Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

At ~~December 1, 2016,~~August 30, 2017, there were ~~24,897,189~~25,230,570 shares outstanding of common stock.

	October 29, 2016			January 30, 2016			July 29, 2017			January 28, 2017
	(Unaudited)						(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	18,001		$	43,163		$	17,291		$	20,247
Marketable securities	31,169			32,391			53,433			58,579
Receivables	14,265			12,840			16,334			12,538
Inventories	150,623			98,299			141,782			106,924
Prepaid expenses and other current assets	14,199			12,204			15,378			13,075
Total current assets	228,257			198,897			244,218			211,363

Fixed assets, net	135,325			137,233			131,934			129,651
Goodwill	56,920			54,245			60,057			56,001
Intangible assets, net	14,900			11,766			15,903			14,610
Deferred tax assets, net	9,533			4,634			9,733			7,041
Other long-term assets	8,093			7,920			7,022			8,017
Total long-term assets	224,771			215,798			224,649			215,320

Total assets		$	453,028		$	414,695		$	468,867		$	426,683

Liabilities and Shareholders’ Equity
Current liabilities
Trade accounts payable		$	58,088		$	21,919		$	60,652		$	25,529
Accrued payroll and payroll taxes	12,000			12,466			15,684			14,914
Income taxes payable	4,310			4,066					68			1,866
Deferred rent and tenant allowances	8,276			8,116			8,393			8,344
Short-term borrowings			11,787	—
Other liabilities	21,582			22,575			23,657			22,944
Total current liabilities	116,043			69,142			108,454			73,597

Long-term deferred rent and tenant allowances	42,715			43,779			40,795			41,066
Other long-term liabilities	4,839			4,817			5,113			4,969
Total long-term liabilities	47,554			48,596			45,908			46,035

Total liabilities	163,597			117,738			154,362			119,632
Commitments and contingencies (Note 3)

Shareholders’ equity
Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding	—			—			—			—
Common stock, no par value, 50,000 shares authorized; 24,899 shares issued and outstanding at October 29, 2016 and 25,708 shares issued and outstanding at January 30, 2016	139,758			135,013
Common stock, no par value, 50,000 shares authorized; 25,231 shares issued and outstanding at July 29, 2017 and 24,945 shares issued and outstanding at January 28, 2017							143,682			140,984
Accumulated other comprehensive loss	(14,698)			(15,247)			(6,676)			(16,488)
Retained earnings	164,371			177,191			177,499			182,555
Total shareholders’ equity	289,431			296,957			314,505			307,051

Total liabilities and shareholders’ equity		$	453,028		$	414,695		$	468,867		$	426,683

Three Months Ended

Nine Months Ended

October 29, 2016

October 31, 2015

October 29, 2016

October 31, 2015

Net sales

$

221,391

$

204,320

$

572,634

$

561,749

Cost of goods sold

145,213

134,261

391,653

377,382

Gross profit

76,178

70,059

180,981

184,367

Selling, general and administrative expenses

59,265

54,835

169,144

159,706

Operating profit

16,913

15,224

11,837

24,661

Interest (expense) income, net

(37
)

84

22

440

Other income (expense), net

11

(71
)

253

(227
)
Earnings before income taxes

16,887

15,237

12,112

24,874

Provision for income taxes

6,192

5,584

4,392

9,238

Net income

$

10,695

$

9,653

$

7,720

$

15,636

Basic earnings per share

$

0.44

$

0.36

$

0.31

$

0.56

Diluted earnings per share

$

0.43

$

0.36

$

0.31

$

0.55

Weighted average shares used in computation of earnings per share:

Basic

24,485

26,467

24,798

27,973

Diluted

24,622

26,602

24,982

28,178

	Three Months Ended							Six Months Ended
	July 29, 2017				July 30, 2016			July 29, 2017				July 30, 2016
Net sales	$	192,245		$		178,272		$	373,399		$		351,243
Cost of goods sold		132,449				123,428			261,555				246,440
Gross profit		59,796				54,844			111,844				104,803
Selling, general and administrative expenses		60,558				55,980			118,841				109,879
Operating loss		(762	)			(1,136	)		(6,997	)			(5,076	)
Interest income, net		92				28			174				59
Other (expense) income, net		(23	)			(256	)		(472	)			242
Loss before income taxes		(693	)			(1,364	)		(7,295	)			(4,775	)
Benefit from income taxes		(85	)			(526	)		(2,239	)			(1,800	)
Net Loss	$	(608	)	$		(838	)	$	(5,056	)	$		(2,975	)
Basic loss per share	$	(0.02	)	$		(0.03	)	$	(0.21	)	$		(0.12	)
Diluted loss per share	$	(0.02	)	$		(0.03	)	$	(0.21	)	$		(0.12	)
Weighted average shares used in computation of loss per share:
Basic		24,689				24,712			24,635				24,957
Diluted		24,689				24,712			24,635				24,957

Three Months Ended

Nine Months Ended

October 29, 2016

October 31, 2015

October 29, 2016

October 31, 2015

Net income

$
10,695

$
9,653

$
7,720

$
15,636

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

Foreign currency translation

(1,888
)

67

441

(2,608
)
Net change in unrealized gain/loss on available-for-sale
securities

(8
)

15

108

(34
)
Other comprehensive (loss) income, net

(1,896
)

82

549

(2,642
)
Comprehensive income

$
8,799

$
9,735

$
8,269

$
12,994

	Three Months Ended						Six Months Ended
	July 29, 2017			July 30, 2016			July 29, 2017			July 30, 2016
Net loss	$	(608	)	$	(838	)	$	(5,056	)	$	(2,975	)
Other comprehensive income (loss), net of tax and reclassification adjustments:
Foreign currency translation		8,305			(2,664	)		9,784			2,329
Net change in unrealized gain/loss on available-for-sale securities		17			122			28			116
Other comprehensive income (loss), net		8,322			(2,542	)		9,812			2,445
Comprehensive income (loss)	$	7,714		$	(3,380	)	$	4,756		$	(530	)

Common Stock

Accumulated
Other
Comprehensive

Retained

Shares

Amount

Loss

Earnings

Total

Balance at January 30, 2016

25,708

$
135,013

$
(15,247
)

$
177,191

$
296,957

Net income

—

—

—

7,720

7,720

Other comprehensive income, net

—

549

—

549

Issuance and exercise of stock-based awards, including net tax
loss of $809

386

1,346

—

—

1,346

Stock-based compensation expense

—

3,399

—

—

3,399

Repurchase of common stock

(1,195
)

—

—

(20,540
)

(20,540
)
Balance at October 29, 2016

24,899

$
139,758

$
(14,698
)

$
164,371

$
289,431

	Common Stock				Accumulated Other Comprehensive			Retained
	Shares		Amount		Loss			Earnings			Total
Balance at January 28, 2017		24,945	$	140,984	$	(16,488	)	$	182,555		$	307,051
Net loss		—		—		—			(5,056	)		(5,056	)
Other comprehensive income, net				—		9,812			—			9,812
Issuance and exercise of stock-based awards		286		198		—			—			198
Stock-based compensation expense		—		2,500		—			—			2,500
Balance at July 29, 2017		25,231	$	143,682	$	(6,676	)	$	177,499		$	314,505

Common Stock

Accumulated
Other
Comprehensive

Retained

Shares

Amount

Loss

Earnings

Total

Balance at January 31, 2015

29,418

$
129,094

$
(11,278
)

$
241,708

$
359,524

Net income

—

—

—

15,636

15,636

Other comprehensive loss, net

—

—

(2,642
)

—

(2,642
)
Issuance and exercise of stock-based awards, including net tax
benefit of $714

241

866

—

—

866

Stock-based compensation expense

—

3,843

—

—

3,843

Repurchase of common stock

(2,976
)

—

—

(77,697
)

(77,697
)
Balance at October 31, 2015

26,683

$
133,803

$
(13,920
)

$
179,647

$
299,530

	Common Stock						Accumulated Other Comprehensive			Retained
	Shares			Amount			Loss			Earnings			Total
Balance at January 30, 2016		25,708		$	135,013		$	(15,247	)	$	177,191		$	296,957
Net loss		—			—			—			(2,975	)		(2,975	)
Other comprehensive income, net		—			—			2,445			—			2,445
Issuance and exercise of stock-based awards, including net tax loss of $529		282			(132	)		—			—			(132	)
Stock-based compensation expense		—			2,221			—			—			2,221
Repurchase of common stock		(1,059	)		—			—			(18,269	)		(18,269	)
Balance at July 30, 2016		24,931		$	137,102		$	(12,802	)	$	155,947		$	280,247

	Nine Months Ended						Six Months Ended
	October 29, 2016			October 31, 2015			July 29, 2017			July 30, 2016
Cash flows from operating activities:
Net income	$	7,720		$	15,636
Adjustments to reconcile net income to net cash provided by operating activities:
Net loss							$	(5,056	)	$	(2,975	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization and accretion		21,178			23,158			13,520			14,336
Deferred taxes		(4,983	)		(5,223	)		(2,456	)		(3,713	)
Stock-based compensation expense		3,399			3,843			2,500			2,221
Excess tax benefit from stock-based compensation		—			(714	)
Other		221			1,222			621			95
Changes in operating assets and liabilities:
Receivables		(1,361	)		(3,211	)		(2,092	)		(842	)
Inventories		(51,047	)		(40,571	)		(32,553	)		(32,766	)
Prepaid expenses and other current assets		(3,183	)		(1,127	)		(995	)		(2,690	)
Trade accounts payable		35,873			15,951			34,627			38,181
Accrued payroll and payroll taxes		(631	)		(3,231	)		561			225
Income taxes payable		(708	)		(964	)		(3,372	)		(4,804	)
Deferred rent and tenant allowances		(1,035	)		3,924			(521	)		(12	)
Other liabilities		(1,459	)		(8,217	)		(1,016	)		(813	)
Net cash provided by operating activities		3,984			476			3,768			6,443
Cash flows from investing activities:
Additions to fixed assets		(16,829	)		(27,115	)		(12,461	)		(11,895	)
Acquisition, net of cash acquired		(5,395	)		—
Purchases of marketable securities and other investments		(48,232	)		(58,641	)		(37,586	)		(28,353	)
Sales and maturities of marketable securities and other investments		49,986			144,446			42,615			28,658
Net cash (used in) provided by investing activities		(20,470	)		58,690
Net cash used in investing activities								(7,432	)		(11,590	)
Cash flows from financing activities:
Proceeds from revolving credit facilities		17,849			33,504			1,791			—
Payments on revolving credit facilities		(5,813	)		(32,393	)		(1,791	)		—
Repurchase of common stock		(21,607	)		(77,697	)		—			(19,084	)
Proceeds from exercise of stock-based awards, net of withholding tax		756			678
Excess tax benefit from stock-based compensation		—			714
Net cash used in financing activities		(8,815	)		(75,194	)
Proceeds from issuance and exercise of stock-based awards								370			518
Payments for tax withholdings on equity awards								(172	)		(121	)
Net cash provided by (used in) financing activities								198			(18,687	)
Effect of exchange rate changes on cash and cash equivalents		139			(50	)		510			271
Net decrease in cash and cash equivalents		(25,162	)		(16,078	)		(2,956	)		(23,563	)
Cash and cash equivalents, beginning of period		43,163			20,862			20,247			43,163
Cash and cash equivalents, end of period	$	18,001		$	4,784		$	17,291		$	19,600
Supplemental disclosure on cash flow information:
Cash paid during the period for income taxes	$	10,042		$	15,348		$	3,660		$	6,736
Accrual for purchases of fixed assets		2,236			5,487			2,550			1,835
Accrual for repurchase of common stock								—			254

Nature of Business—Zumiez Inc., including its wholly owned subsidiaries, (the “Company,” “we,” “us,” “its” and “our”) is a leading specialty retailer of apparel, footwear, accessories and hardgoods for young men and women who want to express their individuality through the fashion, music, art and culture of action sports, streetwear, and other unique lifestyles. At ~~October~~July 29, ~~2016,~~2017, we operated ~~688~~692 stores; ~~608~~605 in the United States (“U.S.”), 4751 in Canada, 2830 in Europe, and 56 in Australia. We operate under the names Zumiez, Blue Tomato, and Fast Times. Additionally, we operate ecommerce websites at ~~www.zumiez.com~~, ~~www.blue-tomato.com~~, and www.fasttimes.com.au.

In August 2016, we acquired 100% of the outstanding stock of Fast Times Skateboarding (“Fast Times”) for $7.1 million paid in $5.7 million of cash and $1.4 million in shares of common stock. Fast Times is an Australian specialty retailer of skateboards, hardware, apparel and footwear. Fast Times currently operates 5 stores and a website. All assets and liabilities assumed were measured at fair value on the date of the acquisition and primarily consisted of inventory, fixed assets, intangible assets and goodwill.

Fiscal Year—We use a fiscal calendar widely used by the retail industry that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31. Each fiscal year consists of four 13-week quarters, with an extra week added to the fourth quarter every five or six years. The three months ended ~~October~~July 29, ~~2016~~2017 and ~~October 31, 2015~~July 30, 2016 were 13-week periods. The ~~nine~~six months ended ~~October~~July 29, 2017 and July 30, 2016 ~~and October 31, 2015~~ were ~~39-week~~26-week periods.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements include the accounts of Zumiez Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.

In our opinion, the unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the condensed consolidated balance sheets, operating results and cash flows for the periods presented.

The financial data at January ~~30, 2016~~28, 2017 is derived from audited consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended January ~~30, 2016,~~28, 2017, and should be read in conjunction with the audited consolidated financial statements and notes thereto. Interim results are not necessarily indicative of results for the full fiscal year due to seasonality and other factors.

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. These estimates can also affect supplemental information disclosed by us, including information about contingencies, risk and financial condition. Actual results could differ from these estimates and assumptions.

Segment Reporting—We identify our operating segments according to how our business activities are managed and evaluated. Our operating segments have been aggregated and are reported as one reportable segment based on the similar nature of products sold, production, merchandising and distribution processes involved, target customers and economic characteristics.

Recent Accounting Standards—In March 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (ASU) as part of its simplification initiative that includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Upon the adoption of the ASU, excess tax benefits and deficiencies for share-based payments are recorded as an adjustment of income taxes and reflected in operating cash flows rather than recorded in equity and reported in financing cash flows. The guidance allows for the employer to withhold up to the maximum statutory tax rates in the applicable jurisdictions without triggering liability accounting. The guidance also allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. We adopted this standard beginning January 29, 2017. The ~~new standard is effective~~amendment related to accounting for excess tax benefits and deficiencies was adopted prospectively, resulting in recognition of excess tax deficiencies against income tax benefit rather than additional paid-in capital of $0.1 million and $0.5 million for the ~~fiscal year beginning after December 15, 2016, with early adoption permitted. We are evaluating the impact of this standard on our condensed consolidated financial statements.~~three and six months ended July 29, 2017.

In February 2016, the FASB issued a comprehensive standard related to lease accounting to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Most significantly, the new guidance requires lessees to recognize operating leases with a term of more than 12 months as lease assets and lease liabilities. The adoption will require a modified retrospective approach at the beginning of the earliest period presented. The new standard is effective for the fiscal year beginning after December 15, 2018, with early adoption permitted. We are

continuing to evaluating the impact of this standard on our condensed consolidated financial statements. We expect this standard to have a material impact on our condensed consolidated financial statements.

In January 2016, the FASB issued a new standard related primarily to accounting for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income for equity securities with readily determinable fair values. The new standard will be effective for the fiscal year beginning after December 15, 2017 and early adoption is permitted. We are currently evaluating the impact of this standard on our ~~condensed consolidated financial statements.~~

In July 2015, the FASB issued guidance simplifying the measurement of inventory. This standard requires entities that use inventory methods other than the last-in, first-out (LIFO) or retail inventory method to measure inventory at the lower of cost or net realizable value, which is defined as the estimated selling prices in the normal course of business, less reasonably predictable costs of completion, disposal, and transportation. We are required to adopt this guidance for the fiscal year beginning after December 15, 2016. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.

In May 2014, the FASB issued a comprehensive new revenue recognition standard. The new standard allows for a full retrospective approach to transition or a modified retrospective approach. This guidance was effective for fiscal years and interim periods within those years beginning after December 15, 2016. In August 2015, the FASB issued updated guidance deferring the effective date for the fiscal year beginning after December 15, 2017 and will permit early adoption of the standard, but not before the original effective date of December 15, 2016. We are ~~currently evaluating~~continuing to evaluate the impact of this standard but we do not expect the adoption of this standard to have a material impact on our consolidated financial statements. We are continuing to evaluate the method of adoption we ~~plan~~will use when we transition to ~~use and the effect the standard is expected to have on our condensed consolidated financial statements.~~this standard.

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

October 29, 2016

Amortized
Cost

Gross
Unrealized
Holding
Gains

Gross
Unrealized
Holding
Losses

Estimated
Fair Value

Cash and cash equivalents:

Cash

$
16,563

$
—

$
—

$
16,563

Money market funds

1,438

—

—

1,438

Total cash and cash equivalents

18,001

—

—

18,001

Marketable securities:

State and local government securities

23,930

6

(12
)

23,924

Variable-rate demand notes

7,245

—

—

7,245

Total marketable securities

$
31,175

$
6

$
(12
)

$
31,169

	January 30, 2016										July 29, 2017
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value			Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	33,608	$	—	$	—		$	33,608		$	15,070	$	—	$	—		$	15,070
Money market funds		9,555		—		—			9,555			2,221		—		—			2,221
Total cash and cash equivalents		43,163		—		—			43,163			17,291		—		—			17,291
Marketable securities:
State and local government securities		32,754		8		(187	)		32,575			45,016		39		(17	)		45,038
Variable-rate demand notes		644		—		—			644			8,395		—		—			8,395
Total marketable securities	$	33,398	$	8	$	(187	)	$	33,219		$	53,411	$	39	$	(17	)	$	53,433
Less: Long-term marketable securities (1)									(828	)
Total current marketable securities								$	32,391

~~(1)~~

January 28, 2017

Amortized
Cost

Gross
Unrealized
Holding
Gains

Gross
Unrealized
Holding
Losses

Estimated
Fair Value

Cash and cash equivalents:

Cash

$
19,190

$
—

$
—

$
19,190

Money market funds

657

—

—

657

State and local government securities

400

—

—

400

Total cash and cash equivalents

20,247

—

—

20,247

Marketable securities:

State and local government securities

19,151

8

(30
)

19,129

Variable-rate demand notes

39,450

—

—

39,450

Total marketable securities

$
58,601

$
8

$
(30
)

$
58,579

~~At January 30, 2016, we held one auction rate security, classified as available-for-sale marketable securities and included in other long-term assets on the condensed consolidated balance sheet.~~

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

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

	October 29, 2016															July 29, 2017
	Less Than 12 Months					12 Months or Greater					Total					Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Marketable securities:
State and local government securities		10,437		(11	)		302		(1	)		10,739		(12	)		8,834		(5	)		1,002		(12	)		9,836		(17	)
Total marketable securities	$	10,437	$	(11	)	$	302	$	(1	)	$	10,739	$	(12	)	$	8,834	$	(5	)	$	1,002	$	(12	)	$	9,836	$	(17	)

	January 30, 2016															January 28, 2017
	Less Than 12 Months					12 Months or Greater					Total					Less Than 12 Months					12 Months or Greater				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Marketable securities:
State and local government securities		16,884		(15	)		853		(172	)		17,737		(187	)		8,702		(30	)		-		-		8,702		(30	)
Total marketable securities	$	16,884	$	(15	)	$	853	$	(172	)	$	17,737	$	(187	)	$	8,702	$	(30	)	$	-	$	-	$	8,702	$	(30	)

We did not record a realized loss for other-than-temporary impairments during the three and ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 or ~~October 31, 2015.~~July 30, 2016.

Leases—We lease our stores and certain corporate and other operating facilities under operating leases. Total rent expense is as follows (in thousands):

A majority of our leases provide for ongoing co-tenancy requirements or early cancellation clauses that would further lower rental rates, or permit lease terminations, or both, in the event that co-tenants cease to operate for specific periods or if certain sales levels are not met in specific periods. Most of the store leases require payment of a specified minimum rent and a contingent rent based on a percentage of the store’s net sales in excess of a specified threshold, as well as real estate taxes, insurance, common area maintenance charges and other executory costs. Future minimum lease payments at ~~October~~July 29, ~~2016~~2017 are as follows (in thousands):

Purchase Commitments—At ~~October~~July 29, ~~2016,~~2017, we had outstanding purchase orders to acquire merchandise from vendors of ~~$153.0~~$190.7 million. We have an option to cancel these commitments with no notice prior to shipment, except for certain private label and international purchase orders in which we are obligated to repay contractual amounts upon cancellation.

Litigation—We are involved from time to time in claims, proceedings and litigation arising in the ordinary course of business. We have made accruals with respect to these matters, where appropriate, which are reflected in our condensed consolidated financial statements. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made. We may enter into discussions regarding settlement of these matters, and may enter into settlement agreements, if we believe settlement is in the best interest of our shareholders.

Insurance Reserves—We use a combination of third-party insurance and self-insurance for a number of risk management activities including workers’ compensation, general liability and employee-related health care benefits. We maintain reserves for our self-insured losses, which are estimated based on historical claims experience and actuarial and other assumptions. The self-insurance reserve at ~~October~~July 29, ~~2016~~2017 and January ~~30, 2016~~28, 2017 was ~~$2.8~~$2.7 million and ~~$2.1~~$2.3 million.

On February 5, 2016, the Company entered into an asset-based revolving credit agreement with Wells Fargo Bank, National Association, as administrative agent, collateral agent, letter of credit issuer and lenders, which provides for a senior secured revolving credit facility of up to $100 million (“ABL Facility”), subject to a borrowing base, with a letter of credit sub-limit of $10 million. The ABL Facility is available for working capital and other general corporate purposes. ~~The ABL Facility replaced our $25.0 million secured revolving credit facility with Wells Fargo, which was entered into on July 9, 2014.~~ The ABL Facility will mature on February 5, 2021.

The ABL Facility is secured by a first-priority security interest in substantially all of the personal property (but not the real property) of the borrowers and guarantors. Amounts borrowed under the ABL Facility bear interest, at the Company’s option, at either an adjusted LIBOR rate plus a margin of 1.25% to 1.75% per annum, or an alternate base rate plus a margin of 0.25% to 0.75% per annum. The Company is also required to pay a fee of 0.25% per annum on undrawn commitments under the ABL Facility. Customary agency fees and letter of credit fees are also payable in respect of the ABL Facility.

There were no borrowings outstanding under the ABL Facility at ~~October~~July 29, ~~2016 or the replaced secured revolving credit facility~~2017 and at January ~~30, 2016.~~28, 2017. We had no open commercial letters of credit outstanding under these lines of credit at ~~October~~July 29, ~~2016~~2017 and at January ~~30, 2016.~~28, 2017.

~~and~~ no borrowings outstanding at July 29, 2017 and at January ~~30, 2016.~~28, 2017. We had no open commercial letters of credit outstanding under these lines of credit at ~~October~~July 29, ~~2016~~2017 and at January ~~30, 2016.~~28, 2017.

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

The following tables summarize assets measured at fair value on a recurring basis (in thousands):

	October 29, 2016						July 29, 2017
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	1,438	$	—	$	—	$	2,221	$	—	$	—
Marketable securities:
State and local government securities		—		23,924		—		—		45,038		—
Variable-rate demand notes		—		7,245		—		—		8,395		—
Other long-term assets:
Money market funds		1,832		—		—		1,245		—		—
Equity investments		—		—		119		—		—		127
Total	$	3,270	$	31,169	$	119	$	3,466	$	53,433	$	127

	January 30, 2016						January 28, 2017
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	9,555	$	—	$	—	$	657	$	—	$	—
State and local government securities								400		—		—
Marketable securities:
State and local government securities		—		31,747		—		—		19,129		—
Variable-rate demand notes		—		644		—		—		39,450		—
Other long-term assets:
Money market funds		1,510		—		—		1,557		—		—
State and local government securities		—		—		828
Equity investments		—		—		118		—		—		116
Total	$	11,065	$	32,391	$	946	$	2,614	$	58,579	$	116

The Level 2 marketable securities ~~primarily~~ include state and local municipal securities and variable-rate demand notes. Fair values are based on quoted market prices for similar assets or liabilities or determined using inputs that use readily observable market data that are actively quoted and can be validated through external sources, including third-party pricing services, brokers and market transactions. We review the pricing techniques and methodologies of the independent pricing service for Level 2 investments and believe that its policies adequately consider market activity, either based on specific transactions for the security valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. We monitor security-specific valuation trends and we make inquiries with the pricing service about material changes or the absence of expected changes to understand the underlying factors and inputs and to validate the reasonableness of the pricing.

There were no material assets measured at fair value on a nonrecurring basis for the three and ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 and ~~October 31, 2015.~~July 30, 2016.

Share Repurchase—In December 2015, our Board of Directors authorized us to repurchase up to $70.0 million of our common stock. This program ~~is expected to continue through~~was completed at January 28, ~~2017, unless the time period is extended or shortened by the Board of Directors.~~

~~The following table summarizes common stock~~2017. There was no share repurchase activity during the ~~nine~~six months ended ~~October~~July 29, ~~2016 (in thousands, except per share amounts):~~2017 and 1.1 million shares repurchased during the six months ended July 30, 2016.

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

Foreign currency
translation
adjustments

Net unrealized
gains (losses) on
available-for-sale
investments

Accumulated other
comprehensive
loss

Three months ended October 29, 2016:

Balance at July 30, 2016

$
(12,807
)

$
5

$
(12,802
)
Other comprehensive loss, net (1)

(1,888
)

(8
)

(1,896
)
Balance at October 29, 2016

$
(14,695
)

$
(3
)

$
(14,698
)
Three months ended October 31, 2015:

Balance at August 1, 2015

$
(13,880
)

$
(122
)

$
(14,002
)
Other comprehensive income, net (1)

67

15

82

Balance at October 31, 2015

$
(13,813
)

$
(107
)

$
(13,920
)

	Foreign currency translation adjustments			Net unrealized gains (losses) on available-for-sale investments			Accumulated other comprehensive loss
Three months ended July 29, 2017:
Balance at April 29, 2017	$	(14,995	)	$	(3	)	$	(14,998	)
Other comprehensive income, net (1)		8,305			17			8,322
Balance at July 29, 2017	$	(6,690	)	$	14		$	(6,676	)
Three months ended July 30, 2016:
Balance at April 30, 2016	$	(10,143	)	$	(117	)	$	(10,260	)
Other comprehensive (loss) income, net (1)		(2,664	)		122			(2,542	)
Balance at July 30, 2016	$	(12,807	)	$	5		$	(12,802	)

Foreign currency
translation
adjustments

Net unrealized
gains (losses) on
available-for-sale
investments

Accumulated other
comprehensive
loss

Nine months ended October 29, 2016:

Balance at January 30, 2016

$
(15,136
)

$
(111
)

$
(15,247
)
Other comprehensive income, net (1)

441

108

549

Balance at October 29, 2016

$
(14,695
)

$
(3
)

$
(14,698
)
Nine months ended October 31, 2015:

Balance at January 31, 2015

$
(11,205
)

$
(73
)

$
(11,278
)
Other comprehensive loss, net (1)

(2,608
)

(34
)

(2,642
)
Balance at October 31, 2015

$
(13,813
)

$
(107
)

$
(13,920
)

	Foreign currency translation adjustments			Net unrealized gains (losses) on available-for-sale investments			Accumulated other comprehensive loss
Six months ended July 29, 2017:
Balance at January 28, 2017	$	(16,474	)	$	(14	)	$	(16,488	)
Other comprehensive income, net (1)		9,784			28			9,812
Balance at July 29, 2017	$	(6,690	)	$	14		$	(6,676	)
Six months ended July 30, 2016:
Balance at January 30, 2016	$	(15,136	)	$	(111	)	$	(15,247	)
Other comprehensive income, net (1)		2,329			116			2,445
Balance at July 30, 2016	$	(12,807	)	$	5		$	(12,802	)

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

We account for stock-based compensation by recording the estimated fair value of stock-based awards granted as compensation expense over the vesting period, net of estimated forfeitures. Stock-based compensation expense is attributed to earnings using a straight-line method. We estimate forfeitures of stock-based awards based on historical experience and expected future activity.

The fair value of restricted stock awards and units is measured based on the closing price of our common stock on the date of grant. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. ~~The following weighted-average assumptions were used to estimate the fair value of stock options granted:~~

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

At ~~October~~July 29, ~~2016,~~2017, there was ~~$7.2~~$8.9 million of total unrecognized compensation cost related to unvested stock options, restricted stock awards and restricted stock units. This cost has a weighted-average remaining recognition period of ~~1.2~~1.3 years.

The following table summarizes restricted stock awards and restricted stock units activity (in thousands, except grant date weighted-average fair value):

We had 0.3 million stock ~~option activity (in thousands, except grant date weighted-average~~options outstanding at July 29, 2017 with a weighted average exercise price of $22.82 and ~~weighted-average remaining contractual life):~~0.2 million stock options outstanding at January 28, 2017 with a weighted average exercise price of $25.61.

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

Three Months Ended

Nine Months Ended

October 29, 2016

October 31, 2015

October 29, 2016

October 31, 2015

Net income

$

10,695

$
9,653

$

7,720

$
15,636

Weighted average common shares for basic earnings per share:

24,485

26,467

24,798

27,973

Dilutive effect of stock options and restricted stock

137

135

184

205

Weighted average common shares for diluted earnings per share:

24,622

26,602

24,982

28,178

Basic earnings per share

$

0.44

$
0.36

$

0.31

$
0.56

Diluted earnings per share

$

0.43

$
0.36

$

0.31

$
0.55

	Three Months Ended						Six Months Ended
	July 29, 2017			July 30, 2016			July 29, 2017			July 30, 2016
Net loss	$	(608	)	$	(838	)	$	(5,056	)	$	(2,975	)
Weighted average common shares for basic loss per share:		24,689			24,712			24,635			24,957
Dilutive effect of stock options and restricted stock		—			—			—			—
Weighted average common shares for diluted loss per share:		24,689			24,712			24,635			24,957
Basic loss per share	$	(0.02	)	$	(0.03	)	$	(0.21	)	$	(0.12	)
Diluted loss per share	$	(0.02	)	$	(0.03	)	$	(0.21	)	$	(0.12	)

~~Total anti-dilutive~~The common shares related to stock-based awards ~~not included in~~excluded from the calculation of diluted ~~earnings~~loss per share were ~~0.2~~0.3 million and 0.5 million for the three and ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017and 0.3 million and ~~0.1~~0.4 million for the three and ~~nine~~six months ended ~~October 31, 2015.~~July 30, 2016 because the effect of inclusion would have been antidilutive.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this document. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed in “Item 1A Risk Factors” in our Form 10-K filed with the SEC on March ~~14, 2016~~13, 2017 and in this Form 10-Q.

Forward-looking statements relate to our expectations for future events and future financial performance. Generally, the words “anticipates,” “expects,” “intends,” “may,” “should,” “plans,” “believes,” “predicts,” “potential,” “continue” and similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements. These statements are only predictions. Actual events or results may differ materially. Factors which could affect our financial results are described below under the heading “Risk Factors” and in “Item 1A Risk Factors” of our Form 10-K referred to in the preceding paragraph. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assume responsibility for the accuracy and completeness of the forward-looking statements. We undertake no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.

Fiscal 2017 is the 53-week period ending February 3, 2018. Fiscal 2016 is the 52-week period ending January 28, 2017. ~~Fiscal 2015 is the 52-week period ending January 30, 2016.~~ The first ~~nine~~six months of fiscal 2017 was the 26-week period ended July 29, 2017. The first six months of fiscal 2016 was the ~~39-week~~26-week period ended ~~October 29,~~July 30, 2016. ~~The first nine months of fiscal 2015 was the 39-week period ended October 31, 2015.~~

“Zumiez,” the “Company,” “we,” “us,” “its,” “our” and similar references refer to Zumiez Inc. and its wholly-owned subsidiaries.

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. Additionally, the portion of gift cards that will not be redeemed (“gift card breakage”) is recognized in net sales after 24 months, at which time the likelihood of redemption is considered remote based on our historical redemption data.

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 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. Changes in our comparable sales between two periods are based on net sales of store or ecommerce businesses which were in operation during both of the two periods being compared and, if a store or ecommerce business is included in the calculation of comparable sales for only a portion of one of the two periods being compared, then that store or ecommerce business is included in the calculation for only the comparable portion of the other period. Any change in square footage of an existing comparable store, including remodels and relocations, does not eliminate that store from inclusion in the calculation of comparable sales. Any store or ecommerce business that we acquire will be included in the calculation of comparable sales after the first anniversary of the acquisition date. Current year foreign exchange rates are applied to both current year and prior year comparable sales to achieve a consistent basis for comparison. There may be variations in the way in which some of our competitors and other apparel retailers calculate comparable sales. As a result, data herein regarding our comparable sales may not be comparable to similar data made available by our competitors or other retailers.

Cost of goods sold consists of branded merchandise costs and our private label merchandise costs including design, sourcing, importing and inbound freight costs. Our cost of goods sold also includes shrinkage, buying, occupancy, distribution and warehousing costs (including associated depreciation) and freight costs for store merchandise transfers. This may not be comparable to the way in which our competitors or other retailers compute their cost of goods sold. Cash consideration received from vendors is reported as a reduction of cost of goods sold if the inventory has sold, a reduction of the carrying value of the inventory if the inventory is still on hand, or a reduction of selling, general and administrative expense if the amounts are reimbursements of specific, incremental and identifiable costs of selling the vendors’ products.

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

Selling, general and administrative expenses consist primarily of store personnel wages and benefits, administrative staff and infrastructure expenses, freight costs for merchandise shipments from the distribution centers to the stores, store supplies, depreciation on fixed assets at our home office and stores, facility expenses, training expenses and advertising and marketing costs. Credit card fees, insurance, public company expenses, legal expenses, ~~amortization of intangibles,~~ future incentive payments, and other miscellaneous operating costs are also included in selling, general and administrative expenses. This may not be comparable to the way in which our competitors or other retailers compute their selling, general and administrative expenses.

Our management evaluates the following items, which we consider key performance indicators, in assessing our performance:

Comparable sales. As previously described in detail under the caption “General,” comparable sales provide a measure of sales growth for stores and ecommerce businesses open at least one year over the comparable prior year period.

We consider comparable sales to be an important indicator of our current performance. Comparable sales results are important to achieve leveraging of our costs, including store payroll and store occupancy. Comparable sales also have a direct impact on our total net sales, operating profit, cash and working capital.

Gross profit. Gross profit measures whether we are optimizing the price and inventory levels of our merchandise. Gross profit is the difference between net sales and cost of goods sold. Any inability to obtain acceptable levels of initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of operations.

Operating profit. We view operating profit as a key indicator of our success. Operating profit is the difference between gross profit and selling, general and administrative expenses. The key drivers of operating profit are comparable sales, gross profit, our ability to control selling, general and administrative expenses and our level of capital expenditures affecting depreciation expense.

The following table presents selected items on the condensed consolidated statements of income as a percent of net sales:

	Three Months Ended						Nine Months Ended						Three Months Ended								Six Months Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015			July 29, 2017				July 30, 2016				July 29, 2017				July 30, 2016
Net sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0		%		100.0		%		100.0		%		100.0		%
Cost of goods sold		65.6			65.7			68.4			67.2			68.9				69.2				70.0				70.2
Gross profit		34.4			34.3			31.6			32.8			31.1				30.8				30.0				29.8
Selling, general and administrative expenses		26.8			26.8			29.5			28.4			31.5				31.5				31.9				31.2
Operating profit		7.6			7.5			2.1			4.4
Operating loss														(0.4	)			(0.7	)			(1.9	)			(1.4	)
Interest and other (expense) income, net		—			—			—			0.1			—				(0.1	)			(0.1	)			0.1
Earnings before income taxes		7.6			7.5			2.1			4.5
Provision for income taxes		2.8			2.7			0.8			1.6
Net income		4.8	%		4.8	%		1.3	%		2.9	%
Loss before income taxes														(0.4	)			(0.8	)			(2.0	)			(1.3	)
Benefit from income taxes														(0.1	)			(0.3	)			(0.6	)			(0.5	)
Net loss														(0.3	)	%		(0.5	)	%		(1.4	)	%		(0.8	)	%

Three Months (13 weeks) Ended ~~October~~July 29, ~~2016~~2017 Compared With Three Months (13 weeks) Ended ~~October 31, 2015~~July 30, 2016

Net sales were ~~$221.4~~$192.2 million for the three months ended ~~October~~July 29, ~~2016~~2017 compared to ~~$204.3~~$178.3 million for the three months ended ~~October 31, 2015,~~July 30, 2016, an increase of ~~$17.1~~$14.0 million or ~~8.4%~~7.8%. The increase primarily reflected anthe increase in comparable sales of ~~$8.2~~$8.3 million and ~~the~~ net addition of 3519 stores (made up of 2716 new stores in North America, 5 new stores in Europe and 56 new stores in Australia partially offset by 18 store ~~closure~~closures in North ~~America and 1 store closure in Europe)~~America) subsequent to ~~October 31, 2015.~~July 30, 2016. By region, North America sales increased ~~$14.7~~$10.6 million or ~~7.8%~~6.4% and other international sales (which consists of Europe and ~~Australia) sales~~Australia sales) increased ~~$2.4~~$3.4 million or ~~14.6%~~27.1% for the three months ended ~~October~~July 29, ~~2016~~2017 compared to the three months ended ~~October 31, 2015.~~July 30, 2016.

Comparable sales increased ~~4.0%~~4.7% primarily driven by an increase in comparable transactions partially offset by a decrease in dollars per transaction. Dollars per transaction decreased due to a decrease in units per transaction ~~and a decrease~~partially offset by an increase in average unit retail. Comparable sales increases in men’s clothing ~~accessories,~~ and junior’s clothing were partially offset by decreases in hardgoods, accessories and footwear. For information as to how we define comparable sales, see “General” above.

Gross profit was ~~$76.2~~$59.8 million for the three months ended ~~October~~July 29, ~~2016~~2017 compared to ~~$70.1~~$54.8 million for the three months ended ~~October 31, 2015,~~July 30, 2016, an increase of ~~$6.1~~$5.0 million, or ~~8.7%~~9.0%. As a percent of net sales, gross profit increased 1030 basis points for the three months ended ~~October~~July 29, ~~2016~~2017 to ~~34.4%~~31.1%. The increase was primarily driven by a 1060 basis point increase due to the leveraging of our store occupancy costs partially offset by a 20 basis point increase in ~~product margin.~~inventory shrinkage.

Selling, general and administrative (“SG&A”) expenses were ~~$59.3~~$60.6 million for the three months ended ~~October~~July 29, ~~2016~~2017 compared to ~~$54.8~~$56.0 million for the three months ended ~~October 31, 2015,~~July 30, 2016, an increase of ~~$4.4~~$4.6 million, or ~~8.1%~~8.2%. SG&A expenses as a percent of net sales ~~remained~~was flat during the three months ended October 29, 2016 at 26.8%. The decrease of 40 basis points related to the leverage of store expenses was entirely offset by an increase of 40 basis point in corporate investment.

~~Net income~~ for the three months ended ~~October~~July 29, ~~2016~~2017 to 31.5%. The decrease of 60 basis points due to the leveraging of our store costs was ~~$10.7~~entirely offset by a 30 basis point increase due to investment in salaries and increases in minimum wage and a 30 basis point increase related to annual incentive compensation.

Net loss for the three months ended July 29, 2017 was $0.6 million, or ~~$0.43~~$0.02 per diluted share, compared with net ~~income~~loss of ~~$9.7~~$0.8 million, or ~~$0.36~~$0.03 per diluted share, for the three months ended ~~October 31, 2015.~~July 30, 2016. Our effective income tax rate for the three months ended ~~October~~July 29, ~~2016~~2017 was ~~36.7%~~12.3% compared to ~~36.6%~~38.6% for the three months ended ~~October 31, 2015.~~July 30, 2016. The decrease in effective tax rate was primarily due to $0.1 million of excess tax deficiencies for share-based payments recorded against income tax benefit during the three months ended July 29, 2017. Refer to “Recent Accounting Standards” section in Note 1 of Notes to Condensed Consolidated Financial Statements for further discussion.

~~Nine~~Six Months ~~(39~~(26 weeks) Ended ~~October~~July 29, ~~2016~~2017 Compared With ~~Nine~~Six Months ~~(39~~(26 weeks) Ended ~~October 31, 2015~~July 30, 2016

Net sales were ~~$572.6~~$373.4 million for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 compared to ~~$561.7~~$351.2 million for the ~~nine~~six months ended ~~October 31, 2015,~~July 30, 2016, an increase of ~~$10.9~~$22.2 million or ~~1.9%~~6.3%. The increase primarily reflected an increase in comparable sales of $11.3 million and the net addition of 3519 stores (made up of 2716 new stores in North America, 5 new stores in Europe and 56 new stores in Australia ~~partially~~ offset by 18 store ~~closure~~closures in North ~~America and 1 store closure in Europe)~~America) subsequent to ~~October 31, 2015, partially offset by a decrease in comparable sales of $13.9 million.~~July 30, 2016. By region, North America sales increased ~~$9.5~~$16.7 million or ~~1.9%~~5.2% and other international sales (which consists of Europe and Australia) increased ~~$1.4~~$5.5 million or ~~2.9%~~18.8% for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 compared to the ~~nine~~six months ended ~~October 31, 2015.~~July 30, 2016.

Comparable sales ~~decreased 2.5%~~increased 3.3% primarily driven by ~~a decrease~~an increase in comparable transactions ~~and~~slightly offset by a decrease in dollars per transaction. Dollars per transaction decreased due to a decrease in ~~average unit retail~~units per transaction partially offset by an increase in ~~units per transaction.~~average unit retail. Comparable sales increases in men’s clothing and junior’s clothing were partially offset by decreases in hardgoods, footwear, ~~junior’s clothing,~~ and ~~accessories were partially offset by increases in men’s clothing.~~accessories. For information as to how we define comparable sales, see “General” above.

Gross profit was ~~$181.0~~$111.8 million for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 compared to ~~$184.4~~$104.8 million for the ~~nine~~six months ended ~~October 31, 2015, a decrease~~July 30, 2016, an increase of ~~$3.4~~$7.0 million, or ~~1.8%~~6.7%. As a percent of net sales, gross profit ~~decreased 120~~increased 20 basis points for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 to ~~31.6%~~30.0%. The ~~decrease~~increase was primarily driven by ~~an 80~~a 30 basis point ~~decrease~~increase in our product margin and a 30 basis point increase due to the ~~deleveraging~~leveraging of our store occupancy costs ~~and 20~~partially offset by a 40 basis ~~points due to higher outbound shipping expenses for customer orders as a percent of net sales.~~point increase in inventory shrinkage.

Selling, general and administrative (“SG&A”) expenses were ~~$169.1~~$118.8 million for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 compared to ~~$159.7~~$109.9 million for the ~~nine~~six months ended ~~October 31, 2015,~~July 30, 2016, an increase of ~~$9.4~~$9.0 million, or ~~5.9%~~8.2%. SG&A expenses as a percent of net sales increased by ~~110~~70 basis points for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 to ~~29.5%~~31.9%. The increase was primarily driven by ana 60 basis point increase ~~of 80~~due to investment in salaries and increases in minimum wage and 30 basis points ~~due~~related to ~~the deleveraging of our store operating expenses and 60 basis points due to the deleveraging of corporate costs,~~annual incentive compensation partially offset by a 3020 basis ~~points~~point decrease ~~related~~due to ~~prior year expenses associated with~~the leveraging of our ~~acquisition of Blue Tomato, including incentive payments made as part of the transaction.~~store costs.

Net ~~income~~loss for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 was ~~$7.7~~$5.1 million, or ~~$0.31~~$0.21 per diluted share, compared with net ~~income~~loss of ~~$15.6~~$3.0 million, or ~~$0.55~~$0.12 per diluted share, for the ~~nine~~six months ended ~~October 31, 2015.~~July 30, 2016. Our effective income tax rate for the ~~nine~~six months ended ~~October 39, 2016~~July 29, 2017 was ~~36.3%~~30.7% compared to ~~37.1%~~37.7% for the ~~nine~~six months ended ~~October 31, 2015.~~July 30, 2016. The decrease in effective tax rate was primarily due to $0.5 million of excess tax deficiencies for share-based payments recorded against income tax benefit during the six months ended July

29, 2017. Refer to “Recent Accounting Standards” section in Note 1 of Notes to Condensed Consolidated Financial Statements for further discussion.

Our primary uses of cash are for operational expenditures, inventory purchases and capital investments, including new stores, store remodels, store relocations, store fixtures and ongoing infrastructure improvements. Additionally, we may use cash for the repurchase of our common stock. Historically, our main source of liquidity has been cash flows from operations.

The significant components of our working capital are inventories and liquid assets such as cash, cash equivalents, current marketable securities and receivables, reduced by accounts payable, accrued payroll and accrued expenses. 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.

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. ~~In that regard, our~~Our net investment to open a new store has varied significantly in the past due to a number of factors, including the geographic location and size of the new store, and is likely to vary significantly in the future.

During fiscal ~~2016,~~2017, we expect to spend approximately ~~$21~~$24 million to ~~$23~~$26 million on capital expenditures, a majority of which will relate to leasehold improvements and fixtures for the approximately 2818 new stores we plan to open in fiscal ~~2016~~2017 and remodels or relocations of existing stores. There can be no assurance that the number of stores that we actually open in fiscal ~~2016~~2017 will not be different from the number of stores we plan to open, or that actual fiscal ~~2016~~2017 capital expenditures will not differ from our expectations.

Net cash provided by operating activities ~~increased~~decreased by ~~$3.5~~$2.7 million to ~~$4.0~~$3.8 million for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 from ~~$0.5~~$6.4 million for the ~~nine~~six months ended ~~October 31, 2015.~~July 30, 2016. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for inventory, employee compensation, store occupancy expenses and other operational expenditures. Cash received from our customers generally corresponds to our net sales. Because our customers primarily use credit cards or cash to buy from us, our receivables from customers settle quickly. Historically, changes to our operating cash flows have been driven primarily by changes in operating income, which is impacted by changes to non-cash items such as depreciation, amortization and accretion, deferred taxes, and ~~excess tax benefit from stock-based compensation, and~~ changes to the components of working capital.

Net cash used in investing activities was ~~$20.5~~$7.4 million for the ~~nine~~six months ended ~~October~~July 29, ~~2016,~~2017, related to ~~$16.8~~$12.5 million of capital expenditures primarily for new store openings and existing store remodels or relocations ~~and $5.4 million for the acquisition of Fast Times (net of cash acquired)~~ partially offset by ~~$1.8~~$5.0 million in net sales of marketable securities. Net cash ~~provided by~~used in investing activities was ~~$58.7~~$11.6 million for the ~~nine~~six months ended ~~October 31, 2015, primarily~~July 30, 2016, related to ~~$85.8 million in net sales of marketable securities partially offset by $27.1~~$11.9 million of capital expenditures primarily for new store openings and existing store remodels or ~~relocations.~~relocations partially offset by $0.3 million in net sales of marketable securities.

Net cash provided by financing activities for the six months ended July 29, 2017 was $0.2 million, primarily related to $0.4 million proceeds from the issuance and exercise of stock-based awards partially offset by $0.2 million in payments for tax withholding obligations upon vesting of restricted stock. Net cash used in financing activities for the ~~nine~~six months ended ~~October 29,~~July 30, 2016 was ~~$8.8~~$18.7 million, primarily related to ~~$21.6~~$19.1 million cash paid for the repurchase of common stock ~~partially offset by $12.0~~and $0.1 million in ~~net proceeds from revolving credit facilities and $0.8 million in proceeds from stock-based award exercises. Net cash used in financing activities~~payments for ~~the nine months ended October 31, 2015 was $75.2 million, primarily related to $77.7 million cash paid for the repurchase~~tax withholding obligations upon vesting of ~~common~~restricted stock partially offset by ~~$1.4~~$0.5 million in proceeds from the issuance and exercise of stock-based ~~award exercises and related tax benefits and $1.1 million in net proceeds from revolving credit facilities.~~awards.

Our most significant sources of liquidity continue to be funds generated by operating activities and available cash, cash equivalents and current marketable securities. We expect these sources of liquidity and available borrowings under our revolving credit facility will be sufficient to meet our foreseeable cash requirements for operations and planned capital expenditures for at least the next twelve months. Beyond this time frame, if cash flows from operations are not sufficient to meet our capital requirements, then we will be required to obtain additional equity or debt financing in the future. 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 February 5, 2016, the Company entered into~~We maintain an asset-based revolving credit agreement with Wells Fargo Bank, National Association, as administrative agent, collateral agent, letter of credit issuer and lenders, which provides for a senior secured revolving credit facility of up to $100 million (“ABL Facility”), subject to a borrowing base, with a letter of credit sub-limit of $10 million. The ABL Facility is available for working capital and other general corporate purposes. ~~The ABL Facility replaced our $25.0 million secured revolving credit facility with Wells Fargo, which was entered into on July 9, 2014.~~ The ABL Facility will mature on February 5, 2021.

There were no borrowings outstanding under the ABL Facility at ~~October~~July 29, ~~2016 or the secured revolving credit facility~~2017 and at January ~~30, 2016.~~28, 2017. We had no open commercial letters of credit outstanding under these lines of credit at ~~October~~July 29, ~~2016~~2017 and at January ~~30, 2016.~~28, 2017.

Additionally, we have revolving lines of credit of up to ~~$22.4~~20.5 million Euro ($24.0 million at July 29, 2017), the proceeds of which are used to fund certain international operations. The revolving lines of credit bear interest at 1.65%. There were ~~$11.8 million borrowings outstanding at October 29, 2016 and~~ no borrowings outstanding at July 29, 2017 and at January ~~30, 2016.~~28, 2017. We had no open commercial letters of credit outstanding under these lines of credit at ~~October~~July 29, ~~2016~~2017 and at January ~~30, 2016.~~28, 2017.

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our condensed 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. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that we believe to be relevant at the time our condensed consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our condensed consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

There have been no significant changes to our critical accounting estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended January ~~30, 2016.~~28, 2017.

There were no material changes outside the ordinary course of business in our contractual obligations during the ~~nine~~six months ended ~~October~~July 29, ~~2016.~~2017. The following table summarizes the total amount of future payments due under our contractual obligations at ~~October~~July 29, ~~2016~~2017 (in thousands):

At ~~October~~July 29, ~~2016,~~2017, we did not have any off-balance sheet arrangements.

We do not believe that inflation has had a material impact on our net sales or operating results for the past three fiscal years. However, substantial increases in costs, including the price of raw materials, labor, energy and other inputs used in the production of our merchandise, could have a significant impact on our business and the industry in the future. Additionally, while deflation could positively impact our merchandise costs, it could have an adverse effect on our average unit retail price, resulting in lower sales and operating results.

Investing in our securities involves a high degree of risk. The following risk factors, issues and uncertainties should be considered in evaluating our future prospects. In particular, keep these risk factors in mind when you read “forward-looking” statements elsewhere in this report. Forward-looking statements relate to our expectations for future events and time periods. Generally, the words “anticipates,” “expects,” “intends,” “may,” “should,” “plans,” “believes,” “predicts,” “potential,” “continue” and similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements. Any of the following risks could harm our business, operating results or financial condition and could result in a complete loss of your investment. Additional risks and uncertainties that are not yet identified or that we currently think are immaterial may also harm our business and financial condition in the future.

Our ability to attract customers to our stores depends heavily on the success of the shopping malls in which many of our stores are located; any decrease in consumer traffic in those malls could cause our sales to be less than expected.

In order to generate customer traffic we depend heavily on locating many of our stores in prominent locations within successful shopping malls. Sales at these stores are derived, in part, from the volume of traffic in those malls. Our stores benefit from the ability of a mall’s other tenants to generate consumer traffic in the vicinity of our stores and the continuing popularity of malls as shopping destinations. Our sales volume and mall traffic generally may be adversely affected by, among other things, economic downturns in a particular area, competition from ecommerce retailers, non-mall retailers and other malls, increases in gasoline prices, fluctuations in exchange rates in border or tourism-oriented locations and the closing or decline in popularity of other stores in the malls in which we are located. An uncertain economic outlook could curtail new shopping mall development, decrease shopping mall traffic, reduce the number of hours that shopping mall operators keep their shopping malls open or force them to cease operations entirely. A reduction in mall traffic as a result of these or any other factors could have a material adverse effect on our business, results of operations and financial condition.

~~Our business is dependent upon our being able~~Failure to anticipate, identify and respond to changing fashion trends, customer preferences and other fashion-related ~~factors; failure to do so~~factors could have a material adverse effect on us.

~~Customer~~Customer tastes and fashion trends in our market are volatile and tend to change rapidly. Our success depends on our ability to effectively anticipate, identify and respond to changing fashion tastes and consumer preferences, and to translate market trends into appropriate, saleable product offerings in a timely manner. If we are unable to successfully anticipate, identify or respond to changing styles or trends and misjudge the market for our products or any new product lines, including adequately anticipating the correct mix and trends of our private label merchandise, our sales may be lower than predicted and we may be faced with a substantial amount of unsold inventory or missed opportunities. In response to such a situation, we may be forced to rely on markdowns or promotional sales to dispose of excess or slow-moving inventory, which could have a material adverse effect on our results of operations.

21We may be unable to compete favorably in the highly competitive retail industry, and if we lose customers to our competitors, our sales could decrease.

The teenage and young adult retail apparel, footwear, accessories and hardgoods industry is highly competitive. We compete with other retailers for vendors, teenage and young adult customers, suitable store locations, qualified store associates, management personnel, on-line marketing content, social media engagement and ecommerce traffic. Some of our competitors are larger than we are and have substantially greater financial and marketing resources, including advanced ecommerce market capabilities. 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. Current and increased competition could have a material adverse effect on our business, results of operations and financial condition.

U.S. and global economic and political uncertainty, coupled with cyclical economic trends in retailing, could have a material adverse effect on our results of operations.

Our retail market historically has been subject to substantial cyclicality. As the U.S. and global economic and political conditions change, the trends in discretionary consumer spending become unpredictable and discretionary consumer spending could be reduced due to uncertainties about the future. When disposable income decreases or discretionary consumer spending is reduced due to a decline in consumer confidence, purchases of apparel and related products may decline. The current uncertainty in the U.S. and global economies and political environment could have a material adverse impact on our results of operations and financial position.

In response to a decline in disposable income and consumer confidence, we believe the “value” message has become more important to consumers. As a retailer that sells approximately 80% branded merchandise, this trend may negatively affect our business, as we generally will have to charge more than vertically integrated private label retailers or we may be forced to rely on promotional sales to compete in our market which could have a material adverse effect on our financial position.

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. Sales at these stores are derived, in part, from the volume of traffic in those malls. Our stores benefit from the ability of a mall’s other tenants to generate consumer traffic in the vicinity of our stores and the continuing popularity of malls as shopping destinations. Furthermore, we depend on generating increased traffic to our websites and converting that traffic into sales. This requires us to achieve expected results from our marketing and social media campaigns, accuracy of data analytics, reliability of our website, network, and transaction processing and a high-quality on-line customer experience. Our sales volume and customer traffic in our stores and on our websites generally could be adversely affected by, among other things, economic downturns, competition from other ecommerce retailers, non-mall retailers and other malls, increases in gasoline prices, fluctuations in exchange rates in border or tourism-oriented locations and the closing or decline in popularity of other stores in the malls in which we are located. An uncertain economic outlook could curtail new shopping mall development, decrease shopping mall and ecommerce traffic, reduce the number of hours that shopping mall operators keep their shopping malls open or force them to cease operations entirely. A reduction in consumer traffic to our stores or websites could have a material adverse effect on our business, results of operations and financial condition.

Our growth strategy depends on our ability to ~~open~~grow customer engagement in our current markets and ~~operate~~expand into new ~~stores each year,~~markets, which could strain our resources and cause the performance of our existing ~~stores~~business to suffer.

Our growth largely depends on our ability to ~~open~~optimize our customer engagement in our current trade areas and operate successfully in new ~~stores successfully.~~geographic markets. However, our ability to open stores in new ~~stores~~geographic markets in the U.S. and international locations is subject to a variety of risks and uncertainties, and we may be unable to open new stores as planned or have access to desirable lease space, and any failure to successfully open and operate in new ~~stores~~markets could have a material adverse effect on our results of operations. We intend to continue to open new stores in future years, while remodeling a portion of our existing store base ~~annually.~~such that we have the optimum number of stores in any given trade area. The expansion into new markets may present competitive, merchandising, hiring and distribution challenges that are different from those currently encountered in our existing markets. In addition, our proposed expansion will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of our individual stores and our overall business. ~~To the extent our new store openings are in markets where we already have stores, we may experience reduced net sales in existing stores in those markets.~~ In addition, successful execution of our growth strategy may require that we obtain additional financing, and we may not be able to obtain that financing on acceptable terms or at all.

In addition, we plan to open new stores in regions of the U.S. or international locations in which we currently have few, or no, stores. The expansion into these markets may present competitive, merchandising, hiring and distribution challenges that are different from those currently encountered in our existing markets. Any of these challenges could adversely affect our business and results of operations.

Failure to successfully integrate any businesses ~~or stores~~ that we acquire could have an adverse impact on our results of operations and financial performance.

We may, from time to time, acquire ~~other retail stores or~~ businesses, such as our acquisition of Blue Tomato ~~one of~~, which operates primarily in the ~~leading~~ European ~~specialty retailers of apparel, footwear, accessories,~~market, and ~~hardgoods.~~Fast Times, which operates primarily in the Australian market. We may experience difficulties in integrating any ~~stores or~~ businesses we may acquire, including their stores, websites, facilities, personnel, financial systems, distribution, operations and general operating procedures, and any such acquisitions may also result in the diversion of our capital and our management’s attention from other business issues and opportunities. If we experience difficulties in integrating acquisitions or if such acquisitions do not provide the benefits that we expect to receive, we could experience increased costs and other operating inefficiencies, which could have an adverse effect on our results of operations and overall financial performance.

Our plans for international expansion include risks that could have a negative impact on our results of operations.

~~In fiscal 2011, we opened our first stores in Canada and we~~We plan to continue to open new stores in ~~Canada. In fiscal 2012, we acquired Blue Tomato, which operates primarily in~~ the Canadian, European, ~~market,~~ and ~~we plan to continue to open new stores in Europe. In fiscal 2016, we acquired Fast Times, which operates in the~~ Australian ~~market, and we plan to open new stores in Australia in the future.~~markets. We may continue to expand internationally in other markets, either organically, or through additional acquisitions. International markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing U.S. market. As a result, operations in international markets may be less successful than our operations in the U.S. Additionally, consumers in international markets may not be familiar with us or the brands we sell, and we may need to build brand awareness in the markets. Furthermore, we have limited experience with the legal and regulatory environments and market practices ~~outside of the U.S.~~in new international markets and cannot guarantee that we will be able to penetrate or successfully operate in these new international markets. We also expect to incur additional costs in complying with applicable foreign laws and regulations as they pertain to both our products and our operations.

~~Additionally,~~ Accordingly, for the ~~results of operations of~~reasons noted above, our plans for international subsidiaries are exposed to foreign exchange rate fluctuations. Upon translation, operating results may differ materially from expectations. As we expand our international operations, our exposure to exchange rate fluctuations will increase.

~~The current uncertainty surrounding the U.S. and global economies, including the European economy, coupled with cyclical economic trends in retailing~~expansion include risks that could have a ~~material adverse effect~~negative impact on our results of operations.

Our retail market historically has been subject to substantial cyclicality. As the U.S. and global economic conditions change, the trends in discretionary consumer spending become unpredictable and discretionary consumer spending could be reduced due to uncertainties about the future. When discretionary consumer spending is reduced, purchases of apparel and related products may decline. The current uncertainty in the U.S. and global economies and increased government debt may have a material adverse impact on our results of operations and financial position.

Because of this cycle, we believe the “value” message has become more important to consumers. As a retailer that sells approximately 80% branded merchandise, this trend may negatively affect our business, as we generally will have to charge more than vertically integrated private label retailers.

Our sales and inventory levels fluctuate on a seasonal ~~basis, leaving our operating results particularly susceptible to changes in back-to-school and winter holiday shopping patterns.~~basis. Accordingly, our quarterly results of operations are volatile and may fluctuate significantly.

Our quarterly results of operations have fluctuated significantly in the past and can be expected to continue to fluctuate significantly in the future. Our sales and profitability are typically disproportionately higher in the third and fourth fiscal quarters of each fiscal year due to increased sales during the back-to-school and winter holiday shopping seasons. Sales during these periods cannot be used as an accurate indicator of annual results. 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. In addition, in order to prepare for the back-to-school and winter holiday shopping seasons, we must order and keep in stock significantly more merchandise than we carry during other times of the year. Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could have a material adverse effect on our business, results of operations and financial condition.

Our quarterly results of operations are affected by a variety of other factors, including:

Significant fluctuations and volatility in the ~~price~~cost of ~~cotton, foreign~~raw materials, global labor, ~~costs~~shipping and other ~~raw materials used in~~costs related to the production of our merchandise may have a material adverse effect on our business, results of operations and financial conditions.

Increases in the cost of ~~cotton, other~~ raw materials, ~~foreign~~global labor costs, freight costs and ~~transportation~~other shipping costs ~~used~~ in the production and transportation of our merchandise can result in higher costs ~~in the price we pay~~ for this merchandise. The costs for ~~cotton~~these products are affected by weather, consumer demand, government regulation, speculation on the commodities market and other factors that are generally unpredictable and beyond our control. Our gross profit and results of operations could be adversely affected to the extent that the selling prices of our products do not increase proportionately with the increases in the costs of ~~cotton or other~~raw materials. Increasing labor costs and oil-related product costs, such as manufacturing and transportation costs, could also adversely impact gross profit. Additionally, significant changes in the relationship between carrier capacity and shipper demand could increase transportation costs, which could also adversely impact gross profit.

Most of our merchandise is produced by foreign manufacturers; therefore, the availability, quality and costs of ~~these products~~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. Some of these facilities are located in regions that may be affected by natural disasters, political instability or other conditions that could cause a disruption in trade. 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. 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. Our business could be adversely affected by disruptions in the supply chain, such as strikes, work stoppages, or port closures. ~~Although~~

Fluctuations in foreign currency exchange rates could impact our financial condition and results of operations.

We are exposed to foreign currency exchange rate risk with respect to our sales, profits, assets and liabilities denominated in currencies other than the U.S. dollar. As a result, the fluctuation in the value of the U.S. dollar against other currencies could have a material adverse effect on our results of operations, financial condition and cash flows. Upon translation, operating results may differ materially from expectations. As we continue to expand our international operations, our exposure to exchange rate fluctuations will increase. Tourism spending may be affected by changes in currency exchange rates, and as a result, sales at stores with higher tourism traffic may be adversely impacted by fluctuations in currency exchange rates. Further, although the prices charged by vendors for the merchandise we purchase are primarily denominated in U.S. dollars, a decline in the relative value of the U.S. dollar to foreign currencies could lead to increased merchandise costs, which could negatively affect our competitive position and our results of operations.

23Our business could be adversely affected by increased labor costs, including costs related to an increase in minimum wage and health care.

~~The regulatory~~Labor is one of the primary components in the cost of operating our business. Increased labor costs, whether due to competition, unionization, increased minimum wage, state unemployment rates, health care, or other employee benefits costs may adversely impact our operating expenses. A considerable amount of our store team members are paid at rates related to the federal or state minimum wage and any changes to the minimum wage rate may increase our operating expenses. Furthermore, inconsistent increases in state and or city minimum wage requirements ~~regarding conflict minerals could have a negative~~limit our ability to increase prices across all markets and channels. Additionally, we are self-insured with respect to our health care coverage in the U.S. and do not purchase third party insurance for the health insurance benefits provided to employees with the exception of pre-defined stop loss coverage, which helps limit the cost of large claims. There is no assurance that future health care legislation will not adversely impact on our results or operations.

Our business could suffer if a manufacturer fails to use acceptable labor and environmental practices.

We do not control our vendors or the manufacturers that produce the products we buy from them, nor do we control the labor and environmental practices of ~~operations.~~

~~Pursuant to~~our vendors and these manufacturers. The violation of labor, safety, environmental and/or other laws and standards by any of our vendors or these manufacturers, or the ~~Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC promulgated final rules regarding disclosure~~divergence of the ~~use~~labor and environmental practices followed by any of certain minerals (tantalum, tin, gold and tungsten) known as conflict minerals, which are mined from the Democratic Republic of the Congo and adjoining countries, as well as procedures regarding a manufacturer's efforts to prevent the sourcing of such minerals and metals producedour vendors or these manufacturers from those minerals. We conducted the required due diligence activities for the 2015 calendar year and filed our third Form SD report with the SEC in May 2016. Additional requirements under the rule could affect sourcing at competitive prices and availability in sufficient quantities of certain of the minerals usedgenerally accepted as ethical in the ~~manufacture~~U.S., could interrupt, or otherwise disrupt, the shipment of finished products to us or damage our ~~products, which~~reputation. Any of these, in turn, could have a material adverse effect on our ability to purchase these products in the future. The costs of compliance, including those related to supply chain research, the limited number of suppliers and possible changes in the sourcing of these minerals, could have a material adverse effect on our results of operations or cash flow.

Our business is susceptible to weather conditions that are out of our control, including the potential risks of unpredictable weather patterns and any weather patterns associated with naturally occurring global climate change, and the resultant unseasonable weather could have a negative impact on our results of operations.

Our business is susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm temperatures during the winter season or cool weather during the summer season (including any weather patterns associated with global warming and cooling) could render a portion of our inventory incompatible with those unseasonable conditions. These prolonged unseasonable weather conditions could have a material adverse effect on our businessreputation, financial condition and results of operations.

We In that regard, most of the products we sell are manufactured overseas, primarily in Asia, Mexico and Central America, which may ~~be unable to compete favorably~~increase the risk that the labor and environmental practices followed by the manufacturers of these products may differ from those considered acceptable in the ~~highly competitive retail industry,~~U.S.

Additionally, our products are subject to regulation of and ~~if we lose customers~~regulatory standards set by various governmental authorities with respect to ~~our competitors, our sales could decrease.~~

~~The teenage~~quality and ~~young adult retail apparel, footwear, accessories~~safety. These regulations and ~~hardgoods industry is highly competitive. We compete~~standards may change from time to time. Our inability to comply on a timely basis with other retailers for vendors, teenage and young adult customers, suitable store locations, qualified store associates and management personnel. Some of our competitors are larger than we are and have substantially greater financial, marketing, including advanced ecommerce marketing capabilities, and other resources than we do. 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 andregulatory requirements could result in significant fines or penalties, which could adversely affect our reputation and sales. Issues with the ~~loss~~quality and safety of merchandise we sell, regardless of our ~~customers. Current~~culpability, or customer concerns about such issues, could result in damage to our reputation, lost sales, uninsured product liability claims or losses, merchandise recalls and increased ~~competition could have a material adverse effect on our business, results of operations and financial condition.~~costs.

If we fail to develop and maintain good relationships with vendors or if a vendor is otherwise unable or unwilling to supply us with adequate quantities of their products at acceptable prices, our business and financial performance could suffer.

Our business is dependent on ~~continued~~developing and maintaining good ~~relations~~relationships with a large number of vendors to provide our ~~vendors.~~customers with an extensive selection of current and relevant brands. In ~~particular, we~~addition to maintaining our large number of current vendor relationships, this includes identifying, attracting and launching new vendors every year to provide a diverse and unique product assortment. We believe that we generally are able to obtain attractive pricing and terms from vendors because we are perceived as a desirable customer, and deterioration in our relationship with our vendors could have a material adverse effect on our business. ~~There~~

However, there can be no assurance that our current vendors or new vendors will provide us with an adequate supply or quality of products or acceptable pricing. Our vendors could discontinue selling to us, raise the prices they charge, ~~at any time~~sell through direct channels or allow their merchandise to be discounted by other retailers. There can be no assurance that we will be able to acquire desired merchandise in sufficient quantities on terms acceptable to us in the future. In addition, certain of our vendors sell their products directly to the retail market and therefore compete with us directly and other vendors may decide to do so in the future. There can be no assurance that such vendors will not decide to discontinue supplying their products to us, supply us only less popular or lower quality items, raise the prices they charge us or focus on selling their products directly.

In addition, a number of our vendors are smaller, less capitalized companies and are more likely to be impacted by unfavorable general economic and market conditions than larger and better capitalized companies. These smaller vendors may not have sufficient liquidity during economic downturns to properly fund their businesses and their ability to supply their products to us could be negatively impacted. Any inability to acquire suitable merchandise at acceptable prices, or the loss of one or more key vendors, could have a material adverse effect on our business, results of operations and financial condition.

Our ~~ecommerce operations subject us to numerous risks that could~~omni-channel strategy may not have ~~an adverse effect on our results of operations.~~

~~Our ecommerce operations subject us to certain risks that could have an adverse effect on our operational results, including:~~

In addition, risks beyond our control, such as governmental regulation of ecommerce, entry of our vendors in the ecommerce business in competition with us, online security breaches and general economic conditions specific to ecommercereturn we anticipate, which could have an adverse effect on our results of operations.

We are executing an omni-channel strategy to enable our customers to shop wherever, whenever and however they choose to engage with us. Our omni-channel strategy may not deliver the results we anticipate or may not adequately anticipate changing consumer trends, preferences and expectations. We will continue to develop additional ways to execute our superior omni-channel experience and interact with our customers, which requires significant investments in IT systems and changes in operational strategy, including localization, on-line and in-store point of sale systems, order management system, and transportation management system. If we ~~lose key executives~~fail to effectively integrate our store and ecommerce shopping experiences, effectively scale our IT structure or we do not realize the return on our investments that we anticipate our operating results could be adversely affected. Our competitors are ~~unable~~also investing in omni-channel initiatives. If our competitors are able to ~~attract and retain the talent required for~~be more effective in their strategy, it could have an adverse effect on our results of operations. If we our omni-channel strategy fails to meet customer expectations related to functionality, timely delivery, or customer experience, our business ~~our financial performance could suffer.~~

~~Our performance depends largely on~~and results of operations may be adversely affected. Additionally, to manage the ~~efforts and abilities~~anticipated growth of our ~~key executives. If we lose the services of one or more of our key executives, we may not be able to successfully manage our business or achieve our growth objectives. As our business grows,~~operations and personnel, we will need to ~~attract~~continue to improve our operational and ~~retain~~financial systems, transaction processing, procedures and controls, and in doing so could incur substantial additional ~~qualified personnel in a timely manner~~expenses that could impact our financial results.

If our information systems fail to function effectively our operations could be disrupted and ~~we may~~our financial results could be harmed.

~~Our failure to meet our staffing needs~~work effectively, this could adversely ~~affect~~impact the promptness and accuracy of our transaction processing, financial accounting and reporting and our ability to ~~implement~~manage our ~~growth strategy~~business and ~~could have a material impact on our~~properly forecast operating results and cash requirements. Further, we may suffer loss of ~~operations.~~

~~Our success depends in part upon our ability to attract, motivate~~critical data and retain a sufficient number of qualified employees who understand and appreciate our culture and our brand and are able to adequately represent this culture to our customers. Qualified individuals of the requisite caliber, skills and number needed to fill these positions may be in short supply in some areas, and the employee turnover rate in the retail industry is high. Competition for qualified employees could require us to pay higher wages to attract a sufficient number of suitable employees. If we are unable to hire and retain store managers and store associates capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and knowledge of our merchandise, our ability to open new stores may be impaired and the performance of our existing and new stores could be materially adversely affected. We are also dependent upon temporary personnel to adequately staff our stores and our distribution and fulfillment operations particularly during busy periods such as the back-to-school and winter holiday seasons. There can be no assurance that we will receive adequate assistance from our temporary personnel, or that there will be sufficient sources of temporary personnel. Although none of our employees are currently covered by collective bargaining agreements, we cannot guarantee that our employees will not elect to be represented by labor unions in the future, which could increase our labor costs and could subject us to the risk of work stoppages and strikes. Any such failure to meet our staffing needs, any material increases in employee turnover rates, any increases in labor costs or any work stoppages, interruptions or ~~strikes~~delays in our 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, security or services we require, the failure could interrupt our services and could have a material adverse effect on our business, orfinancial condition and results of operations.

~~Our business could suffer with the closure or disruption of our home office or our distribution centers.~~

Domestically, we rely on a single distribution center located in Corona, California to receive, store and distribute the vast majority of our merchandise to our domestic stores. Internationally, we operate a combined distribution and ecommerce fulfillment center located in Graz, Austria that supports our Blue Tomato ecommerce and store operations in Europe and we operate a distribution center located in Delta, British Columbia, Canada to distribute our merchandise to our Canadian stores. Additionally, we are headquartered in Lynnwood, Washington. As a result, a natural disaster or other catastrophic event that affects one of the regions where we operate these centers could significantly disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.

We are required to make substantial rental payments under our operating leases and any failure to make these lease payments when due could have a material adverse effect on our business and growth plans.

Payments under operating leases account for a significant portion of our operating expenses and has historically been our third largest expense behind cost of sales and employee related costs. Total rent expense, including contingent rent based on sales of some of our stores, was $56.8 million and $52.7 million for the nine months ended October 29, 2016 and October 31, 2015. Total rent expense amounts do not include real estate taxes, insurance, common area maintenance charges and other executory costs, which were $30.7 million and $28.7 million for the nine months ended October 29, 2016 and October 31, 2015.

At October 29, 2016, we were committed to property owners for minimum lease payments of $416.3 million. In addition to minimum lease payments, substantially all of our store leases provide for contingent rent payments based on sales of the respective stores, as well as real estate taxes, insurance, common area maintenance charges and other executory costs. These amounts generally escalate each year. We expect that any new stores we open will also be leased by us under operating leases, which will further increase our operating lease expenses and obligations.

~~Our substantial operating lease obligations could have significant negative consequences, including:~~

We depend on cash flow from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under bank loans or from other sources, we may not be able to service 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.

The terms of our primary credit facility impose certain restrictions on us that may impair our ability to respond to changing business and economic conditions. These restrictions could have a significant adverse impact on our business. Additionally, our business could suffer if our ability to acquire financing is reduced or eliminated.

On February 5, 2016, the Company entered into an asset-based revolving credit agreement with Wells Fargo Bank, National Association, which provides for a senior secured revolving credit facility of up to $100 million (“ABL Facility”), subject to a borrowing base, with a letter of credit sub-limit of $10 million. The ABL Facility is available for working capital and other general corporate purposes. The ABL Facility replaced our $25.0 million secured revolving credit facility with Wells Fargo, which was entered into on July 9, 2014. The ABL Facility will mature on February 5, 2021.

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.

Our business could suffer if a manufacturer fails to use acceptable labor practices.

We do not control our vendors or the manufacturers that produce the products we buy from them, nor do we control the labor practices of our vendors and these manufacturers. The violation of labor or other laws by any of our vendors or these manufacturers, or the divergence of the labor practices followed by any of our vendors or these manufacturers from those generally accepted as ethical in the U.S., could interrupt, or otherwise disrupt, the shipment of finished products to us or damage our reputation. Any of these, in turn, could have a material adverse effect on our financial condition and results of operations. In that regard, most of the products we sell are manufactured overseas, primarily in Asia and Central America, which may increase the risk that the labor practices followed by the manufacturers of these products may differ from those considered acceptable in the U.S.

Additionally, our products are subject to regulation of and regulatory standards set by various governmental authorities with respect to quality and safety. Regulations and standards in this area are currently in place. These regulations and standards may change from time to time. Our inability to comply on a timely basis with regulatory requirements could result in significant fines or penalties, which could adversely affect our reputation and sales. Issues with the quality and safety of merchandise we sell, regardless of our culpability, or customer concerns about such issues, could result in damage to our reputation, lost sales, uninsured product liability claims or losses, merchandise recalls and increased costs.

Our failure to adequately anticipate a correct mix of private label merchandise may have a material adverse effect on our business.

Sales from private label merchandise account for approximately 20% of our net sales and generally carry higher gross margins than our other merchandise. We may take steps to increase the percentage of net sales of private label merchandise in the future, although there can be no assurance that we will be able to achieve increases in private label merchandise sales as a percentage of net sales. Our failure to anticipate, identify and react in a timely manner to fashion trends with our private label merchandise, could have a material adverse effect on our comparable sales, financial condition and results of operations.

If our information systems hardware or software fails to function effectively or does not scale to keep pace with our planned growth, our operations could be disrupted and our financial results could be harmed.

We are continuing to make investments to improve our information systems infrastructure. If our information systems, including 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 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. 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.

~~The~~If the security of our ~~databases that contain personal information of our retail customers could~~data is breached we may be ~~breached, which could subject us~~subjected to adverse publicity, litigation and significant expenses. ~~In addition, if we~~

Information systems are ~~unable~~susceptible to ~~comply with~~an increasing threat of continually evolving cybersecurity risks. We maintain security ~~standards created by the credit card industry, our operations could be adversely affected.~~

~~Database privacy, network security~~systems, devices and ~~identity theft are matters of growing public concern. In an attempt~~activity monitoring to prevent unauthorized access to our network, systems and databases containing confidential, ~~third-party information, we have installed privacy protection systems, devices~~proprietary, and ~~activity monitoring on our networks.~~personally identifiable information. Nevertheless, if unauthorized parties gain access to our networks, systems or databases, they may be able to steal, publish, delete or modify ~~our private and sensitive third-party~~confidential information. In such circumstances, we could be held liable to our customers or other parties or be subject to regulatory or other actions for breaching privacy rules and we may be exposed to reputation damage and loss of customers’ trust and business. This could result in costly investigations and litigation, civil or criminal penalties and adverse publicity that could adversely affect our financial condition, results of operations and reputation. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional resources, train employees, and engage third-parties. Further, ifthe regulatory environment surrounding information security, cybersecurity and privacy is increasingly demanding. If we are unable to comply with the new and changing security standards, ~~established by banks and the credit card industry,~~ we may be subject to fines, restrictions and ~~expulsion from card acceptance programs,~~financial exposure, which could adversely affect our retail operations.

If we lose key executives or are unable to attract and retain the talent required for our business, our financial performance could suffer.

Our performance depends largely on the efforts and abilities of our key executives. If we lose the services of one or more of our key executives, we may not be able to successfully manage our business or achieve our growth objectives. Furthermore, as our business grows, we will need to attract and retain additional qualified personnel in a timely manner and we may not be able to do so.

Our failure to meet our staffing needs could adversely affect our ability to implement our growth strategy and could have a material impact on our results of operations.

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees who understand and appreciate our culture and brand and are able to adequately represent this culture. Qualified individuals of the requisite caliber, skills and number needed to fill these positions may be in short supply in some areas and the employee turnover rate in the retail industry is high. Our business depends on the ability to hire and retain qualified technical and support roles for procurement, distribution, e-commerce and back office functions. Competition for qualified employees in these areas could require us to pay higher wages to attract a sufficient number of suitable employees.

If we are unable to hire and retain store managers and store associates capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and knowledge of our merchandise, our ability to open new stores may be impaired and the performance of our existing and new stores could be materially adversely affected. We are also dependent upon temporary personnel to adequately staff our operations particularly during busy periods such as the back-to-school and winter holiday seasons. There can be no assurance that we will receive adequate assistance from our temporary personnel, or that there will be sufficient sources of temporary personnel. If we are unable to hire qualified temporary personnel, our results of operations could be adversely impacted.

Although none of our employees are currently covered by collective bargaining agreements, we cannot guarantee that our employees will not elect to be represented by labor unions in the future, which could increase our labor costs and could subject us to the risk of work stoppages and strikes. Any such failure to meet our staffing needs, any material increases in employee turnover rates, any increases in labor costs or any work stoppages, interruptions or strikes could have a material adverse effect on our business or results of operations.

A decline in cash flows from operations could have a material adverse effect on our business and growth plans.

We depend on cash flow from operations to fund our current operations and our growth strategy, including the payment of our operating leases, wages, store operation costs and other cash needs. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our credit facility or from other sources, we may not be able to pay our operating lease expenses, grow our business, respond to competitive challenges or fund our other liquidity and capital needs, which could have a material adverse effect on our business.

The terms of our asset-based revolving 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.

We maintain an asset-based revolving credit agreement with Wells Fargo Bank, N.A., as administrative agent, collateral agent, letter of credit issuer and lenders, which provides for a senior secured revolving credit facility (“ABL Facility”) of up to $100 million. The ABL 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. In addition, excess availability equal to at least 10% of the loan cap must be maintained under the ABL Facility. The ABL Facility does not otherwise contain financial maintenance covenants. 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.

The ABL 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. 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.

Our business could suffer with the closure or disruption of our home office or our distribution centers.

Domestically, we rely on a single distribution center located in Corona, California to receive, store and distribute the vast majority of our merchandise to our domestic stores. Internationally, we operate a combined distribution and ecommerce fulfillment center located in Graz, Austria that supports our Blue Tomato ecommerce and store operations in Europe. We operate a distribution center located in Delta, British Columbia, Canada to distribute our merchandise to our Canadian stores. We operate a distribution and fulfillment center located in Melbourne, Australia to distribute our merchandise to our Australian stores. Additionally, we are headquartered in Lynnwood, Washington. As a result, 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.

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 in malls, particularly in public areas, 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. 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.

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. The unauthorized use or other misappropriation of our trademarks or domain names could diminish the value of the Zumiez, or Blue Tomato, or Fast Times brands, our store concepts, our private label brands or our goodwill and cause a decline in our net sales. Although we have secured or are in the process of securing protection for our trademarks and domain names in a number of countries outside of the U.S., there are certain countries where we do not currently have or where we do not currently intend to apply for protection for certain ~~trademarks or at all.~~trademarks. Also, the efforts we have taken to protect our trademarks may not be sufficient or effective. Therefore, we may not be able to prevent other persons from using our trademarks or domain names outside of the U.S., which also could adversely affect our business. We are also subject to the risk that we may infringe on the intellectual property rights of third parties. Any infringement or other intellectual property claim made against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays or require us to pay royalties or license fees. As a result, any such claim could have a material adverse effect on our operating results.

~~The effects of war or acts 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 in malls, particularly in public areas, could lead to lower customer traffic in shopping malls. In addition, local authorities or mall management could close shopping malls in response to security concerns. Mall closures, as well as lower customer traffic due to security concerns, could result in decreased sales. Additionally, the armed conflicts in the Middle East, or the threat, escalation or commencement of war or other armed conflict elsewhere, could significantly diminish consumer spending, and result in decreased sales for us. Decreased sales could have a material adverse effect on our business, financial condition and results of operations.

~~The outcome of litigation could have a material adverse effect on our business, and may result in substantial costs and could divert management's attention.~~

We are involved, from time to time, in litigation incidental to our business including complaints filed by investors. This litigation could result in substantial costs, and could divert management's attention and resources, which could harm our business. Risks associated with legal liability are often difficult to assess or quantify, and their existence and magnitude can remain unknown for significant periods of time. There can be no assurance that the actual outcome of pending or future litigation will not have a material adverse effect on our results of operations or financial condition. Additionally, while we maintain director and officer liability insurance for litigation surrounding investor lawsuits, the amount of insurance coverage may not be sufficient to cover a claim and the continued availability of this insurance cannot be assured.

Our operations expose us to the risk of litigation, which could lead to significant potential liability and costs that could harm our business, financial condition or results of operations.

We employ a substantial number of full-time and part-time employees, a majority of whom are employed at our store locations. As a result, we are subject to a large number of federal, state and foreign laws and regulations relating to employment. This creates a risk of potential claims that we have violated laws related to discrimination and harassment, health and safety, wage and hour laws, criminal activity, personal injury and other claims. We are also subject to other types of claims in the ordinary course of our business. Some or all of these claims may give rise to litigation, which could be time-consuming for our management team, costly and harmful to our business.

In addition, we are exposed to the risk of class action litigation. The costs of defense and the risk of loss in connection with class action suits are greater than in single-party litigation claims. 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 assure you that such litigation will not disrupt our business or impact our financial results.

Our failure to comply with federal, state, local or foreign laws and regulations, or changes in these laws and regulations, could have an adverse impact on our results of operations and financial performance.

Our business is subject to a wide array of laws and regulations including those related to employment, trade, consumer protection, transportation, occupancy laws, health care, wage laws, employee health and safety, taxes, privacy, health information privacy, identify theft, customs, truth-in-advertising, securities laws, unsolicited commercial communication and environmental issues. Our policies, procedures and internal controls are designed to comply with foreign and domestic laws and regulations, such as those required by the Sarbanes-Oxley Act of 2002 and the U.S. Foreign Corrupt Practices Act. Although we have policies and procedures aimed at ensuring legal and regulatory compliance, our employees or vendors could take actions that violate these laws and regulations. ~~Changes~~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, ~~including those related to health care, taxes, privacy, environmental issues~~particularly in the U.S. and ~~trade,~~Europe, could adversely affect our results of operations or financial condition.

~~Our business could be adversely affected by increased labor costs, including costs related to an increase in the minimum wage and new health care laws.~~

Labor is a primary component in the cost of operating our business. Increased labor costs, whether due to competition, unionization, increased minimum wage, state unemployment rates, employee benefits costs or otherwise, may adversely impact our operating expenses. A considerable amount of our store team members are paid at rates related to the federal or state minimum wage and any changes to the minimum wage rate may increase our operating expenses. Furthermore, inconsistent increases in state and or city minimum wage requirements limits our ability to increase prices across all markets and channels. Additionally, we are self-insured with respect to our health care coverage in the U.S. and do not purchase third party insurance for the health insurance benefits provided to employees with the exception of pre-defined stop loss coverage, which helps limit the cost of large claims. In March 2010, The Patient Protection and Affordable Care Act was enacted requiring employers such as us to provide health insurance for all qualifying employees or pay penalties for not providing coverage. These costs were incurred in fiscal 2015, however, there is no assurance that we will be able to absorb and/or pass through the costs of future heath care legislation in a manner that will not adversely impact our results or operations.

~~Failure to maintain adequate financial and management processes and controls could lead to errors~~Fluctuations in our ~~financial reporting~~tax obligations and ~~could harm~~effective tax rate may result in volatility in our ~~ability~~operating results.

We are subject to ~~manage~~income taxes in many domestic and foreign jurisdictions. In addition, our ~~expenses.~~

~~Reporting obligations as a public company~~products are subject to import and ~~our anticipated growth, both domestically and internationally, are likely to place a considerable strain~~excise duties and/or sales, consumption or value-added taxes in many jurisdictions. We record tax expense based on our ~~financial~~estimates of future payments, which include reserves for estimates of probable settlements of domestic and ~~management systems, processes and controls, as well as on our personnel. In addition, we~~foreign tax audits. At any one time, many tax years are ~~required~~subject to ~~document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 so that our management~~audit by various taxing jurisdictions. There can ~~certify~~be no assurance as to the ~~effectiveness~~outcome of these audits which may have an adverse effect to our ~~internal controls and~~business. In addition, our independent registered public accounting firm can render an opinion on the effectiveness of our internal control over financial reporting on an annual basis. This process requires us to document our internal controls over financial reporting and to potentially make significant changes thereto, if applicable. As a result, we have incurred and expect to continue to incur substantial expenses to test our financial controls and systems, and we have been and in the futureeffective tax rate may be ~~required to improve our financial~~materially impacted by changes in tax rates and ~~managerial controls, reporting systems~~duties, the mix and ~~procedures, to incur substantial expenses to make such improvements and to hire additional personnel. If our management is ever unable to certify the effectiveness~~level of ~~our internal controls~~earnings or ~~if our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal control over financial reporting,~~losses by taxing jurisdictions, or if material weaknesses in our internal controls are ever identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could have a material adverse effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in our stock price and adversely affect our ability to raise capital.

~~Changes to accounting rules or regulations could significantly affect our financial results.~~

~~Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. New accounting rules or regulations and~~by changes to existing accounting rules or ~~regulations~~regulations. Changes to foreign or domestic tax laws could have ~~occurred and may occur in the future. Future changes to accounting rules or regulations, such as changes to lease accounting guidance or~~ a ~~requirement to convert to international~~material impact on our financial ~~reporting standards, could negatively affect our~~condition, results of operations ~~and financial condition through increased cost of compliance.~~or cash flows.

We may fail to meet analyst expectations, which could cause the price of our stock to decline.

Our common stock is traded publicly and various securities analysts follow our financial results and issue reports on us. These reports include information about our historical financial results as well as the analysts' estimates of our future performance. The analysts' estimates are based upon their own independent opinions and can be different from our estimates or expectations. If our operating results are below the estimates or expectations of public market analysts and investors, our stock price could decline. In December 2007, a securities class action litigation and associated derivative lawsuits were brought against us and such actions are frequently brought against other companies following a decline in the market price of their securities. These lawsuits were dismissed with prejudice in March 2009. If our stock price is volatile, we may become involved in this type of litigation in the future. Any litigation could result in substantial costs and a diversion of management's attention and resources that are needed to successfully run our business.

The reduction of total outstanding shares through the execution of the share repurchase program of common stock may increase the risk that a group of shareholders could form a group to become a controlling shareholder.

We do not have a controlling shareholder, nor are we aware of any shareholders that have formed a “group” (defined as when two or more persons agree to act together for the purposes of acquiring, holding, voting or otherwise disposing of the equity securities of an issuer). The reduction of total outstanding shares through the execution of the share repurchase program of common stock may increase the risk that a group of shareholders could form a group to become a controlling shareholder.

A controlling shareholder would have significant influence over, and may have the ability to control, matters requiring approval by ~~the Company’s~~our shareholders, including the election of directors and approval of mergers, consolidations, sales of assets, recapitalizations and amendments to ~~the Company’s~~our articles of incorporation. 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.

We have our excess cash primarily invested in state and local municipal securities and variable-rate demand notes. These investments have historically been considered very safe investments with minimal default rates. At October 29, 2016, we had $31.2 million of investments in state and local government securities and variable-rate demand notes. These securities are not guaranteed by the U.S. government and are subject to additional credit risk based upon each local municipality’s tax revenues and financial stability. As a result, we may experience a reduction in value or loss of liquidity of our investments, which may have a negative adverse effect on our results of operations, liquidity and financial condition.

A decline in the market price of our stock and/or our performance may trigger an impairment of the goodwill and other indefinite-lived intangible assets recorded on the condensed consolidated balance sheets.

Goodwill and other indefinite-lived intangible assets are required to be tested for impairment at least annually or more frequently if management believes indicators of impairment exist. Any reduction in the carrying value of our goodwill or other indefinite-lived intangible assets as a result of our impairment analysis could result in a non-cash impairment charge, which could have a significant impact on our results of operations.

~~Reduced operating results and cash flows may cause us to incur impairment charges.~~

We review the carrying value of our fixed assets for impairment whenever events or changes in circumstances indicate that the carrying value of such asset may not be recoverable. The review could result in a non-cash impairment charge related to underperforming stores, which could impact our results of operations.

Our market risk profile at ~~October~~July 29, ~~2016~~2017 has not significantly changed since January ~~30, 2016.~~28, 2017. Our market risk profile at January ~~30, 2016~~28, 2017 is disclosed in our Annual Report on Form 10-K.

Evaluation of Disclosure Controls and Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)). Based on this evaluation, our CEO and CFO concluded that, as of ~~October~~July 29, ~~2016,~~2017, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)) during the quarter ended ~~October~~July 29, ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We are involved from time to time in litigation incidental to our business. We are unable to predict the outcome of litigated cases. A court determination in any of litigation actions against us could result in significant liability and could have a material adverse effect on our business, results of operations or financial condition.

See Note 3 to the Notes to Condensed Consolidated Financial Statements found in Part I Item 1 of this Form 10-Q (listed under “Litigation” under Commitments and Contingencies).

Please refer to the Risk Factors set forth in Item 2 of Part I of this Form 10-Q as well as the risk factors previously disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended January ~~30, 2016.~~28, 2017. There have been no material changes in the risk factors set forth in our Annual Report on Form 10-K for the year ended January ~~30, 2016.~~28, 2017.

~~The following table presents information with respect to purchase~~There were no issuer purchases of our common stock ~~of the Company made~~ during the thirteen weeks ended ~~October~~July 29, ~~2016 (in thousands, except average price paid per share):~~2017.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Washington		91-1040022
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


Large accelerated filer	☒☐	Accelerated filer	☐☒

Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

Part I.	Financial Information

	Item 1.	Condensed Consolidated Financial Statements

		~~Condensed Consolidated Balance Sheets at~~ ~~October~~July 29, ~~20162017 (unaudited) and~~ ~~January ~~30, 2016~~28, 2017~~	3

		~~Unaudited Condensed Consolidated Statements of ~~Income~~Loss for the~~ ~~three and ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 and~~ ~~~~October 31, 2015~~July 30, 2016~~	4

		~~Unaudited~~ ~~Condensed Consolidated Statements of Comprehensive Income (Loss) for the~~ ~~three and ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 and~~ ~~~~October 31, 2015~~July 30, 2016~~	5

		~~Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the~~ ~~nine~~ six months ended ~~October~~July 29, ~~2016~~ ~~2017 and~~ ~~~~October 31, 2015~~July 30, 2016~~	6

		~~Unaudited Condensed Consolidated Statements of Cash Flows for the~~ ~~nine~~six months ended ~~October~~July 29, ~~20162017 and~~ ~~~~October 31, 2015~~July 30, 2016~~	7

		~~Notes to Condensed Consolidated Financial Statements~~	8

	Item 2.	~~Management’s~~ ~~Discussion and Analysis of Financial Condition and Results of Operations~~	1615

	Item 3.	~~Quantitative and Qualitative Disclosures About Market~~ ~~Risk~~	3028

	Item 4.	~~Controls and Procedures~~	3028

Part II.	~~Other~~ ~~Information~~

	Item 1.	~~Legal Proceedings~~	3129

	Item 1A.	~~Risk Factors~~	3129

	Item 2.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	3129

	Item 3.	~~Defaults~~ ~~Upon Senior Securities~~	3129

	Item 4.	~~Mine Safety Disclosures~~	3129

	Item 5.	~~Other Information~~	3129

	Item 6.	~~Exhibits~~	3230

~~Signature~~			3331

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	October 29, 2016		October 31, 2015		October 29, 2016		October 31, 2015		July 29, 2017		July 30, 2016		July 29, 2017		July 30, 2016
Minimum rent expense	$	18,803	$	17,518	$	55,213	$	51,462	$	19,316	$	18,409	$	38,294	$	36,410
Contingent rent expense		674		531		1,547		1,270		619		459		1,216		873
Total rent expense (1)	$	19,477	$	18,049	$	56,760	$	52,732	$	19,935	$	18,868	$	39,510	$	37,283

Fiscal 2016	$	17,668
Fiscal 2017		66,715	$	36,120
Fiscal 2018		61,871		68,983
Fiscal 2019		55,081		62,096
Fiscal 2020		51,249		57,997
Fiscal 2021				52,629
Thereafter		163,711		146,343
Total (1)	$	416,295	$	424,168

Number of shares repurchased		1,195
Average price per share of repurchased shares (with commission)	$	17.19
Total cost of shares repurchased	$	20,540

	Restricted Stock Awards/Units			Grant Date Weighted- Average Fair Value		Intrinsic Value		Restricted Stock Awards/Units			Grant Date Weighted- Average Fair Value		Intrinsic Value
Outstanding at January 30, 2016		286		$	30.32
Outstanding at January 28, 2017									442		$	23.05
Granted		265		$	18.74				288		$	17.19
Vested		(126	)	$	29.64				(178	)	$	22.70
Forfeited		(14	)	$	26.04				(20	)	$	19.80
Outstanding at October 29, 2016		411		$	23.20	$	8,878
Outstanding at July 29, 2017									532		$	20.12	$	6,593

	Stock Options			Grant Date Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)		Intrinsic Value
Outstanding at January 30, 2016		143		$	27.86
Granted		82		$	19.70
Exercised		(4	)	$	8.64
Forfeited		(21	)	$	32.50
Outstanding at October 29, 2016		200		$	24.47		6.8	$	338
Exercisable at October 29, 2016		85		$	25.92		4.8	$	182

	Total		Fiscal 2016		Fiscal 2017 and Fiscal 2018		Fiscal 2019 and Fiscal 2020		Thereafter		Total		Fiscal 2017		Fiscal 2018 and Fiscal 2019		Fiscal 2020 and Fiscal 2021		Thereafter
Operating lease obligations (1)	$	416,295	$	17,668	$	128,586	$	106,330	$	163,711	$	424,168	$	36,120	$	131,079	$	110,626	$	146,343
Purchase obligations (2)		153,030		153,030		—		—		—		190,657		190,657		—		—		—
Total	$	569,325	$	170,698	$	128,586	$	106,330	$	163,711	$	614,825	$	226,777	$	131,079	$	110,626	$	146,343

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Dollar Value of Shares that May Yet Be Repurchased Under the Plans or Programs (1)
July 31, 2016 - August 27, 2016		91	$	16.68		91	$	34,608
August 28, 2016 - October 1, 2016		45		16.72		45		33,855
October 2, 2016 - October 29, 2016 (2)		—		22.53		—		33,855
Total		136				136

Exhibit No.		Description of Exhibits

31.1		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		~~CertificationsCertifications of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350~~

101		The following materials from Zumiez Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended ~~October~~July 29, ~~2016,~~2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at ~~October~~July 29, ~~2016~~2017 (unaudited) and January ~~30, 2016;~~28, 2017; (ii) Unaudited Condensed Consolidated Statements of ~~Income~~Loss for the three and ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 and ~~October 31, 2015;~~April 30, 2016; (iii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 and ~~October 31, 2015;~~July 30, 2016; (iv) Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 and ~~October 31, 2015;~~July 30, 2016; (v) Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~October~~July 29, ~~2016~~2017 and ~~October 31, 2015;~~July 30, 2016; and (vi) Notes to Condensed Consolidated Financial Statements.

	ZUMIEZ INC.

Dated: ~~December 6, 2016~~September 7, 2017	By:	/s/ Christopher C. Work
		Christopher C. Work
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)