitability or otherwise have an adverse effect on our business.
Removed
This includes costs to comply with regulatory developments regarding the use of “conflict minerals,” certain minerals originating from the Democratic Republic of Congo and adjoining countries, which may affect the sourcing and availability of raw materials used by manufacturers and subject us to increased costs associated with our products, processes or sources of our inputs.
Added
In addition, government shutdowns or the risk of government shutdowns as well as the impact or expected impact of elections, both in the U.S. and in other markets where we operate could have a material adverse impact on our results of operations and financial position.
Removed
If our information systems fail to function effectively, or do not scale to keep pace with our planned growth, our operations could be disrupted and our financial results could be harmed.
Added
In times when there is a decline in disposable income and consumer confidence, there could be a trend to consumers seeking more inexpensive or value-oriented merchandise.
Removed
The terms of our secured credit agreement impose certain restrictions on us that may impair our ability to respond to changing business and economic conditions, which could have a significant adverse impact on our business. Additionally, our business could suffer if our ability to acquire financing is reduced or eliminated.
Added
Also, our business could be adversely affected by disruptions in the supply chain, such as strikes, work stoppages, or port closures.
Removed
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.
Added
Most of our merchandise is imported and is subject to duties, indirect taxes, quotas and non-tariff trade barriers, any of which may limit the quantity of products that we may import into the U.S. and other countries or may impact the cost of such products.
Removed
The credit facility contains various representations, warranties and restrictive covenants that, among other things and subject to specified circumstances and exceptions, restrict our ability to incur indebtedness (including guarantees), grant liens, make investments, pay dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers, dispose of certain assets or change the nature of their business.
Added
The current U.S. presidential administration has implemented tariffs and has signaled that it may implement additional or increased tariffs, other trade restrictions, or may alter trade agreements between the U.S. and Canada, China, the European Union and Mexico, among others. Such actions include limiting trade and/or imposing tariffs on imports from such countries.
Removed
The 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.
Added
Tariffs have the potential to significantly raise the cost of our merchandise. In such a case, there can be no assurance that we will be able to shift manufacturing and supply agreements to non-impacted countries to reduce the effects of tariffs.
Removed
These restrictions could (1) limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans; and (2) adversely affect our ability to finance our operations, strategic acquisitions, investments or other capital needs or to engage in other business activities that would be in our interest.
Added
We rely on information systems and technology in our operations and our growth plans and any material failure, inadequacy interruption, or security failure of that technology could adversely affect our ability to effectively operate and grow our business and could adversely affect our financial results.
Removed
The credit facility contains certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance, and providing additional guarantees and collateral in certain circumstances.
Added
Any failure, inadequacy, or interruption of our technology systems could harm our ability to effectively operate and grow our business and could adversely affect our financial results. In addition, the technologies and artificial intelligence tools that we incorporate into certain aspects of our operations may not generate the intended efficiencies and may impact our business results.
Removed
The credit facility includes customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross-default to other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, material judgments and change of control.
Added
Specifically artificial intelligence tools could have the potential to be deficient, inaccurate, or biased and if we fail to adopt and oversee the use of artificial intelligence in a thoughtful and strategic manner, it could harm our financial performance.
Removed
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.
Added
To better manage, operate and grow our business, we may need to continue to invest in and improve our information technology systems, and in doing so could incur substantial additional expenses that could impact our financial results.
Added
Information systems are susceptible to an increasing threat of continually evolving cybersecurity risks. Similar to many other retail companies, we expect to continue to experience cyber attacks, including phishing, social engineering, and other attempts to breach, or gain unauthorized access to our systems and databases.
Added
To date, these attacks have not had a material impact on our operations, but we cannot provide assurance that they will not have an impact in the future. Unauthorized access, theft, use, destruction, or other compromises are becoming increasingly sophisticated and may occur through a variety of methods.
Added
The rapid evolution and increased adoption of artificial intelligence technologies by attackers may intensify our cybersecurity risks.
Added
Globally, a lack of harmonization and the rapid evolution in relation to ESG legal and regulatory reform across the jurisdictions in which we may operate may affect our future implementation of, and compliance with, ESG standards and requirements. Standards for tracking and reporting ESG matters are relatively new, have not been formalized and continue to evolve.
Added
Collecting, measuring, and reporting ESG information and metrics can be difficult and time consuming.
Added
In addition, our processes and controls may not comply with evolving standards for identifying, measuring and reporting ESG metrics, including ESG-related disclosures that may be required of public companies by the SEC and other regulators, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future, and could cause us to undertake costly initiatives to satisfy such new criteria.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

11 edited+0 added−2 removed24 unchanged
Biggest changeUse of Third Parties We work with a third party that provides us with threat hunting services via an Endpoint Detection and Response (EDR) platform. This team proactively searches for newly uncovered threats based on up-to-the-minute intelligence on the cybersecurity threat landscape and their knowledge of the Zumiez environment.
Biggest changeThis team proactively searches for newly uncovered threats based on up-to-the-minute intelligence on the cybersecurity threat landscape and their knowledge of the Zumiez environment. Upon discovery of a potential threat, the threat hunting team provides initial remediation guidance. We also conduct periodic penetration testing of our systems.
On a day-to-day basis and from a project perspective, the Security and Compliance Team undertakes the following activities: • Builds and reviews reports on newly identified security threats. • Monitors various internal security toolsets including EDR (Endpoint Detection and Response), email security and logging from company firewalls and other security related systems and takes action to prevent or resolve incidents identified by monitoring. • Ensures that appropriate vendor patches/configurations are applied to the various internal systems that operate to maintain a secure environment. • Works with various teams with the IT department to ensure that company servers and data are properly backed up and that compliance requirements and security best practices are following during new system implementations. 21 • Deploys and tunes various security and monitoring platforms. • Manages the North America Annual PCI (Payment Card Industry) review and consults with Zumiez international entities regarding PCI. • Provides evidence gathering for, and conducts walk throughs with, internal and external audit teams for internal control over financial reporting related to Section 404 of the Sarbanes-Oxley Act of 2002 (SOX Controls). • Maintains a system of security policies and procedures within the IT department related to cybersecurity and compliance requirements, primarily related to PCI compliance and SOX Controls.
On a day-to-day basis and from a project perspective, the Security and Compliance Team undertakes the following activities: • Builds and reviews reports on newly identified security threats. • Monitors various internal security toolsets including EDR (Endpoint Detection and Response), email security and logging from company firewalls and other security related systems and takes action to prevent or resolve incidents identified by monitoring. • Ensures that appropriate vendor patches/configurations are applied to the various internal systems that operate to maintain a secure environment. • Works with various teams with the IT department to ensure that company servers and data are properly backed up and that compliance requirements and security best practices are following during new system implementations. • Deploys and tunes various security and monitoring platforms. • Manages the North America Annual PCI (Payment Card Industry) review and consults with Zumiez international entities regarding PCI. • Provides evidence gathering for, and conducts walk throughs with, internal and external audit teams for internal control over financial reporting related to Section 404 of the Sarbanes-Oxley Act of 2002 (SOX Controls). • Maintains a system of security policies and procedures within the IT department related to cybersecurity and compliance requirements, primarily related to PCI compliance and SOX Controls.
Although to date these risks have not materialized into any instances or series of instances that have had a material adverse effect on our business or otherwise caused material harm to the company, we have, on occasion, experienced cybersecurity threats to our data and information systems, including phishing attacks.
Although to date these risks have not materialized into any instances or series of instances that have had a material 23 adverse effect on our business or otherwise caused material harm to the company, we have, on occasion, experienced cybersecurity threats to our data and information systems, including phishing attacks.
Annual Cybersecurity Plan . This plan is provided for the first quarter Audit Committee meeting and outlines the cybersecurity related strategic initiatives for the fiscal year. It outlines any new investments and projects and their alignment with the cybersecurity framework, as well as the expected timelines for the implementation of these activities. 23 Quarterly Cybersecurity Memos .
Annual Cybersecurity Plan . This plan is provided for the first quarter Audit Committee meeting and outlines the cybersecurity related strategic initiatives for the fiscal year. It outlines any new investments and projects and their alignment with the cybersecurity framework, as well as the expected timelines for the implementation of these activities. Quarterly Cybersecurity Memos .
Cybersecurity Incident Response Plan We have a Cybersecurity Incident Response Plan which is maintained by the Security and Compliance Team. The Incident Response Plan establishes what people and organizations need to be engaged in the event of a significant 22 incident.
Cybersecurity Incident Response Plan We have a Cybersecurity Incident Response Plan which is maintained by the Security and Compliance Team. The Incident Response Plan establishes what people and organizations need to be engaged in the event of a significant incident.
Working within the organization to clearly define the need for secure computing practices, gaining buy-in on this need and the development of a mindset across the organization around secure computing. • Measurement and Visibility .
In doing so, it utilizes some of the following key guiding principles and priorities: • Alignment . Working within the organization to clearly define the need for secure computing practices, gaining buy-in on this need and the development of a mindset across the organization around secure computing. • Measurement and Visibility .
The CIS framework is based on the COSO (Committee of Sponsoring Organizations on the Treadway Commission) and NIST (National Institute of Standards and Technology) frameworks and provides a highly actionable way to implement those frameworks and maps directly to other compliance requirements relevant to us, including PCI compliance and SOX controls (briefly discussed above).
The CIS framework is based on the COSO (Committee of Sponsoring Organizations on the Treadway Commission) and NIST (National Institute of Standards and Technology) frameworks and provides a highly actionable way to implement those frameworks and maps directly to other compliance requirements relevant to us, including PCI compliance and SOX controls (briefly discussed above). 22 Use of Third Parties We work with a third party that provides us with threat hunting services via an Endpoint Detection and Response (EDR) platform.
While the foregoing summary is specific to our North America business operations we believe that the cybersecurity programs of our International business operations are consistent with the approach and framework outlined below and are appropriate for the scope and scale of their operations.
While the foregoing summary is specific to our North America business operations we believe that the cybersecurity programs of our International business operations are consistent with the approach and framework outlined below and are appropriate for the scope and scale of their operations. 20 The Security and Compliance Team, within our IT department, takes the lead role in helping to ensure that we maintain comprehensive technologies and programs to ensure our systems are effective and prepared for cybersecurity risks.
The Security and Compliance Team works very closely with our team across the IT department and with several different third parties who provide expertise in different areas such as threat hunting and penetration testing.
The Security and Compliance Team works very closely with our team across the IT department and with several different third parties who provide expertise in different areas such as threat hunting and penetration testing. 21 Objectives and Key Principles and Priorities The objective of the Security and Compliance Team is to build practices within the company to define, implement, enforce, and measure our security, compliance and disaster recovery readiness.
Upon discovery of a potential threat, the threat hunting team provides initial remediation guidance. We also conduct periodic penetration testing of our systems. This testing is performed by a qualified third-party testing company and is in alignment with our CIS controls. Penetration testing is meant to provide us with information on the security of a particular system or application.
This testing is performed by a qualified third-party testing company and is in alignment with our CIS controls. Penetration testing is meant to provide us with information on the security of a particular system or application. These findings then can be used by us to inform remediation work on a go-forward basis. Cybersecurity Insurance.
The Security and Compliance Team, within our IT department, takes the lead role in helping to ensure that we maintain comprehensive technologies and programs to ensure our systems are effective and prepared for cybersecurity risks. The Security and Compliance Team is led by the Security and Compliance Program Manager and consists of a Lead Security Engineer and a Security Analyst.
The Security and Compliance Team is led by the Security and Compliance Program Manager and consists of a Lead Security Engineer and a Security Analyst.
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Objectives and Key Principles and Priorities The objective of the Security and Compliance Team is to build practices within the company to define, implement, enforce, and measure our security, compliance and disaster recovery readiness. In doing so, it utilizes some of the following key guiding principles and priorities: • Alignment .
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These findings then can be used by us to inform remediation work on a go-forward basis. Cybersecurity Insurance.

Item 2. Properties

Properties — owned and leased real estate

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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.
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 1, 2025. 24 We own approximately 356,000 square feet of land in Lynnwood, Washington on which we own a 63,071 square foot home office.

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 SAF ETY DISCLOSURES Not applicable. 24 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. 25 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−1 removed2 unchanged
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.
Biggest changeIssuer Purchases of Equity Securities There were no issuer purchases of our common stock during the thirteen weeks ended February 1, 2025 Performance 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 1, 2020 and ending on February 1, 2025.
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.
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. 26 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.
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.
The comparison assumes $100 was invested on February 1, 2020 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 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.
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 1, 2025, there were 19,158,574 shares of common stock outstanding.
Holders of the Company’s Capital Stock We had approximately 12 shareholders of record as of March 7, 2024.
Holders of the Company’s Capital Stock We had approximately 11 shareholders of record as of March 1, 2025.
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
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. 2/2/20 1/30/21 1/29/22 1/28/23 2/3/24 2/1/25 Zumiez 100.00 138.21 138.76 82.61 56.79 51.20 S&P MidCap 400 100.00 118.46 135.11 138.27 144.87 174.39 S&P 400 Apparel Retail 100.00 127.00 141.51 118.23 117.06 152.91 Item 6. [Reserved] 27
Removed
Issuer Purchases of Equity Securities There were no issuer purchases of our common stock during the thirteen weeks ended February 3, 2024.

Item 7. Management's Discussion & Analysis

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

62 edited+18 added−27 removed61 unchanged
Biggest changeWe remain committed to serving the customer launching nearly 200 new brands in 2023, continuing to focus on our localized fulfillment platform that provides substantial improvements in the speed of delivery to our customers and connecting with our customers in a unique way through our events and digital communications. 27 The following table shows net sales, operating (loss) profit, operating margin and diluted (loss) earnings per share for fiscal 2023 compared to fiscal 2022: Fiscal 2023 Fiscal 2022 % Change Net sales (in thousands) (1) $ 875,486 $ 958,380 -8.6 % Operating profit (in thousands) $ (64,789 ) $ 31,100 -308.3 % Operating margin -7.4 % 3.2 % Diluted earnings per share $ (3.25 ) $ 1.08 -400.9 % (1) The decrease in net sales was primarily driven by continued inflationary pressures on the consumer, continued challenges in competition for the discretionary dollar, and tougher trends in certain categories of our business.
Biggest changeThe following table shows net sales, operating profit (loss), operating margin and diluted (loss) earnings per share for fiscal 2024 compared to fiscal 2023: Fiscal 2024 Fiscal 2023 % Change Net sales (in thousands) (1) $ 889,202 $ 875,486 1.6 % Operating profit (loss) (in thousands) $ 1,950 $ (64,789 ) 103.0 % Operating margin 0.2 % -7.4 % Diluted loss per share $ (0.09 ) $ (3.25 ) 97.2 % (1) The increase in net sales was primarily driven by an increase in dollars per transaction, partially offset by a decrease in transactions.
Investing 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.
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.
Financing Activities Net cash provided by financing activities in fiscal 2023 was $0.7 million related to proceeds from the issuance and exercise of stock-based awards.
Net cash provided by financing activities in fiscal 2023 was $0.7 million related to proceeds from the issuance and exercise of stock-based awards.
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.
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, $6.3 million associated with improvements to our websites and $6.0 million in other improvements.
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.
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.
Cost of goods sold consists of branded merchandise costs and our private label merchandise costs including design, sourcing, importing and inbound freight costs. Our cost of goods sold also includes shrinkage, buying, occupancy, ecommerce fulfillment, distribution and warehousing costs (including associated depreciation) and freight costs for store merchandise transfers.
Cost of goods sold ("COGS") consists of branded merchandise costs and our private label merchandise costs including design, sourcing, importing and inbound freight costs. Our cost of goods sold also includes shrinkage, buying, occupancy, ecommerce fulfillment, distribution and warehousing costs (including associated depreciation) and freight costs for store merchandise transfers.
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.
A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution. 37 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.
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.
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. 30 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.
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.
There can be no assurance that the number of stores that we actually open in fiscal 2025 will not be different from the number of stores we plan to open, or that actual fiscal 2025 capital expenditures will not differ from this expected amount.
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.
A 10% increase in actual physical inventory shrinkage rate at February 1, 2025 would have decreased net income by less than $0.1 million in fiscal 2024. 35 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.
Selling, general and administrative expenses consist primarily of store personnel wages and benefits, administrative staff and infrastructure expenses, freight costs for merchandise shipments from the distribution centers to the stores, store supplies, depreciation on fixed assets at our home office and stores, facility expenses, training expenses and advertising and marketing costs.
Selling, general and administrative expenses consist primarily of store personnel wages and benefits, administrative staff and information technology expenses, freight costs for merchandise shipments from the distribution centers to the stores, store supplies, depreciation on fixed assets at our home office and stores, facility expenses, training expenses and advertising and marketing costs.
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.
A 10 basis point decrease in forecasted sales assumptions would have resulted in an additional impairment charge of $0.3 million in fiscal 2024. 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.
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.
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 increased by $0.2 million in fiscal 2024. A 10% increase in our sales return reserve at February 1, 2025 would have decreased net income by $0.3 million in fiscal 2024.
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.
At February 1, 2025, 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.
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.
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 28, 2023, refer to this same section in our 2023 annual report on Form 10-K as filed with the Securities and Exchange Commission on March 13, 2025.
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.
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 1, 2025 and February 3, 2024 and should be read together with our consolidated financial statements, the accompanying notes, and other information included in this Annual Report.
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.
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 1, 2025 and February 3, 2024, we had valuation allowances on our deferred tax assets of $28.8 million and $25.0 million, respectively.
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.
If the incremental borrowing rate increased 10 basis points from the rate in effect at February 1, 2025, the lease liability balance would decrease by $0.2 million. 36 Description Judgments and Uncertainties Effect If Actual Results Differ From Assumptions Revenue Recognition Revenue is recognized upon purchase at our retail store locations.
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 .
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 2024 resulted in $5.1 million of income tax expense when compared to fiscal 2023 of $12.3 million.
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.
Our gift card breakage reserve has increased by $1.8 million in fiscal 2024. A 1% increase in the estimated gift card redemption rate would have decreased net income by less than $0.1 million in fiscal 2024.
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.
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 $1.5 million related to long-lived assets in fiscal 2024.
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.
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 1, 2025 and February 3, 2024, cash, cash equivalents and current marketable securities were $147.6 million and $171.6 million.
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.
However, if actual results are not consistent with our estimates, we may be exposed to losses or gains that could be material. Our inventory reserves have increased by $0.4 million in fiscal 2024. A 10% decrease in the sales price of our inventory at February 1, 2025 would have decreased net income by $0.6 million in fiscal 2024.
For comparisons of years ended January 28, 2023 and January 29, 2022, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of our Annual Report on Form 10-K for the year ended January 28,2023, filed with the SEC on March 20, 2023 and incorporated herein by reference.
For comparisons of years ended February 3, 2024 and January 28, 2023, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of our Annual Report on Form 10-K for the year ended February 3, 2024, filed with the SEC on March 13, 2025 and incorporated herein by reference.
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%.
Results of Operations The following table presents selected items on the consolidated statements of (loss) income as a percent of net sales: Fiscal 2024 Fiscal 2023 Fiscal 2022 Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 65.9 % 67.9 % 66.1 % Gross profit 34.1 % 32.1 % 33.9 % Selling, general and administrative expenses 33.9 % 39.5 % 30.7 % Operating profit (loss) 0.2 % -7.4 % 3.2 % Interest and other income, net 0.3 % 0.3 % 0.2 % Earnings (loss) before income taxes 0.5 % -7.1 % 3.4 % Provision for income taxes 0.7 % 0.1 % 1.2 % Net (loss) income -0.2 % -7.2 % 2.2 % Fiscal 2024 Results Compared With Fiscal 2023 Net Sales Net sales were $889.2 million for fiscal 2024 compared to $875.5 million for fiscal 2023, an increase of $13.7 million or 1.6%.
The increase in 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.
The increase in dollars per transaction was driven by an increase in average unit retail, and an increase in units per transaction. For the year, our largest growth in comparable sales was in our men’s category, followed by women’s and footwear. Our largest comparable sales decrease was in our accessories category, followed by hardgoods.
We operate a sales strategy that integrates our stores with our ecommerce platform. There is significant interaction between our store sales and our ecommerce sales channels and we believe that they are utilized in tandem to serve our customers. Therefore, our comparable sales also include our ecommerce sales.
There is significant interaction between our store sales and our ecommerce sales channels and we believe that they are utilized in tandem to serve our customers. Therefore, our comparable sales also include our ecommerce sales.
During fiscal 2022, we spent $25.6 million on capital expenditures which consisted of $13.8 million of costs related to investment in 32 new stores and 2 remodeled or relocated stores, $6.6 million associated with improvements to our websites and $5.2 million in other improvements.
During fiscal 2024, we spent $15.0 million on capital expenditures which consisted of $8.2 million of costs related to investment in 7 new stores and 6 remodeled or relocated stores, $2.8 million associated with improvements to our websites and $4.0 million in other improvements.
Net cash used in financing activities in fiscal 2022 was $87.3 million related to $87.9 million used in the repurchase of common stock and $0.5 million in payments for tax withholding obligations upon vesting of restricted stock partially offset by $1.1 million in proceeds from the issuance and exercise of stock-based awards.
Net cash used in financing activities in fiscal 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 Capital Expenditures Our capital requirements include construction and fixture costs related to the opening of new stores and remodel and relocation expenditures for existing stores.
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.
Net sales for the year ended February 1, 2025 included a $3.1 million decrease due to the change in foreign exchange rates, which consisted of a $1.7 million decrease in Europe, a decrease of $1.1 million in Canada, and a decrease of $0.3 million in Australia.
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.
Working capital, the excess of current assets over current liabilities, was $166.9 million at the end of fiscal 2024, a decrease of 9% from $182.5 million at the end of fiscal 2023.
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
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. 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. 38
Capital Expenditures Our capital requirements include construction and fixture costs related to the opening of new stores and remodel and relocation expenditures for existing stores. Future capital requirements will depend on many factors, including the pace of new store openings, the availability of suitable locations for new stores and the nature of arrangements negotiated with landlords.
Future capital requirements will depend on many factors, including the pace of new store openings, the availability of suitable locations for new stores and the nature of arrangements negotiated with landlords.
Net cash provided by investing activities was $101.6 million in fiscal 2021 related to $117.4 million in net sales of marketable securities and $15.7 million of capital expenditures primarily for new store openings and existing store remodels or relocations.
Investing Activities Net cash provided by investing activities was $32.6 million in fiscal 2024 related to $15.0 million of capital expenditures primarily for and existing store remodels or relocations primarily offset by $47.6 million in sales of marketable securities, net of purchases.
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.
During fiscal 2022, we spent $25.6 million on capital expenditures which consisted of $13.8 million of costs related to investment in 32 new stores and 2 remodeled or relocated stores, $4.9 million associated with improvements to our websites and $6.9 million in other improvements. 33 In fiscal 2025, we expect to spend approximately $13.0 million to $15.0 million on capital expenditures, a majority of which will relate to leasehold improvements and fixtures for the approximately 9 new stores we plan to open in fiscal 2025 and 6 remodels or relocations of existing stores.
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.
The following table summarizes our cash flows from operating, investing and financing activities (in thousands): Fiscal 2024 Fiscal 2023 Fiscal 2022 Total cash provided by (used in) Operating activities $ 20,701 $ 14,755 $ (379 ) Investing activities 32,602 (8,548 ) 54,209 Financing activities (24,600 ) 704 (87,257 ) Effect of exchange rate changes on cash and cash equivalents (1,458 ) (1,080 ) (2,172 ) Net increase (decrease) in cash, cash equivalents, and restricted cash $ 27,245 $ 5,831 $ (35,599 ) 32 Operating Activities Net cash provided by operating activities increased by $5.9 million in fiscal 2024 to $20.7 million cash provided by operating activities from $14.8 million cash provided by operating activities in fiscal 2023.
However, there can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our then-current shareholders.
However, there can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our then-current shareholders. On December 20, 2024, we entered into a credit agreement with PNC Bank, National Association (the “bank”).
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.
Fiscal 2025—A Look At the Upcoming Year In fiscal 2025, our focus will continue to be serving the customer by bringing differentiated product in a unique sales experience along with strategic investments focused on enhancing the customer experience while increasing market share and creating operational efficiencies to drive long-term operating margin expansion.
Our effective income tax rate for fiscal 2023 was -1.2% compared to 35.2% for fiscal 2022. The change in effective income tax rate for fiscal 2023 compared to fiscal 2022 was primarily related to an increase in foreign losses in certain jurisdictions, including Blue Tomato goodwill impairment, which are subject to a valuation allowance.
Our effective income tax rate for fiscal 2024 was 142.0% compared to -1.2% for fiscal 2023. The change in effective income tax rate for fiscal 2024 compared to fiscal 2023 was primarily related to foreign losses in Austria, which are subject to a valuation allowance.
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.
These decreases were partially offset by a 20 basis point increase in annual incentive compensation. Net Loss Net loss for fiscal 2024 was $1.7 million, or $0.09 per diluted share, compared with net loss of $62.6 million, or $3.25 per diluted share, for fiscal 2023.
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%.
Excluding the impact of changes in foreign exchange rates, North America sales increased $23.5 million or 3.4% and other international sales decreased $6.7 million or 3.8% during fiscal 2024 compared to fiscal 2023. Gross Profit Gross profit was $303.0 million for fiscal 2024 compared to $280.9 million for fiscal 2023, an increase of $22.1 million, or 7.9%.
Net cash provided by operating activities decreased by $135.3 million in fiscal 2022 to $0.4 million cash used in operating activities from $135.0 million cash provided by operating activities in fiscal 2021.
Net cash provided by operating activities increased by $15.1 million in fiscal 2023 to $14.8 million cash provided by operating activities from $0.4 million cash used in operating activities in fiscal 2022.
Net cash used in financing activities in fiscal 2021 was $191.4 million related to $193.8 million used in the repurchase of common stock and $0.6 million in payments on tax withholding obligation upon vesting of restricted stock partially offset by $3.0 million in proceeds from the issuance and exercise of stock-based awards.
Financing Activities Net cash used in financing activities in fiscal 2024 was $24.6 million, related $25.2 million used in the repurchase of common stock partially offset by $0.6 million in proceeds from the issuance and exercise of stock-based awards.
Total undiscounted future payments for lease liabilities were $256.4 million at February 3, 2024.
Total undiscounted future payments for lease liabilities were $228.5 million at February 1, 2025.
The decrease in cash, cash equivalents and current marketable securities in fiscal 2023 was due primarily to cash provided by operating activities of $14.8 million, partially offset by capital expenditures of $20.3 million primarily related to the opening of 19 new stores and 4 remodels and relocations.
The increase in cash, cash equivalents and current marketable securities in fiscal 2024 was due primarily to cash provided by operating activities of $20.7 million, sale of marketable securities net of purchases amounting to $47.6 million, partially offset by the $25.2 million repurchase of common stock, and capital expenditures of $15.0 million primarily related to the opening of 7 new stores and 6 remodels and relocations.
SG&A expenses as a percent of net sales increased 880 basis points in fiscal 2023 to 39.5%.
SG&A expenses as a percent of net sales decreased 560 basis points in fiscal 2024 to 33.9%.
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.
This was an improvement from a loss of $3.25 per share in fiscal 2023, or a $1.12 loss per share excluding goodwill impairment charges. 28 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.
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.
We record the sale of gift cards as a current liability and recognize revenue when a customer redeems a gift card. Additionally, the portion of gift cards 29 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.
The improvement in year-over-year sales trends throughout fiscal 2023 reflects positive momentum in emerging brands on the men’s side of the business as the men’s category had positive sales growth both in the back to school weeks of the third quarter and the entire fourth quarter.
The improving sales trends throughout fiscal 2023 reflected positive momentum in emerging brands on the men’s side of the business as the men’s category turned positive in the fourth quarter.
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.
We are in a solid financial position providing the security to manage through potential difficulties, while also investing strategically in important long-term initiatives and returning value to our shareholders. While our growth and return to positive operating profit in fiscal 2024 have us optimistic, the macro-economic environment in 2025 remains unclear.
While inflation is moderating from the peaks in 2022 and early 2023, the impact of multiple years of compounding growth in the cost of consumer goods continues to put pressure on the discretionary income of our customer base.
Inflation has moderated, but it is not yet at desired levels. The impact of multiple years of compounding growth in the cost of consumer goods continues to put pressure on the discretionary income of our customer base as consumer savings balances decrease and consumer debt grows.
The 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.
The benefit was primarily driven by 480 basis point benefit due to impairment of prior year goodwill worth $41.1 million, 30 basis point benefit due to lower corporate costs, 30 basis point benefit in store wages driven by efficiencies in hours and leverage in higher sales and 30 basis points from store costs not tied to wages primarily impacted by leverage on higher sales.
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.
Comparable sales increased 4.0% driven by an increase in dollars per transaction and partially offset by a decrease in transactions. The increase in dollars per transaction was driven by an increase in both average unit retail, and units per transaction. For the year, our largest growth in comparable sales was in our men’s category, followed by women’s and footwear.
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%.
These benefits were partially offset by 20 basis point of negative impact related to increased inventory shrinkage. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses were $301.1 million for fiscal 2024 compared to $345.7 million for fiscal 2023, a decrease of $44.6 million, or 12.9%.
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.
This Credit Facility also provides for the issuances of standby letters of credit in an amount not to exceed $17.5 million, commercial letters of credit in an amount not to exceed $10 million and borrowings in foreign currency with a borrowing sublimit not to exceed $15 million in equivalent U.S. dollars.
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 largest comparable sales decrease was in our accessories category, followed by hardgoods. By region, North America sales increased $22.3 million or 3.2% and other international sales decreased $8.6 million or 4.8% during fiscal 2024 compared to fiscal 2023.
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.
The Credit Facility will mature on December 20, 2025. There were no borrowings or open commercial letters of credit outstanding under the secured credit facility at February 1, 2025 and February 3, 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 Credit Agreement provides for a revolving credit facility of up to $25 million (the “credit facility”) and is available for general corporate purpose.
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.
In 2024, sales trends turned positive after the first quarter and we posted positive comparable sales growth in each of the final eight months of the year with comparable sales up 4.0% for the full year (and total sales up 1.6% despite the negative impacts on growth of both the 53 rd week in the prior year worth $12.0 million and closed stores worth $9.0 million).
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.
We had $2.7 million and $3.5 million in issued, but undrawn, standby letters of credit at February 1, 2025 and February 3, 2024, respectively 34 Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
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.
After two difficult years the business returned to growth and positive free cash flow. The balance sheet remains strong with $147.6 million in cash and marketable securities at the end of fiscal 2024 with no debt.
General Net sales constitute gross sales, net of actual and estimated returns and deductions for promotions, and shipping revenue. Net sales include our store sales and our ecommerce sales. We record the sale of gift cards as a current liability and recognize revenue when a customer redeems a gift card.
Trend cycles continue to move quickly, and we will invest in our ability to better understand our customers, communicate with them and serve their needs to drive market share gains. General Net sales constitute gross sales, net of actual and estimated returns and deductions for promotions, and shipping revenue. Net sales include our store sales and our ecommerce sales.
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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.
Added
Fiscal 2024—A Review of This Past Year After stimulus driven, record breaking results in fiscal 2021, the absence of stimulus, trend shifts and the compounding multi-year inflationary impact on consumers were significant detriments throughout fiscal year 2022.While negative sales trends continued into fiscal 2023, they lessened in intensity each quarter with fourth quarter comparable sales down 3.9% from the prior year.
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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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The turn of our business continues to be driven by the apparel categories across both men's and women's with the men’s business being our largest growth category followed by women’s and footwear. In fiscal year 2024, product margin increased 54 basis points from the prior year driven by strong private label performance and less discounting with better sales performance.
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This coupled with higher competition for the discretionary dollar with consumers appearing to favor experiences vs. apparel and negative trends in the business around areas like Skate had a material impact on our results.
Added
Fiscal 2024 was the highest product margin in our history excluding fiscal 2021 which was positively impacted by significant stimulus spending. Gross Margin improved 200 basis points to 34.1% in 2024 driven by leverage on increased sales, strong management of our lease portfolio, negotiated reductions in shipping costs and well-managed distribution operations.
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We are also beginning to see some of the more difficult categories over the past two years become less of a negative impact on total sales growth as we reach lower levels of sales and continue to try new things in these categories.
Added
Our Selling General and Administrative expenses were down $44.6 million from the prior year driven by a $41.1 million goodwill impairment charge in fiscal 2023. Excluding that charge, Selling General and Administrative expenses were reduced by $3.5 million from fiscal 2023 with continued management of expenses that was slightly offset by higher levels of incentive compensation for current year performance.
Removed
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.
Added
Our sales growth, combined with increases in product margins and reductions of expense across multiple areas drove a positive $1.9 million in operating profit for the year, an improvement of $66.7 million from 2023, or an improvement of $25.6 million excluding the goodwill impairment charges in 2023.
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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.
Added
Due to an effective tax rate of 142.0% related to the distribution of our income across the jurisdictions in which we operate, we had a $0.09 loss per share in fiscal 2024.
Removed
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.
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We remained committed to serving our customer launching well over 120 new brands in 2024. We made investments over several years to integrate the digital and physical channels creating a seamless shopping experience for our customer.
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Selling General and Administrative costs increased 17.7% in fiscal year 2023 inclusive of a one-time goodwill impairment charge of $41.1 million which represented 14.0% of the total growth for these expenses during the year.
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We are continuing to deliver our online orders in North America from our stores, which has provided substantial improvements in the speed of delivery to our customers, eliminated the need to manage two pools of inventory separately for digital and physical demand, and created one cost structure for execution of both physical and digital sales.
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Our loss per share in fiscal 2023 of $3.25 includes a one-time goodwill impairment charge worth $2.14 cents per share was down from earnings per share in fiscal 2022 of $1.08.
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Internationally we continue to see deeper penetration of localized fulfillment and are in various stages of roll-out in different countries.

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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 changeForeign Exchange Rate Risk Our international subsidiaries operate with functional currencies other than the U.S. Dollar, including the Canadian Dollar, Euro, Australian Dollar, Norwegian Krone, Swedish Krona, and Swiss Franc. Therefore, we must translate revenues, expenses, assets and liabilities from functional currencies into U.S. dollars at exchange rates in effect during, or at the end of, the reporting period.
Biggest changeTherefore, we must translate revenues, expenses, assets and liabilities from functional currencies into U.S. dollars at exchange rates in effect during, or at the end of, the reporting period. 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.
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.
If our current portfolio average yield rate decreased by 10% in fiscal 2024, our net income would have decreased by $0.4 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.
During different times of the year, due to the seasonality of our business, we may borrow under our revolving credit facility. To the extent we borrow under this revolving credit facility, we are exposed to the market risk related to changes in interest rates. At February 3, 2024, we had no borrowings outstanding under the secured revolving credit facility.
During different times of the year, due to the seasonality of our business, we may borrow under our revolving credit facility. To the extent we borrow under this revolving credit facility, we are exposed to the market risk related to changes in interest rates.
As we expand our international operations, our exposure to exchange rate fluctuations will continue to increase. To date, we have not used derivatives to manage foreign currency exchange risk. We import merchandise from foreign countries.
Assuming a 10% change in foreign exchange rates in fiscal 2024 our net income would have decreased or increased by $1.3 million. As we expand our international operations, our exposure to exchange rate fluctuations will continue to increase. To date, we have not used derivatives to manage foreign currency exchange risk. We import merchandise from foreign countries.
Removed
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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Effective as of May 3, 2024, we terminated our Credit Agreement with Wells Fargo Bank and standby letters of credit were transitioned to restricted deposits. On December 20, 2024, we entered a new Credit Agreement with PNC Bank, National Association. See Note 9 Revolving Credit Facilities and Debt for more details of termination and new credit agreement.
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At February 1, 2025, we had no borrowings outstanding under the secured revolving credit facility. Foreign Exchange Rate Risk Our international subsidiaries operate with functional currencies other than the U.S. Dollar, including the Canadian Dollar, Euro, Australian Dollar, Norwegian Krone, Swedish Krona, and Swiss Franc.

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