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, or an emerging growth company. See definition of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth 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 November ~~27, 2017,~~29, 2023, there were ~~25,249,680~~19,834,032 shares outstanding of common stock.

Recent Accounting Standards—We review recent account pronouncements on a quarterly basis and have excluded discussion of those that are not applicable and those that we determined did not have, or are not expected to have, a material impact on the condensed consolidated financial statements.

2. Revenue

The ~~guidance allows~~following table disaggregates net sales by geographic region (in thousands):


	Three Months Ended				Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
United States	$	169,530	$	192,743	$	455,071	$	547,437
Canada		12,056		13,578		30,172		35,121
Europe		29,536		26,006		92,535		80,217
Australia		5,217		5,264		15,886		15,495
Net sales	$	216,339	$	237,591	$	593,664	$	678,270

Net sales for the ~~employer to withhold up~~three months ended October 28, 2023 included a $1.6 million increase due to the ~~maximum statutory tax~~change in foreign exchange rates, which consisted of a $2.1 million increase in ~~the applicable jurisdictions without triggering liability accounting. The guidance also allows for~~Europe partially offset by 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 amendment related to accounting for excess tax benefits$0.3 million decrease in Canada and ~~deficiencies was adopted prospectively, resulting~~a $0.2 million decrease in ~~recognition of excess tax deficiencies against income tax benefit rather than additional paid-in capital of $0.5 million~~Australia. Net sales for the nine months ended October 28, ~~2017.~~2023 included a $0.4 million increase due to the change in foreign exchange rates, which consisted of a $2.5 million increase in Europe, partially offset by a $1.2 million decrease in Canada and a $0.9 million decrease in Australia.

~~In February 2016, the FASB issued a comprehensive standard~~Our contract liabilities include deferred revenue related to ~~lease accounting~~our customer loyalty program and gift cards. The current liability for gift cards was $3.1 million at October 28, 2023 and $4.9 million at January 28, 2023, respectively. Deferred revenue related to ~~increase transparency~~our STASH loyalty program was $1.0 million at October 28, 2023 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$1.2 million 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.January 28, 2023.

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 consolidated financial statements.9

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 will adopt using a modified retrospective approach. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

2.3. Cash, Cash Equivalents and Marketable Securities

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


	October 28, 2017									October 28, 2023
	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	$	9,764	$	—	$	—		$	9,764	$	23,997	$	—	$	—		$	23,997
Money market funds		896		—		—			896		10,241		—		—			10,241
Corporate debt securities											14,732		—		(2	)		14,730
Total cash and cash equivalents		10,660		—		—			10,660		48,970		—		(2	)		48,968
Marketable securities:
U.S. treasury and government agency securities											18,317		—		(3,416	)		14,901
Corporate debt securities											61,504		—		(1,628	)		59,876
State and local government securities		58,893		21		(35	)		58,879		12,293		—		(213	)		12,080
Variable-rate demand notes		16,230		—		—			16,230
Total marketable securities	$	75,123	$	21	$	(35	)	$	75,109	$	92,114	$	—	$	(5,257	)	$	86,857


	January 28, 2023
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	30,587	$	—	$	—		$	30,587
Money market funds		22,121		—		—			22,121
Corporate debt securities		28,802		—		(7	)		28,795
Total cash and cash equivalents		81,510		—		(7	)		81,503
Marketable securities:
U.S. treasury and government agency securities		20,973		—		(2,891	)		18,082
Corporate debt securities		60,832		—		(2,848	)		57,984
State and local government securities		16,490		—		(570	)		15,920
Total marketable securities	$	98,295	$	—	$	(6,309	)	$	91,986

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

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

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


	October 28, 2023
	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Cash and cash equivalents:
Corporate debt securities	$	7,544	$	(2	)	$	—	$	—		$	7,544	$	(2	)
Total cash and cash equivalents		7,544		(2	)		—		—			7,544		(2	)
Marketable securities:
U.S. treasury and government agency securities	$	—	$	—		$	14,901	$	(3,416	)	$	14,901	$	(3,416	)
Corporate debt securities		1,596		(4	)		43,302		(1,624	)		44,898		(1,628	)
State and local government securities		—		—			12,080		(213	)		12,080		(213	)
Total marketable securities	$	1,596	$	(4	)	$	70,283	$	(5,253	)	$	71,879	$	(5,257	)


	January 28, 2023
	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Cash and cash equivalents:
Corporate debt securities	$	27,099	$	(7	)	$	—	$	—		$	27,099	$	(7	)
Total cash and cash equivalents		27,099		(7	)		-		-			27,099		(7	)
Marketable securities:
U.S. treasury and government agency securities		3,682		(229	)		14,399		(2,662	)		18,081		(2,891	)
Corporate debt securities		12,044		(604	)		45,940		(2,244	)		57,984		(2,848	)
State and local government securities		2,434		(50	)		13,487		(520	)		15,921		(570	)
Total marketable securities	$	18,160	$	(883	)	$	73,826	$	(5,426	)	$	91,986	$	(6,309	)

~~We did not record a realized loss for other-than-temporary impairments during the three and nine months ended~~At October 28, ~~2017 or October 29, 2016.~~

~~3. Commitments~~2023, we had operating leases for our retail stores, certain distribution and ~~Contingencies~~

~~Leases—~~Wefulfillment facilities, vehicles and equipment. Our remaining lease ~~our stores~~terms vary from one month to twelve years, with varying renewal and ~~certain corporate and other operating facilities under operating leases. Total rent~~termination options.

The following table presents components of lease expense ~~is as follows~~ (in thousands):


	Three Months Ended				Nine Months Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Operating lease expense	$	19,404	$	18,591	$	57,034	$	55,349
Variable lease expense		1,341		1,905		5,121		5,680
Total lease expense (1)	$	20,745	$	20,496	$	62,155	$	61,029

~~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~~expense includes short-term lease expense and sublease income which is immaterial to the ~~event that co-tenants cease to operate for specific periods or if certain sales levels are~~Company. Total lease expense does 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,include right-of-use asset impairment charges, common area maintenance charges and other ~~executory costs. Future minimum~~non-lease components.

Supplemental cash flow information related to leases is as follows (in thousands):


	Nine Months Ended
	October 28, 2023			October 29, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(52,656	)	$	(56,796	)
Right-of-use assets obtained in exchange for new operating lease liabilities		45,823			49,331

Weighted-average remaining lease ~~payments at~~term and discount rate were as follows:


	October 28, 2023			October 29, 2022
Weighted-average remaining lease term		4.9			5.0
Weighted-average discount rate		3.2	%		2.5	%

At October 28, ~~2017~~2023, the maturities of our operating leases liabilities are as follows (in thousands):


Fiscal 2023	$	21,732
Fiscal 2024		71,970
Fiscal 2025		54,058
Fiscal 2026		35,520
Fiscal 2027		27,509
Thereafter		53,202
Total minimum lease payments		263,991
Less: interest		(18,674	)
Present value of lease obligations		245,317
Less: current portion		(69,084	)
Long-term lease obligations (1)	$	176,233

Fiscal 2017

$
18,335

Fiscal 2018

69,811

Fiscal 2019

63,005

Fiscal 2020

58,728

Fiscal 2021

53,256

Thereafter

152,681

Total (1)

$
415,816

(1)

Amounts in the table do not include contingent rent, common area maintenance charges and other non-lease components.

~~Purchase Commitments—~~At October 28, ~~2017,~~2023, we have excluded from the table above $3.3 million of operating leases that were contractually executed, but had not yet commenced. These operating leases are expected to commence by the end of fiscal 2024.

5. Commitments and Contingencies

Purchase Commitments—At October 28, 2023, we had outstanding purchase orders to acquire merchandise from vendors of ~~$172.7~~$132.4 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.

On October 14, 2022, former employee Seana Neihart filed a representative action under California’s Private Attorneys General Act, California Labor Code section 2698 et seq (“PAGA”), against us. An answer to the complaint was filed on December 8, 2022. A first amended complaint was filed on February 8, 2023 adding Jessica King as a plaintiff. The lawsuit alleges a series of wage and hour violations under California’s Labor Code. An answer was filed on March 14, 2023. Zumiez has moved to compel individual arbitration of Plaintiffs’ PAGA claims. A hearing is scheduled for November 29, 2023. We continue to investigate the claims and we intend to vigorously defend ourselves.

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 28, ~~2017~~2023 and January 28, ~~2017~~2023 was ~~$2.7~~$2.1 million and ~~$2.3 million.~~$2.8 million, respectively.

5.7. Fair Value Measurements

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:

•

Level 1— Quoted prices in active markets for identical assets or liabilities;

•

Level 2— Quoted prices for similar assets or liabilities in active markets or inputs that are observable; and

•

Level 3— Inputs that are unobservable.

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


	October 28, 2017						October 28, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	896	$	—	$	—	$	10,241	$	—	$	—
Corporate debt securities								—		14,730		—
Marketable securities:
U.S. treasury and government agency securities								—		14,901		—
Corporate debt securities								—		59,876		—
State and local government securities		—		58,879		—		—		12,080		—
Variable-rate demand notes		—		16,230		—
Other long-term assets:
Money market funds		1,746		—		—		5,242		—		—
Equity investments		—		—		141
Total	$	2,642	$	75,109	$	141	$	15,483	$	101,587	$	—

January 28, 2017

Level 1

Level 2

Level 3

Cash equivalents:

Money market funds

$
657

$
—

$
—

State and local government securities

400

—

—

Marketable securities:

State and local government securities

—

19,129

—

Variable-rate demand notes

—

39,450

—

Other long-term assets:

Money market funds

1,557

—

—

Equity investments

—

—

116

Total

$
2,614

$
58,579

$
116


	January 28, 2023
	Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	22,121	$	—	$	—
Corporate debt securities		—		28,795		—
Marketable securities:
U.S. treasury and government agency securities		—		18,082		—
Corporate debt securities		—		57,984		—
State and local government securities		—		15,920		—
Other long-term assets:
Money market funds		6,950		—		—
Total	$	29,071	$	120,781	$	—

The Level 2 marketable securities include U.S treasury and government agency securities, corporate debt securities, 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 and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as fixed assets, operating lease right-of-use-assets, goodwill, other intangible assets and other assets. These assets are measured at fair value ~~on a nonrecurring basis for~~if determined to be impaired. During the three ~~and nine~~ months ended October 28, ~~2017~~2023 we recognized $0.4 million in impairment losses related to fixed assets and ~~October 29, 2016.~~

~~6. Stockholders’ Equity~~

~~Share Repurchase—In December 2015, our Board of Directors authorized us~~$0.1 million in impairment losses related to ~~repurchase up to $70.0 million of our common stock. This program was completed at January 28, 2017. There was no share repurchase activity during~~operating lease right-of-use assets. During the nine months ended October 28, ~~2017~~2023, we recognized $0.7 million in impairment losses related to fixed assets and ~~1.2~~$0.2 million ~~shares repurchased during~~in impairment losses related to operating lease right-of-use assets. During the three months ended October 29, 2022, we recognized $0.1 million in impairment losses related to operating lease right-of-use assets and $0.2 million in impairment losses related to fixed assets. During the nine months ended October 29, ~~2016.~~2022, we recognized $0.2 million in impairment losses related to operating lease right-of-use assets and $0.2 million in impairment losses related to fixed assets.

8. Stockholders’ Equity

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


	Foreign currency translation adjustments (3)			Net unrealized losses on available-for- sale debt securities			Accumulated other comprehensive loss
Three months ended October 28, 2023:
Balance at July 29, 2023	$	(14,330	)	$	(4,227	)	$	(18,557	)
Other comprehensive income (loss), net (1)		(6,116	)		326			(5,790	)
Balance at October 28, 2023	$	(20,446	)	$	(3,901	)	$	(24,347	)
Three months ended October 29, 2022:
Balance at July 30, 2022	$	(22,651	)	$	(4,011	)	$	(26,662	)
Other comprehensive loss, net (1)		(4,476	)		(2,147	)		(6,623	)
Balance at October 29, 2022	$	(27,127	)	$	(6,158	)	$	(33,285	)


	Foreign currency translation adjustments (3)			Net unrealized losses on available-for- sale investments			Accumulated other comprehensive loss
Nine months ended October 28, 2023:
Balance at January 28, 2023	$	(15,101	)	$	(4,692	)	$	(19,793	)
Other comprehensive income (loss), net (2)		(5,345	)		791			(4,554	)
Balance at October 28, 2023	$	(20,446	)	$	(3,901	)	$	(24,347	)
Nine months ended October 29, 2022:
Balance at January 29, 2022	$	(12,505	)	$	(958	)	$	(13,463	)
Other comprehensive loss, net (2)		(14,622	)		(5,200	)		(19,822	)
Balance at October 29, 2022	$	(27,127	)	$	(6,158	)	$	(33,285	)

Foreign currency
translation
adjustments

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

Accumulated other
comprehensive
loss

Three months ended October 28, 2017:

Balance at July 29, 2017

$
(6,690
)

$
14

$
(6,676
)
Other comprehensive loss, net (1)

(1,368
)

(23
)

(1,391
)
Balance at October 28, 2017

$
(8,058
)

$
(9
)

$
(8,067
)
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
)
(1)

Other comprehensive income before reclassifications was $0.2 million, net of taxes for net unrealized losses on available-for-sale investments for the three months ended October 28, 2023.Other comprehensive loss before reclassifications was $2.2 million, net of taxes for net unrealized losses on available-for-sale investments for the three months ended October 29, 2022. There were no net unrealized losses, net of taxes, reclassified from accumulated other comprehensive loss for the three months ended October 28, 2023. Net unrealized losses, net of taxes, reclassified from accumulated other comprehensive loss was $0.1 million for the three months ended October 29, 2022.

(2)

Other comprehensive income before reclassifications was $0.8 million, net of taxes for net unrealized losses on available-for-sale investments for the nine months ended October 28, 2023.Other comprehensive loss before reclassifications was $5.3 million, net of taxes for net unrealized losses on available-for-sale investments for the nine months ended October 29, 2022. There were no net unrealized losses, net of taxes, reclassified from accumulated other comprehensive loss for the nine months ended October 28, 2023. Net unrealized losses, net of taxes, reclassified from accumulated other comprehensive loss was $0.1 million for the nine months ended October 29, 2022.

(3)

Foreign currency translation adjustments are not adjusted for income taxes as they relate to permanent investments in our international subsidiaries.

Foreign currency
translation
adjustments

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

Accumulated other
comprehensive
loss

Nine months ended October 28, 2017:

Balance at January 28, 2017

$
(16,474
)

$
(14
)

$
(16,488
)
Other comprehensive income, net (1)

8,416

5

8,421

Balance at October 28, 2017

$
(8,058
)

$
(9
)

$
(8,067
)
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
)

~~(1)~~

Other comprehensive (loss) income is net of immaterial taxes for the three and nine months ended October 28, 2017 and October 29, 2016 for both net unrealized gains (losses) on available-for-sale investments. Foreign currency translation adjustments are not adjusted for income taxes as they relate to permanent investments in our international subsidiaries.

7.9. Equity Awards

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.

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


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016		October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
Cost of goods sold	$	238	$	239	$	743	$	686	$	390	$	364	$	1,164	$	1,099
Selling, general and administrative expenses		982		939		2,977		2,713		1,242		1,372		3,944		4,150
Total stock-based compensation expense	$	1,220	$	1,178	$	3,720	$	3,399	$	1,632	$	1,736	$	5,108	$	5,249

At October 28, ~~2017,~~2023, there was ~~$7.8~~$10.4 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 years.

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

	Restricted Stock Awards/Units			Grant Date Weighted- Average Fair Value		Intrinsic Value
Outstanding at January 28, 2017		442		$	23.05
								Restricted Stock Awards/Units			Grant Date Weighted- Average Fair Value		Intrinsic Value
Outstanding at January 28, 2023									397		$	33.34
Granted		289		$	17.19				333		$	20.06
Vested		(178	)	$	22.70				(191	)	$	29.45
Forfeited		(22	)	$	19.72				(30	)	$	31.78
Outstanding at October 28, 2017		531		$	20.11	$	9,524
Outstanding at October 28, 2023									509		$	26.19	$	8,728

We had ~~0.3~~0.4 million stock options outstanding at October 28, ~~2017~~2023 with a grant date weighted average exercise price of ~~$22.82~~$26.51 and ~~0.2~~0.3 million stock options outstanding at January 28, ~~2017~~2023 with a grant date weighted average exercise price of ~~$25.61.~~$29.30.

8.10. (Loss) Earnings per Share, Basic and Diluted

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

Three Months Ended

Nine Months Ended

October 28, 2017

October 29, 2016

October 28, 2017

October 29, 2016

Net income

$

11,922

$
10,695

$

6,865

$
7,720

Weighted average common shares for basic earnings per share:

24,712

24,485

24,660

24,798

Dilutive effect of stock options and restricted stock

92

137

185

184

Weighted average common shares for diluted earnings per share:

24,804

24,622

24,845

24,982

Basic earnings per share

$

0.48

$
0.44

$

0.28

$
0.31

Diluted earnings per share

$

0.48

$
0.43

$

0.28

$
0.31


	Three Months Ended					Nine Months Ended
	October 28, 2023			October 29, 2022		October 28, 2023			October 29, 2022
Net (loss) earnings	$	(2,231	)	$	6,932	$	(29,122	)	$	9,602
Weighted average common shares for basic (loss) earnings per share:		19,327			19,101		19,278			19,239
Dilutive effect of stock options and restricted stock		—			147		—			251
Weighted average common shares for diluted (loss) earnings per share:		19,327			19,248		19,278			19,490
Basic (loss) earnings per share	$	(0.12	)	$	0.36	$	(1.51	)	$	0.50
Diluted (loss) earnings per share	$	(0.12	)	$	0.36	$	(1.51	)	$	0.49

~~Total~~

There were 0.4 million and 0.1 million anti-dilutive common shares related to stock-based awards ~~not included in the calculation of diluted earnings per share were 0.3 million~~ for the three months ended October 28, 2023 and October 29, 2022, respectively. There were 0.5 million and 0.1 million anti-dilutive common shares related to stock-based awards for the nine months ended October 28, ~~2017~~2023 and ~~0.2~~October 29, 2022, respectively.

11. Subsequent Event

On November 30, 2023, we entered into a third amendment to our credit facility with Wells Fargo Bank, N.A. The amendment, among other things, (a) amended the credit limit to $25 million through December 1, 2024; (b) amended the EBITDA covenant to not less than $9 million for the ~~three~~quarter ending October 28, 2023, not less than $2.5 million for the quarter ending February 3, 2024, not less than $9 million in the quarter ending May 4, 2024, not less than $12 million for the quarter ending August 3, 2024, and ~~nine months ended October 29, 2016.~~not less than $20 million for the quarter ending November 2, 2024; (c) amended the borrowing rate to SOFR plus 1.75% per annum; (d) introduced an unused commitment fee of 0.50% per annum; and (e) disallows distribution of dividends or execution of stock buybacks through December 1, 2024 without bank approval.

14Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Item 2:~~

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

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 ~~13, 2017~~20, 2023 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~~2023 is the 53-week period ending February 3, ~~2018.~~2024. Fiscal ~~2016 is~~2022 was the 52-week period ending January 28, ~~2017.~~2023. The first nine months of fiscal ~~2017~~2023 was the 39-week period ended October 28, ~~2017.~~2023. The first nine months of fiscal ~~2016~~2022 was the 39-week period ended October 29, ~~2016.~~2022.

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

General

Net sales constitute gross sales (net of actual and estimated returns and deductions for promotions) and shipping revenue. Net sales include our store sales and our ecommerce sales. We record the sale of gift cards as a current liability and recognize revenue when a customer redeems a gift card. 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.~~rate in proportion to the pattern of rights exercised by the customer.

We report “comparable sales” based on net sales beginning on the first anniversary of the first day of operation of a new store or ecommerce business. 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~~increase or decrease less than 25% in square footage of an existing comparable store, including remodels and relocations within the same mall, or temporary closures less than seven days 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, ~~future~~ incentive ~~payments,~~compensation, stock-based compensation 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.

Key Performance Indicators

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

~~Comparable~~Net sales. ~~As previously described in detail under the caption “General,”~~ Net sales constitute gross sales, net of sales returns and deductions for promotions, and shipping revenue. Net sales includes comparable sales ~~provide a measure of~~and new store sales ~~growth~~ for ~~stores~~all our store and ecommerce ~~businesses open at least one year over the comparable prior year period.~~

businesses. We consider ~~comparable~~net sales to be an important indicator of our current performance. ~~Comparable~~Net sales results are important to achieve leveraging of our costs, including store payroll and store occupancy. ~~Comparable~~Net 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~~net sales, gross profit, our ability to control selling, general and administrative expenses and our level of capital expenditures affecting depreciation expense.

Diluted earnings per share. Diluted earnings per share is based on the weighted average number of common shares and common share equivalents outstanding during the period. We view diluted earnings per share as a key indicator of our success in increasing shareholder value.

Trends and Uncertainties Affecting Our Results and Comparability

We have been, and we expect to continue to be affected by a number of factors that may cause actual results to differ from our historical results or current expectations. These factors include the impact of foreign currency rates; changes in laws, including U.S. tax law changes; fluctuations in variable costs, and changes in general economic conditions in the markets in which we operate. Additionally, we have experienced increased costs during 2022 and 2023. Our ability to raise our selling prices depends on market conditions and there may be periods during which we are unable to fully recover increases in our costs or experience an adverse impact on demand due to pricing actions. We believe higher consumer price inflation has resulted in reduced consumer confidence and consumer spending which negatively impacted our sales during fiscal 2022 and the first six months of fiscal 2023.

Results of Operations

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

Three Months Ended

Nine Months Ended

October 28, 2017

October 29, 2016

October 28, 2017

October 29, 2016

Net sales

100.0

%

100.0

%

100.0

%

100.0

%
Cost of goods sold

66.1

65.6

68.5

68.4

Gross profit

33.9

34.4

31.5

31.6

Selling, general and administrative expenses

26.2

26.8

29.6

29.5

Operating profit

7.7

7.6

1.9

2.1

Interest and other (expense) income, net

(0.1
)

—

(0.1
)

—

Earnings before income taxes

7.6

7.6

1.8

2.1

Provision for income taxes

2.7

2.8

0.7

0.8

Net income

4.9

%

4.8

%

1.1

%

1.3

%


	Three Months Ended								Nine Months Ended
	October 28, 2023				October 29, 2022				October 28, 2023				October 29, 2022
Net sales		100.0		%		100.0		%		100.0		%		100.0	%
Cost of goods sold		66.2				65.5				69.0				66.2
Gross profit		33.8				34.5				31.0				33.8
Selling, general and administrative expenses		33.9				30.1				36.3				31.5
Operating (loss) profit		(0.1	)			4.4				(5.3	)			2.3
Interest and other income, net		—				(0.4	)			0.2				0.1
(Loss) earnings before income taxes		(0.1	)			4.0				(5.1	)			2.4
(Benefit from) provision for income taxes		0.9				1.1				(0.2	)			1.0
Net (loss) income		(1.0	)	%		2.9		%		(4.9	)	%		1.4	%

Three Months (13 weeks) Ended October 28, ~~2017~~2023 Compared With Three Months (13 weeks) Ended October 29, ~~2016~~2022

Net Sales

Net sales were ~~$245.8~~$216.3 million for the three months ended October 28, ~~2017~~2023 compared to ~~$221.4~~$237.6 million for the three months ended October 29, ~~2016, an increase~~2022, a decrease of ~~$24.4~~$21.3 million or ~~11.0%~~8.9%. The ~~increase primarily reflected the increase~~decrease in ~~comparable~~ sales ~~of $17.3 million and the net addition of 6 stores (made up of 11 new stores in~~was driven by our North America ~~4 new stores in Europe~~ and ~~2 new stores in~~ Australia ~~partially~~business offset by ~~11 store closures~~more favorable results in Europe. During the quarter, the business continued to see softer sales primarily driven by continued inflationary pressures on the consumer, a shift in spending to travel and experiences, and softer demands for full price key styles and trends in the North ~~America) subsequent to October 29, 2016.~~America business. By region, North America sales ~~increased $20.2~~decreased $24.7 million or ~~10.0%~~12.0% and other international sales (which consists of Europe and Australia sales) increased ~~$4.2~~$3.5 million or ~~22.5%~~11.1% for the three months ended October 28, ~~2017~~2023 compared to the three months ended October 29, ~~2016.~~

~~Comparable~~2022.Excluding the impact of changes in foreign exchange rates, North America sales decreased $24.5 million or 11.9% and other international sales increased ~~7.9% primarily driven by~~$1.6 million or 5.2% for the three months ended October 28, 2023 compared to the three months ended October 29, 2022.

Net sales included a decrease in transactions and an increase ~~in comparable transactions partially offset by a decrease~~ in dollars per transaction. Dollars per transaction ~~decreased~~increased due to ~~a decrease in units per transaction partially offset by~~ an increase in average unit ~~retail. Comparable~~retail and units per transaction. By category, net sales were primarily driven by an increase in ~~men’s~~men's clothing and ~~to a lesser extent junior’s clothing. These increases were partially offset~~decrease in footwear followed by ~~decreases in comparable sales primarily in~~women's clothing, accessories, and ~~to a lesser extent hardgoods and then footwear. For information as to how we define comparable sales, see “General” above.~~hardgoods.

Gross Profit

Gross profit was ~~$83.4~~$73.2 million for the three months ended October 28, ~~2017~~2023 compared to ~~$76.2~~$82.0 million for the three months ended October 29, ~~2016, an increase~~2022, a decrease of ~~$7.2~~$8.8 million, or ~~9.4%~~10.7%. As a percent of net sales, gross profit decreased 5070 basis points for the three months ended October 28, ~~2017~~2023 to ~~33.9%.~~33.8% as we saw significant deleverage on lower sales across our fixed costs as well as rate decreases in numerous areas. The decrease was primarily driven by ~~an 80~~a 120 basis point ~~increase~~deleverage in ~~inventory shrinkage and 40~~store occupancy costs, a 50 basis point decrease in product margin (defined as net sales minus cost of goods sold excluding shrinkage, buying, occupancy, distribution and warehousing costs and freight costs for store merchandise transfers), a 20 basis point increase in web fulfillment costs and 10 basis point increase in buying and private label costs. These decreases were partially offset by ~~a 90~~70 basis point ~~increase due to the leveraging of our store occupancy costs.~~decrease in web shipping costs, 50 basis point decrease in distribution center costs, 20 basis point decrease in inventory shrinkage.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were ~~$64.6~~$73.4 million for the three months ended October 28, ~~2017~~2023 compared to ~~$59.3~~$71.5 million for the three months ended October 29, ~~2016,~~2022, an increase of ~~$5.3~~$1.8 million, or ~~8.9%~~2.5%.SG&A expenses as a percent of net sales ~~decreased 60~~increased 380 basis points for the three months ended October 28, ~~2017~~2023 to ~~26.2%~~33.9%.The ~~decrease~~increase was primarily driven by 90160 basis points ~~from the leveraging~~due to store wages tied to both deleverage on lower sales as well as rate increase that we could not offset by reduction of ~~our~~hours, 110 basis points in non-store wages, 80 basis points due to store costs ~~partially offset~~not tied to store wages primarily impacted by ~~a 40~~deleverage on lower sales, 30 basis ~~point increase related~~points in corporate costs due to ~~annual incentive compensation.~~deleverage on lower sales.

Net ~~Income~~Loss

Net ~~income~~loss for the three months ended October 28, ~~2017~~2023 was ~~$11.9~~$2.2 million, or ~~$0.48~~$0.12 loss per diluted share, compared with net income of ~~$10.7~~$6.9 million, or ~~$0.43~~$0.36 earnings per diluted share, for the three months ended October 29, ~~2016.~~ 2022.Our effective income tax rate for the three months ended October 28, ~~2017~~2023 was ~~35.9%~~a negative 806.8% provision for income taxes compared to ~~36.7%~~a 27.9% provision for income taxes for the three months ended October 29, ~~2016.~~2022. The decrease in effective income tax rate was primarily due to net losses and allocation of income and losses across the jurisdictions that we operate.

Nine Months (39 weeks) Ended October 28, ~~2017~~2023 Compared With Nine Months (39 weeks) Ended October 29, ~~2016~~2022

Net Sales

Net sales were ~~$619.2~~$593.7 million for the nine months ended October 28, ~~2017~~2023 compared to ~~$572.6~~$678.3 million for the nine months ended October 29, ~~2016, an increase~~2022, a decrease of ~~$46.5 million~~$84.6 or ~~8.1%~~12.5%. The ~~increase primarily reflected an increase~~decrease in ~~comparable~~ sales ~~of $28.7 million and the net addition of 6 stores (made up of 11 new stores in~~was driven by our North America ~~4 new stores in~~business offset by more favorable results for Europe and ~~2 new stores~~Australia. During the first half of the year the business continued to see softer sales primarily driven by continued inflationary pressures on the consumer, a shift in ~~Australia offset by 11 store closures~~spending to travel and experiences, and softer demands for full price key styles and trends in the North ~~America) subsequent to October 29, 2016.~~America business. By region, North America sales ~~increased $36.9~~decreased $97.3 million or ~~7.0%~~16.7% and other international sales (which consists of Europe and ~~Australia)~~Australia sales) increased ~~$9.6 million~~$12.7 or ~~20.2%~~13.3% for the nine months ended October 28, ~~2017~~2023 compared to the nine months ended October 29, ~~2016.~~2022.Excluding the impact of changes in foreign exchange rates, North

~~Comparable~~

America sales decreased $96.1 million or 16.5% and other international sales increased ~~5.1% primarily driven by~~$11.1 million or 11.6% for the nine months ended October 28, 2023 compared to the nine months ended October 29, 2022.

Net sales included a decrease in transactions and an increase ~~in comparable transactions slightly offset by a decrease~~ in dollars per transaction. Dollars per transaction ~~decreased~~increased due to a increase in average unit retail that was offset by a decrease in units per ~~transaction partially offset by an increase in average unit retail. Comparable~~transaction. By category, net sales were primarily driven by an ~~increase~~decrease in ~~men’s~~footwear, followed by hardgoods, women's clothing, ~~and to a lesser extent junior’s clothing. These increases were partially offset by decreases in comparable sales primarily from hardgoods and to a lesser extent~~ accessories, and ~~then footwear. For information as to how we define comparable sales, see “General” above.~~ men's clothing.

Gross Profit

Gross profit was ~~$195.2~~$184.2 million for the nine months ended October 28, ~~2017~~2023 compared to ~~$181.0~~$229.4 million for the nine months ended October 29, ~~2016, an increase~~2022, a decrease of ~~$14.2~~$45.2 million, or ~~7.9%~~19.7%. As a percent of net sales, gross profit decreased 10280 basis points for the nine months ended October 28, ~~2017~~2023 to ~~31.5%.~~31.0% as we saw significant deleverage on lower sales across our fixed costs as well as rate increases in numerous areas. The decrease was primarily driven by a 50200 basis point deleverage in store occupancy costs, a 60 basis point decrease in product margin (defined as net sales minus cost of goods sold excluding shrinkage, buying, occupancy, distribution and warehousing costs and freight costs for store merchandise transfers), and a 30 basis point increase in ~~inventory shrinkage~~buying and ~~20 basis point increase related to investment in salaries and annual incentive compensation partially offset by a 60 basis point increase due to the leveraging of our store occupancy~~private label costs.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses were ~~$183.4~~$216.2 million for the nine months ended October 28, ~~2017~~2023 compared to ~~$169.1~~$213.5 million for the nine months ended October 29, ~~2016,~~2022, an increase of ~~$14.3~~$2.7 million, or ~~8.4%~~1.3%.SG&A expenses as a percent of net sales increased ~~by 10~~490 basis points for the nine months ended October 28, ~~2017~~2023 to ~~29.6%~~36.3%.The increase was primarily driven by 40200 basis points due to store wages tied to both deleverage on lower sales as well as rate increase that we could not offset by reduction of hours, 150 basis points due to store costs not tied to store wages primarily impacted by deleverage on lower sales, 60 basis points due to a decrease in government subsidies related to ~~annual incentive compensation~~a one-time German government subsidy received in the first quarter of fiscal 2022, and ~~a 20~~110 basis ~~point increase due to investment~~points in ~~salaries and~~non-store wages. These increases ~~in minimum wage~~were partially offset by a 5030 basis point decrease in events as our important 100K events due to ~~the leveraging of our store costs.~~timing.

Net ~~Income~~Loss

Net ~~income~~loss for the nine months ended October 28, ~~2017~~2023 was ~~$6.9~~$29.1 million, or ~~$0.28~~$1.51 loss per diluted share, compared with net income of ~~$7.7~~$9.6 million, or ~~$0.31~~$0.49 earnings per diluted share, for the nine months ended October 29, ~~2016.~~ 2022.Our effective income tax rate was 4.8% and 41.2% provision for income taxes for the nine months ended October 28, ~~2017 was 39.2% compared to 36.3% for the nine months ended~~2023 and October 29, ~~2016.~~2022, respectively. The ~~increase~~decrease in effective income tax rate was primarily due to ~~$0.5 million~~net losses and the allocation of ~~excess tax deficiencies for share-based payments during~~those losses across the ~~nine months ended October 28, 2017. Refer to “Recent Accounting Standards” section in Note 1 of Notes to Condensed Consolidated Financial Statements for further discussion.~~jurisdictions that we operate.

Liquidity and Capital Resources

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. 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 ~~2017,~~2023, we expect to spend approximately ~~$24~~$20 million to ~~$26~~$21 million on capital expenditures, a majority of which will relate to leasehold improvements and fixtures for the approximately 1918 new stores we remain on track to open in fiscal ~~2017~~2023 and remodels or relocations of existing stores. There can be no assurance that the number of stores that we ~~actually~~ open in fiscal ~~2017~~2023 will not be different from the number of stores we plan to open, or that actual fiscal ~~2017~~2023 capital expenditures will not differ from our expectations.

Operating Activities

Net cash ~~provided by~~used in operating activities increased by ~~$9.9~~$13.5 million due to ~~$13.9~~$22.9 million used in operating activities for the nine months ended October 28, 2023 from $36.4 million used in operating activities for the nine months ended October 29, 2022. Net cash used in operating activities was $22.9 million for the nine months ended October 28, ~~2017 from $4.0~~2023 related to $65.6 million in unfavorable changes in our operating assets and liabilities and a $29.1 million net loss, excluding $71.8 million of noncash charges included within net loss for the period. Net cash used in operating activities was $36.4 million for the nine months ended October 29, ~~2016.~~2022 related to $122.3 million in unfavorable changes in our operating assets and liabilities and $9.6 million net income, excluding $76.3 million of noncash charges included within net income for the period. Our operating cash flows generally 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 changes to the components of working capital.

Investing Activities

Net cash used in investing activities was ~~$35.9~~$10.4 million for the nine months ended October 28, ~~2017,~~2023 related to ~~$19.0~~$28.7 million purchases of marketable securities and other investments, and $16.2 million of capital expenditures primarily for new store openings and existing store remodels or relocations, partially offset by $34.5 million in net sales of marketable securities. Net cash provided by investing activities was $60.4 million for the nine months ended October 29, 2022, related to $80 million in net sales of marketable securities, partially offset by $17.7 million of capital expenditures primarily for new store openings and existing store remodels or relocations, and ~~$16.8~~$1.9 million ~~in net~~ purchases of marketable securities. Net cash used in investing activities was $20.5 million for the nine months ended October 29, 2016, related to $16.8 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 million in net sales of marketable securities.

Financing Activities

Net cash provided by financing activities for the nine months ended October 28, ~~2017~~2023 was ~~$12.1~~$0.7 million ~~primarily~~ related to ~~$11.6 million in net proceeds from revolving credit facilities and $0.7 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.~~awards. Net cash used in financing activities for the nine months ended October 29, ~~2016~~2022 was ~~$8.8~~$87.2 million, ~~primarily~~ related to ~~$21.6~~$87.8 million ~~cash paid for~~used in the repurchase of common stock and ~~$0.1~~$0.5 million in payments for tax withholding obligations upon vesting of restricted stock, partially offset by ~~$12.0~~$1.1 million in ~~net proceeds from revolving credit facilities and $0.9 million~~ proceeds from the issuance and exercise of stock-based awards.

Sources of Liquidity

Our most significant sources of liquidity continue to be funds generated by operating activities and available cash, cash equivalents and current marketable securities. 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.

We ~~maintain an asset-based revolving~~maintained a secured credit agreement with Wells Fargo Bank, ~~National Association, as administrative agent, collateral agent, letter of credit issuer and lenders,~~N.A., which ~~provides for~~provided us with a senior secured ~~revolving~~ credit facility (“credit facility”) of up to ~~$100~~$25.0 million ~~(“ABL Facility”), subject to a borrowing base, with a letter of~~through December 1, 2024. The credit ~~sub-limit of $10 million. The ABL Facility~~facility is available for working capital and other general corporate purposes. The ~~ABL Facility~~credit facility provides for the issuance of standby letters of credit in an amount not to exceed $17.5 million outstanding at any time and with a term not to exceed 365 days. The commercial line of credit provides for the issuance of commercial letters of credit in an amount not to exceed $10.0 million and with terms not to exceed 120 days. The credit facility will mature on ~~February 5, 2021.~~

December 1, 2024. The ~~ABL Facility~~credit facility is secured by a first-priority security interest in substantially all of the personal property (but not the real property) of the borrowers and guarantors. ~~Amounts borrowed under~~

As noted in the ~~ABL Facility bear interest, at~~subsequent event note, numbered 11 in the ~~Company’s option, at either~~Notes to Condensed Consolidated Financial Statements, an ~~adjusted LIBOR~~amendment was entered into for the secured credit agreement effective as of November 30, 2023.The amendment, among other things,
(a) amended the credit limit to $25 million through December 1, 2024; (b) amended the EBITDA covenant to not less than $9 million for the quarter ending October 28, 2023, not less than $2.5 million for the quarter ending February 3, 2024, not less than $9 million in the quarter ending May 4, 2024, not less than $12 million for the quarter ending August 3, 2024, and not less than $20 million for the quarter ending November 2, 2024; (c) amended the borrowing rate to SOFR plus ~~a margin of 1.25% to~~ 1.75% per ~~annum, or~~annum; (d) introduced an ~~alternate base rate plus a margin of 0.25% to 0.75% per annum. The Company is also required to pay a~~unused commitment fee of ~~0.25%~~0.50% per ~~annum on undrawn commitments under the ABL Facility. Customary agency fees~~annum; and ~~letter~~(e) disallows distribution of ~~credit fees are also payable in respect~~dividends or execution of ~~the ABL Facility.~~stock buybacks through December 1, 2024 without bank approval.

There were no borrowings outstanding under the ~~ABL Facility~~credit facility at October 28, ~~2017 and at~~2023 or January 28, 2017. We had $0.1 million in open commercial letters of credit outstanding under these lines of credit at October 28, 2017 and no open commercial letters of credit outstanding under these lines of credit at January 28, 2017.

Additionally, we have revolving lines of credit with UniCredit Bank Austria of up to 20.5 million Euro ($23.8 million at October 28, 2017), the proceeds of which are used to fund certain international operations. The revolving lines of credit bear interest at 1.65%. The utilized facility amount, in whole or in part, is subject to termination with three months’ notice and with immediate effect to the unused facility amount. There was $11.4 million of borrowings outstanding at October 28, 2017 and no borrowings outstanding at January 28, 2017.2023. We had no open commercial letters of credit outstanding under ~~these lines~~our secured revolving credit facility at October 28, 2023 or January 28, 2023. We had $3.5 million and $0.6 million in issued, but undrawn, standby letters of credit at October 28, ~~2017~~2023 and at January 28, ~~2017.~~2023, respectively.

At October 28, 2023 , we did not have any “off-balance sheet arrangements” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operation, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

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 28, ~~2017.~~2023.

~~Contractual Obligations and Commercial Commitments~~

There were no material changes outside the ordinary course of business in our contractual obligations during the nine months ended October 28, 2017. The following table summarizes the total amount of future payments due under our contractual obligations at October 28, 2017 (in thousands):

Total

Fiscal 2017

Fiscal 2018 and
Fiscal 2019

Fiscal 2020 and
Fiscal 2021

Thereafter

Operating lease obligations (1)

$
415,816

$
18,335

$
132,816

$
111,984

$
152,681

Purchase obligations (2)

172,695

172,695

—

—

—

Total

$
588,511

$
191,030

$
132,816

$
111,984

$
152,681

1922

~~(1)~~

Amounts do not include contingent rent and real estate taxes, insurance, common area maintenance charges and other executory costs obligations. See Note 3, “Commitments and Contingencies,” in the Notes to Condensed Consolidated Financial Statements found in Item 1 of this Form 10-Q, for additional information related to our operating leases.

~~(2)~~

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.

~~Off-Balance Sheet Arrangements~~

~~At October 28, 2017, we did not have any off-balance sheet arrangements.~~

~~Impact of Inflation/Deflation~~

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.

Risk Factors

Investing in our securities involves a high degree of risk. The following risk factors, issues and uncertainties should be considered in evaluating our future prospects. In particular, keep these risk factors in mind when you read “forward-looking” statements elsewhere in this report. Forward-looking statements relate to our expectations for future events and time periods. 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.

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. Economic and consumer confidence can also be affected by a variety of factors, including housing prices, unemployment rates and inflation. Sustained levels of inflation, rising interest rates, significant U.S. dollar and foreign currency fluctuations, lower consumer confidence, depressed consumer spending, higher levels of consumer debt, geopolitical instability, economic uncertainty, slower growth or a recession, volatility in the stock market, and other disruptions impacting the retail industry could adversely impact demand for our services. When disposable income decreases or discretionary consumer spending is reduced due to a decline in consumer confidence, purchases of apparel and related products may decline. A deterioration in macroeconomic conditions or consumer confidence or uncertainty in the U.S. and global economies and political environment could have a material adverse impact on our results of operations and financial position.

In times when there is a decline in disposable income and consumer confidence, there could be a trend to consumers seeking more inexpensive or value-oriented merchandise. As a retailer that sells a substantial majority of branded merchandise, this could disproportionately impact us more than vertically integrated private label retailers or we may be forced to rely on promotional sales to compete in our market which could have a material adverse effect on our financial position.

Failure to anticipate, identify and respond to changing fashion trends, customer preferences and other fashion-related factors could have a material adverse effect on us.

C~~ustomer~~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.

We 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~~online 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.~~

The novel coronavirus (COVID-19) global pandemic could continue to have a material impact on our business.

Since being declared a pandemic by the World Health Organization in March 2020, COVID-19 has negatively impacted global economies, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. The COVID-19 global pandemic could continue to have a material impact on our business, including our results of operations, financial condition and liquidity. The duration and severity of the COVID-19 pandemic will determine its ongoing impact on our business, including our ability to execute business strategies and initiatives in their expected time frame, the effect on our suppliers and disruptions to the global supply chain, and the ability of our customers to pay for our services and products.

A resurgence in the spread of COVID-19, or its variants, could force the closure of our retail stores globally, as we saw in the first quarter of 2020. We could also experience store closures on a regional basis, like we have seen in 2020 and 2021. We may face long term store closure requirements and other operational restrictions with respect to some or all of our physical locations for prolonged periods of time due to, among other factors, evolving and increasingly stringent governmental restrictions, public health directives, quarantine policies, or social distancing measures, resulting in a materially adverse impact to our financial results.

With store closures withstanding, consumer fears about becoming ill with the virus may persist, adversely affecting traffic to our stores. Consumer spending may also be negatively impacted by general economic downturn and decreased consumer confidence resulting from the COVID-19 global pandemic. This may negatively impact sales in our stores and our ecommerce channel. The potential reduction in consumer visits to our stores, caused by COVID-19, and any decreased spending at retail stores or online caused by a lack of consumer confidence and spending following the pandemic, could result in a loss of sales and profits.

A rise in the spread of COVID-19 also has the potential to significantly impact our supply chain if manufacturers of our products, distribution centers where we manage our inventory, or operations of our logistics and other service providers are disrupted, temporarily closed or experience worker shortages.

Due to the seasonality of our business, widespread closures during peak shopping periods could disproportionally impact financial results. The inability to effectively adapt to changes in consumer behavior could result in excess inventory and adversely impact financial results. We may experience adverse effects of prolonged operating restrictions related to in-person marketing and training events.

The COVID-19 pandemic’s impact on macroeconomic conditions could alter the functioning of financial and capital markets, foreign currency exchange rates, commodity prices, and interest rates. After the COVID-19 global pandemic has settled, we may continue to experience adverse impacts to our business as a result of evolving macroeconomic factors, including general economic uncertainty, unemployment rates, high inflation, recessionary pressures and any actual economic recession that has occurred or may occur in the future.

The extent of the impact of the COVID-19 global pandemic on our business remains uncertain and difficult to predict, given the innumerable unknowns regarding the duration and severity of the pandemic.

Most of our merchandise is produced by foreign manufacturers; therefore, the availability, quality and costs of our merchandise may be negatively affected by risks associated with international trade and other international conditions.

Most of our merchandise is produced by manufacturers around the world. Some of these facilities are located in regions that may be affected by natural disasters, public health concerns, or emergencies, such as COVID-19 and other communicable diseases or viruses, political ~~uncertainty, coupled with cyclical economic trends~~instability or other conditions that could cause a disruption in ~~retailing,~~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 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 spendingbusiness 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 uncertaintyadversely affected by disruptions in the ~~U.S. and global economies and political environment could have a material adverse impact on our results of operations and financial position.~~supply chain, such as strikes, work stoppages, or port closures.

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~~.

A decrease in consumer traffic could cause our sales to be less than expected.

We depend heavily on generating customer traffic to our stores and websites. This includes locating many of our stores in prominent locations within successful shopping malls. Sales at these stores are derived, in part, from the volume of traffic in those malls. Our stores benefit from the ability of a ~~malls’~~mall’s “anchor” tenants, generally large department stores and other area attractions, to generate consumer traffic in the vicinity of our stores and the continuing popularity of malls as shopping destinations. In addition, some malls that were in prominent locations when we opened our stores may cease to be viewed as prominent. If this trend continues or if the popularity of mall shopping continues to decline generally among our customers, our sales may decline, which would impact our results of operations. Additionally, we may experience other risks associated with operating leases, such as lease termination or impairment of operating lease right-of-use assets. These risks may include circumstances that are not within our control, such as changes in fair market rent. Furthermore, we depend on generating increased traffic to our ~~websites~~ecommerce business 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~~online 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. Also, geopolitical events, including the threat of terrorism, or widespread health emergencies, such as COVID-19 and other communicable diseases, viruses, or pandemics, could cause people to avoid our stores in shopping malls and alter consumer trends.

An uncertain economic outlook or continued bankruptcies of mall-based retailers 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 grow customer engagement in our current markets and expand into new markets, which could strain our resources and cause the performance of our existing business to suffer.

Our growth largely depends on our ability to optimize our customer engagement in our current trade areas and operate successfully in new geographic markets. However, our ability to open stores in new geographic markets, ~~in the U.S. and~~including 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 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 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. In addition, successful execution of our growth strategy may require that we obtain additional financing, and we may not be able to obtain that financing on acceptable terms or at all.

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

We may, from time to time, acquire businesses, such as our acquisition of Blue Tomato~~, which operates primarily in the European market~~, and Fast ~~Times,~~ ~~which operates primarily in the Australian market~~.Times. We may experience difficulties in integrating any 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.

We plan to continue to open new stores in the Canadian, European, and Australian markets. We may continue to expand internationally ininto 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 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. Accordingly, for the reasons noted above, our plans for international expansion include risks that could have a negative impact on our results of operations.

Our sales and inventory levels fluctuate on a seasonal basis. 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:

•

the timing of new store openings and the relative proportion of our new stores to mature stores;

•

whether we are able to successfully integrate any new stores that we acquire and the presence of any unanticipated liabilities in connection therewith;

•

fashion trends and changes in consumer preferences;

•

calendar shifts of holiday or seasonal periods;

•

changes in our merchandise mix;

•

timing of promotional events;

•

general economic conditions and, in particular, the retail sales environment;

•

actions by competitors or mall anchor tenants;

•

weather conditions;

•

the level of pre-opening expenses associated with our new stores; and

•

inventory shrinkage beyond our historical average rates.

Significant fluctuations and volatility in the cost of raw materials, global labor, shipping and other 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 raw materials, global labor costs, freight costs and other shipping costs in the production and transportation of our merchandise can result in higher costs for this merchandise. The costs for 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 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 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.

~~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.

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

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 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 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 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 divergence of the labor and environmental 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 reputation, financial condition and results of operations. In that regard, most of the products we sell are manufactured overseas, primarily in Asia, Mexico and Central America, which may increase the risk that the labor and environmental 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. 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.

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 developing and maintaining good relationships with a large number of vendors to provide our customers with an extensive selection of current and relevant brands. In 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.

However, there can be no assurance that our current vendors or new vendors will provide us with an adequate supply or quality of products or acceptable pricing. Our vendors could discontinue selling to us, raise the prices they charge, sell through direct channels or allow their merchandise to be discounted by other retailers. 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 omni-channel strategy may not have the return 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 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 also investing in omni-channel initiatives. If our competitors are able to 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 and results of operations may be adversely affected. Additionally, to manage the anticipated growth of our operations and personnel, we will 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.

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

~~If our information systems~~or 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. Further, we may suffer loss of critical data and interruptions or 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, financial condition and results of operations.

~~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 hardware and software, do not work effectively, this could adversely impact the promptness and accuracy of our transaction processing, financial accounting and reporting and our ability to manage our business and properly forecast operating results and cash requirements. Additionally, we rely on third-party service providers for certain information systems functions. If 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.

If we fail to meet the requirements to adequately maintain the privacy and security of our personal data ~~is breached~~and business information, we may be subjected to adverse publicity, litigation and significant expenses.

Information systems are susceptible to an increasing threat of continually evolving cybersecurity risks. WeIf we fail to maintain or adequately maintain security systems, devices and activity monitoring to prevent unauthorized access to our network, systems and databases containing confidential, proprietary, and personally identifiable ~~information.~~information, we may be subject to additional risk of adverse publicity, litigation or significant expense. Nevertheless, if unauthorized parties gain access to our networks, systems or databases, they may be able to steal, publish, delete or modify 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, the regulatory environment surrounding information security, cybersecurity and privacy is increasingly demanding. If we are unable to comply with the new and changing security standards, we may be subject to fines, restrictions and financial exposure, which could adversely affect our retail operations.

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

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

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, mandated safety protocols, or other employee benefits costs may adversely impact our operating profit. 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 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 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 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 divergence of the labor and environmental 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 reputation, financial condition and results of operations. In that regard, most of the products we sell are manufactured internationally, primarily in Asia, Mexico and Central America, which may increase the risk that the labor and environmental practices followed by the manufacturers of these products may differ from those considered acceptable in the U.S.

Our business is dependent on developing and maintaining good relationships with a large number of vendors to provide our customers with an extensive selection of current and relevant brands. In addition to maintaining our large number of current vendor relationships, each year we are identifying, attracting and launching new vendors 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.

However, there can be no assurance that our current vendors or new vendors will provide us with an adequate supply or quality of products or acceptable pricing. Our vendors could discontinue selling to us, raise the prices they charge, sell through direct channels or allow their merchandise to be discounted by other retailers. There can be no assurance that we will be able to acquire desired merchandise in sufficient quantities on terms acceptable to us in the future. In addition, certain vendors sell their products directly to the retail market and therefore compete with us directly and other vendors may decide to do so in the future. 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.

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 business and results of operations.

Our omni-channel strategy may not have the return 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, online and in-store point of sale systems, order management system, and transportation management system. If we 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 also investing in omni-channel initiatives. If our competitors are able to 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 and results of operations may be adversely affected. Additionally, to manage the anticipated growth of our operations and personnel, we will 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.

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~~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~~ecommerce 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~~secured credit agreement impose certain restrictions on us that may impair our ability to respond to changing business and economic conditions, which could have a significant adverse impact on our business. Additionally, our business could suffer if our ability to acquire financing is reduced or eliminated.

We maintain ~~an asset-based revolving~~a secured credit agreement with Wells Fargo Bank, N.A., ~~as administrative agent, collateral agent, letter of credit issuer and lenders,~~ which provides ~~for~~us with a senior secured ~~revolving~~ credit facility (“~~ABL Facility”~~credit facility”) of up to ~~$100 million.~~$25.0 million through December 1, 2023, and up to $35.0 million after December 1, 2023 and through December 1, 2024. The ~~ABL Facility~~credit facility contains various representations, warranties and restrictive covenants that, among other things and subject to specified circumstances and exceptions, restrict our ability to incur indebtedness (including guarantees), grant liens, make investments, pay dividends or distributions with respect to capital stock, make prepayments on other indebtedness, engage in mergers, dispose of certain assets or change the nature of their business. ~~In addition, excess availability equal~~The credit facility contains certain financial maintenance covenants that generally require us to have a quick ratio of 1.25:1.0 at ~~least 10%~~the end of each fiscal quarter, and EBITDA not less than $12.0 million as of the ~~loan cap must be maintained under~~fiscal quarters ending July 29, 2023 and October 28, 2023, and not less than $20,0 million as of the ~~ABL Facility. The ABL Facility does not otherwise contain financial maintenance covenants.~~fiscal quarter ending February 3, 2024 and each fiscal quarter thereafter. EBITDA is defined as net profit before tax, depreciation and amortization expense, goodwill and other intangible impairment, leased right-of-use asset impairment, and store fixed asset impairment (up to an aggregate of $5.0 million), plus interest expense (net of capitalized interest expense). 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~~credit facility contains certain affirmative covenants, including reporting requirements such as delivery of financial statements, certificates and notices of certain events, maintaining insurance, and providing additional guarantees and collateral in certain circumstances. The credit facility includes customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross-default to other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, material judgments and change of control. 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. Several bank failures have occurred during 2023 and it is possible that other banks will face similar difficulty in the future. Although we do not maintain any direct deposit accounts, credit agreements or letters of credit with any financial institution currently in receivership, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. Additionally, U.S. debt ceiling and budget deficit concerns have increased the possibility of credit rating downgrades, or a recession in the U.S. Although U.S. lawmakers have passed legislation to raise the federal debt ceiling on multiple occasions, including in June 2023, ratings agencies have threatened to lower the long-term sovereign credit rating on the United States. The impact of the increased debt ceiling and/or downgrades to the U.S. government's sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. 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,~~In the U.S., we rely on a single distribution center located in Corona, California to receive, store and distribute the vast majority of our merchandise to our domestic stores. Internationally, we operate a combined distribution and ecommerce fulfillment center located in Graz, Austria that supports our Blue Tomato ecommerce and store operations in Europe. We operate a distribution center located in Delta, British Columbia, Canada to distribute our merchandise to our Canadian stores. We operate a distribution and ecommerce fulfillment center located in Melbourne, Australia to distribute our merchandise to our Australian stores. Additionally, we are headquartered in Lynnwood, Washington. As a result, unforeseen events, including war, terrorism, other political instability or conflicts, riots, public health issues (including widespread/pandemic illnesses such as coronavirus and other communicable diseases or viruses), a natural disaster or other catastrophic event that affects one of the regions where we operate these centers or our home office could significantly disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.

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,~~or riots, could lead to lower consumer traffic in shopping malls. In addition, local authorities or mall management could close shopping malls in response to security concerns. 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, 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. 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.

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~~provide assurance that such litigation will not disrupt our business or impact our financial results.

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.

~~Our failure~~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. Any violations of such laws or regulations could have an adverse effect on our reputation, results of operations, financial condition and cash flows. Furthermore, changes in the regulations, the imposition of additional regulations, or the enactment of any new legislation, particularly in the U.S. and Europe, could adversely affect our results of operations or financial condition.

Fluctuations in our tax obligations and effective tax rate may result in volatility in our operating results.

We are subject to income taxes in many domestic and foreign jurisdictions. In addition, our products are subject to import and excise duties and/or sales, consumption or value-added taxes in many jurisdictions. We record tax expense based on our estimates of future payments, which include reserves for estimates of probable settlements of domestic and foreign tax audits. At any one time, many tax years are subject to audit by various taxing jurisdictions. There can be no assurance as to the outcome of these audits which may have an adverse effect to our business. In addition, our effective tax rate may be materially impacted by changes in tax rates and duties, the mix and level of earnings or losses by taxing jurisdictions, or by changes to existing accounting rules or regulations. Changes to foreign or domestic tax laws could have a material impact on our financial condition, results of operations or cash flows.

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

Our common stock is traded publicly and various securities analysts follow our financial results and issue reports on us. These reports include information about our historical financial results as well as the analysts' estimates of our future performance. The analysts' estimates are based upon their own independent opinions and can be different from our estimates or expectations. If our operating results are below the estimates or expectations of public market analysts and investors, our stock price could decline.

The reduction of total outstanding shares through the execution of ~~the~~a 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 share repurchase program may be conducted from time to time under authorization made by our Board of Directors. 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~~a 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 our shareholders, including the election of directors and approval of mergers, consolidations, sales of assets, recapitalizations and amendments to 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.

~~Item 3:~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Our market risk profile at October 28, ~~2017~~2023 has not significantly changed since January 28, ~~2017.~~2023. Our market risk profile at January 28, ~~2017~~2023 is disclosed in our Annual Report on Form 10-K.

~~Item 4:~~

~~Controls and Procedures~~

Item 4: Controls and Procedures

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 28, ~~2017,~~2023, 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~~three months ended October 28, ~~2017~~2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2833

PART II - ~~OTHE~~ROTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

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 35 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).

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

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 28, ~~2017.~~2023. 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 28, ~~2017.~~2023.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

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

There were no issuer purchases of ~~our~~ common stock during the thirteen weeks ended October 28, ~~2017.~~ 2023.

~~Item 3.~~

~~Defaults Upon Senior Securities~~

~~None~~

Item 3. Defaults Upon Senior Securities

None

~~Item 4.~~

~~Mine Safety Disclosures~~

Item 4. Mine Safety Disclosures

Not applicable

~~Item 5.~~

~~Other Information~~

~~None~~

Item 5. Other Information

29None

Item 6. Exhibits


~~Item 6.~~Exhibit No.	~~Exhibits~~

~~Exhibit No.~~		Description of Exhibits

~~31.1~~10.36		~~Third Amendment to Credit Agreement dated effective as of November 30, 2023 by and among Zumiez Inc., Zumiez Services Inc. and Wells Fargo Bank, National Association.~~
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~~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~~2002.

32.1		~~Cert~~~~ifications~~Certifications 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~~1350.

~~101~~
101		The following materials from Zumiez Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended October 28, ~~2017,~~2023, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at October 28, ~~2017~~2023 (unaudited) and January 28, ~~2017;~~2023; (ii) Unaudited Condensed Consolidated Statements of ~~Income~~Operations for the three and nine months ended October 28, ~~2017~~2023 and October 29, ~~2016;~~2022; (iii) Unaudited Condensed Consolidated Statements of Comprehensive ~~Income~~Loss for the three and nine months ended October 28, ~~2017~~2023 and October 29, ~~2016;~~2022; (iv) Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended October 28, ~~2017~~2023 and October 29, ~~2016;~~2022; (v) Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 28, ~~2017~~2023 and October 29, ~~2016;~~2022; and (vi) Notes to Condensed Consolidated Financial Statements.
104		The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101

3035

~~SIGNATURE~~

SIGNATURE

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.


	ZUMIEZ INC.

Dated: December 4, ~~2017~~2023	By:	/s/ Christopher C. Work
		Christopher C. Work
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

3136


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


	October 28, 2017			January 28, 2017			October 28, 2023			January 28, 2023
	(Unaudited)						(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	10,660		$	20,247	$	48,968		$	81,503
Marketable securities	75,109			58,579				86,857			91,986
Receivables	15,761			12,538				23,022			20,613
Inventories	156,986			106,924				175,882			134,824
Prepaid expenses and other current assets	14,372			13,075				11,315			11,252
Total current assets	272,888			211,363				346,044			340,178
Fixed assets, net	130,898			129,651				92,925			93,746
Operating lease right-of-use assets								212,984			222,240
Goodwill	59,544			56,001				55,145			56,566
Intangible assets, net	15,645			14,610				13,819			14,443
Deferred tax assets, net	9,842			7,041				10,788			8,205
Other long-term assets	7,452			8,017				11,321			12,525
Total long-term assets	223,381			215,320				396,982			407,725
Total assets		$	496,269		$	426,683	$	743,026		$	747,903

Liabilities and Shareholders’ Equity
Current liabilities
Trade accounts payable		$	61,676		$	25,529	$	74,337		$	40,379
Accrued payroll and payroll taxes	15,782			14,914				18,756			16,321
Income taxes payable			5,454			1,866
Deferred rent and tenant allowances	8,468			8,344
Short-term borrowings			11,391			—
Operating lease liabilities								69,084			65,460
Other liabilities	22,065			22,944				19,602			23,649
Total current liabilities	124,836			73,597				181,779			145,809
Long-term deferred rent and tenant allowances	39,869			41,066
Long-term operating lease liabilities								176,233			188,835
Other long-term liabilities	4,981			4,969				5,550			5,931
Total long-term liabilities	44,850			46,035				181,783			194,766
Total liabilities	169,686			119,632				363,562			340,575
Commitments and contingencies (Note 3)
Commitments and contingencies (Note 5)
Shareholders’ equity
Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding	—					—		—			—
Common stock, no par value, 50,000 shares authorized; 25,252 shares issued and outstanding at October 28, 2017 and 24,945 shares issued and outstanding at January 28, 2017	145,230			140,984
Common stock, no par value, 50,000 shares authorized; 19,836 shares issued and outstanding at October 28, 2023 and 19,489 shares issued and outstanding at January 28, 2023								194,230			188,418
Accumulated other comprehensive loss	(8,067)			(16,488)				(24,347	)		(19,793	)
Retained earnings	189,420			182,555				209,581			238,703
Total shareholders’ equity	326,583			307,051				379,464			407,328
Total liabilities and shareholders’ equity		$	496,269		$	426,683	$	743,026		$	747,903


	Nine Months Ended						Nine Months Ended
	October 28, 2017			October 29, 2016			October 28, 2023			October 29, 2022
Cash flows from operating activities:
Net income	$	6,865		$	7,720
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							$	(29,122	)	$	9,602
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation, amortization and accretion		20,338			21,178			16,209			15,802
Noncash lease expense								51,607			50,074
Deferred taxes		(2,625	)		(4,983	)		(3,014	)		3,441
Stock-based compensation expense		3,720			3,399			5,108			5,249
Impairment of long-lived assets								925			372
Other		1,189			221			943			1,331
Changes in operating assets and liabilities:
Receivables		(2,449	)		(1,361	)		(1,767	)		(2,317	)
Inventories		(48,491	)		(51,047	)		(43,186	)		(52,020	)
Prepaid expenses and other current assets		(578	)		(3,183	)
Prepaid expenses and other assets								(273	)		(5,365	)
Trade accounts payable		35,693			35,873			34,270			14,570
Accrued payroll and payroll taxes		699			(631	)		2,684			(10,191	)
Income taxes payable		2,856			(708	)		252			(1,790	)
Deferred rent and tenant allowances		(1,240	)		(1,035	)
Operating lease liabilities								(52,656	)		(56,796	)
Other liabilities		(2,108	)		(1,459	)		(4,902	)		(8,374	)
Net cash provided by operating activities		13,869			3,984
Net cash used in operating activities								(22,922	)		(36,412	)
Cash flows from investing activities:
Additions to fixed assets		(19,072	)		(16,829	)		(16,210	)		(17,720	)
Acquisition, net of cash acquired		—			(5,395	)
Purchases of marketable securities and other investments		(80,198	)		(48,232	)		(28,679	)		(1,914	)
Sales and maturities of marketable securities and other investments		63,365			49,986			34,506			80,051
Net cash used in investing activities		(35,905	)		(20,470	)
Net cash (used in) provided by investing activities								(10,383	)		60,417
Cash flows from financing activities:
Proceeds from revolving credit facilities		19,412			17,849			25,682			19,844
Payments on revolving credit facilities		(7,841	)		(5,813	)		(25,682	)		(19,844	)
Repurchase of common stock		—			(21,607	)
Proceeds from issuance and exercise of stock-based awards		697			851			890			1,110
Payments for tax withholdings on equity awards		(171	)		(95	)		(185	)		(499	)
Common stock repurchased								—			(87,860	)
Net cash provided by (used in) financing activities		12,097			(8,815	)		705			(87,249	)
Effect of exchange rate changes on cash and cash equivalents		352			139
Net decrease in cash and cash equivalents		(9,587	)		(25,162	)
Cash and cash equivalents, beginning of period		20,247			43,163
Cash and cash equivalents, end of period	$	10,660		$	18,001
Effect of exchange rate changes on cash, cash equivalents, and restricted cash								(1,643	)		(4,978	)
Net decrease in cash, cash equivalents, and restricted cash								(34,243	)		(68,222	)
Cash, cash equivalents, and restricted cash, beginning of period								88,453			124,052
Cash, cash equivalents, and restricted cash, end of period							$	54,210		$	55,830
Supplemental disclosure on cash flow information:
Cash paid during the period for income taxes	$	4,434		$	10,042		$	1,686		$	5,166
Accrual for purchases of fixed assets		2,190			2,236			2,780			1,802

	Three Months Ended				Nine Months Ended
	October 28, 2017		October 29, 2016		October 28, 2017		October 29, 2016
Minimum rent expense	$	19,604	$	18,803	$	57,898	$	55,213
Contingent rent expense		799		674		2,016		1,547
Total rent expense (1)	$	20,403	$	19,477	$	59,914	$	56,760


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


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 28, ~~2017~~2023 (unaudited) and January 28, ~~2017~~~~2023	3

		~~Unaudited Condensed Consolidated Statements of ~~Income~~Operations for the three and nine months ended October 28, ~~2017~~2023 and October 29, ~~2016~~~~2022	4

		~~Unaudited Condensed Consolidated Statements of Comprehensive ~~Income~~Loss for thethree and nine months ended October 28, ~~2017~~2023 and October 29, ~~2016~~~~2022	5

		~~Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended October 28, ~~2017~~2023 and October 29, ~~2016~~~~2022	6

		~~Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 28, ~~2017~~2023 and October 29, ~~2016~~~~2022	7

		~~Notes to Condensed Consolidated Financial Statements~~	8

	Item 2.	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	1517

	Item 3.	~~Quantitative and Qualitative Disclosures About Market Risk~~	2833

	Item 4.	~~Controls and Procedures~~	2833

Part II.	~~Other Information~~

	Item 1.	~~Legal Proceedings~~	2934

	Item 1A.	~~Risk Factors~~	2934

	Item 2.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	2934

	Item 3.	~~Defaults Upon Senior Securities~~	2934

	Item 4.	~~Mine Safety Disclosures~~	2934

	Item 5.	~~Other Information~~	2934

	Item 6.	~~Exhibits~~	3035

~~Signature~~			3136

	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 income		—		—		—			6,865		6,865
Other comprehensive income, net		—		—		8,421			—		8,421
Issuance and exercise of stock-based awards		307		526		—			—		526
Stock-based compensation expense		—		3,720		—			—		3,720
Balance at October 28, 2017		25,252	$	145,230	$	(8,067	)	$	189,420	$	326,583

Fiscal 2017	$	18,335
Fiscal 2018		69,811
Fiscal 2019		63,005
Fiscal 2020		58,728
Fiscal 2021		53,256
Thereafter		152,681
Total (1)	$	415,816

	Foreign currency translation adjustments			Net unrealized gains (losses) on available-for-sale investments			Accumulated other comprehensive loss
Three months ended October 28, 2017:
Balance at July 29, 2017	$	(6,690	)	$	14		$	(6,676	)
Other comprehensive loss, net (1)		(1,368	)		(23	)		(1,391	)
Balance at October 28, 2017	$	(8,058	)	$	(9	)	$	(8,067	)
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	)

	Total		Fiscal 2017		Fiscal 2018 and Fiscal 2019		Fiscal 2020 and Fiscal 2021		Thereafter
Operating lease obligations (1)	$	415,816	$	18,335	$	132,816	$	111,984	$	152,681
Purchase obligations (2)		172,695		172,695		—		—		—
Total	$	588,511	$	191,030	$	132,816	$	111,984	$	152,681