As filed with the United States Securities and Exchange Commission on November 8, 2005

Registration No. 333-129101

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2
to

Form S-1

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

Zumiez Inc.

(Exact name of registrant as specified in its charter)

6300 Merrill Creek Parkway, Suite B
Everett, WA 98203
(425) 551-1500

(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)

Richard M. Brooks
President and Chief Executive Officer
Zumiez Inc.
6300 Merrill Creek Parkway, Suite B
Everett, WA 98203

(Name, address, including zip code and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: o

CALCULATION OF REGISTRATION FEE

(1)               Includes shares to be sold upon exercise, if any, of the underwriters’ over-allotment option. See “Underwriting.”

(2)                  Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of Regulation C under the Securities Act of 1933, as amended, based on the average of the high and low prices of the Common Stock as reported by the Nasdaq National Market on November 4, 2005.

(3)                  Of this amount, $8,200.83 was previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

SUBJECT TO COMPLETION, DATED NOVEMBER 8, 2005

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

2,375,000 Shares

Zumiez Inc.

Common Stock

The selling shareholders identified in this prospectus are offering 2,375,000 shares of our common stock. We will not receive any proceeds from the sale of the shares offered by the selling shareholders.

Our common stock is traded on the Nasdaq National Market under the symbol “ZUMZ.” On November 7, 2005, the last reported sale price of our common stock on the Nasdaq National Market was $36.67 per share.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 7.

Delivery of the shares of our common stock will be made on or about             , 2005.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The selling shareholders identified in this prospectus have granted the underwriters an option to purchase a maximum of 356,250 additional shares of our common stock to cover over-allotment of shares, if any, exercisable at any time until 30 days after the date of this prospectus.

William Blair & Company

The date of this prospectus is                       , 2005.

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus. We and the underwriters have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We and the underwriters are not making an offer to sell or seeking offers to buy these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing herein is accurate as of the date appearing on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.

i

PROSPECTUS SUMMARY

This summary highlights selected information contained in greater detail elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common stock. You should carefully read the following summary together with the more detailed information regarding us and our common stock being sold in this offering, including “Risk Factors” and the financial statements and the related notes, appearing elsewhere in this prospectus before making an investment decision.

Zumiez Inc.

We are a leading specialty retailer of action sports related apparel, footwear, equipment and accessories operating under the Zumiez brand name. Our stores cater to young men and women between the ages of 12 and 24 who seek popular brands representing a lifestyle centered on activities that include skateboarding, surfing, snowboarding, bicycle motocross (or “BMX”) and motocross. We support the action sports lifestyle and promote our brand through a multi-faceted marketing approach that is designed to integrate our brand image with our customers’ activities and interests. As of July 30, 2005, we operated 150 stores primarily located in shopping malls, giving us a presence in 18 states.

Our stores bring the look and feel of an independent specialty shop to the mall through a differentiated merchandising strategy, high-energy sales personnel and a distinctive store environment. We offer a diverse and dynamic collection of brands that currently includes Billabong, Burton, DC Shoe, DVS Shoes, Element, Etnies, Hurley, Quiksilver, Roxy and Volcom, among many others. We believe that our strategic mix of both apparel and hardgoods, including skateboards, snowboards, bindings, components and other equipment, allows us to strengthen the potential of the brands we sell and helps to affirm our credibility with our customers. In addition, we supplement our stores with a select offering of private label apparel and products as a value proposition that we believe complements our overall merchandise selection. We seek to staff our stores with store associates who are knowledgeable users of our products, which we believe provides our customers with enhanced customer service and supplements our ability to identify and react quickly to emerging trends and fashions. Most of our stores, which average approximately 2,700 square feet, feature couches and action sports oriented video game stations that are intended to encourage our customers to shop for longer periods of time and to interact with each other and our store associates.

Over our 26-year history, we have developed a corporate culture based on a passion for the action sports lifestyle. Our management philosophy emphasizes an integrated combination of results measurement, training and incentive programs, all designed to drive sales productivity at the individual store associate level. We have:

·     increased our store count from 53 as of the end of fiscal 1999 to 150 as of the end of the second quarter of fiscal 2005;

·     improved net sales per store from approximately $882,000 in fiscal 1999 to approximately $1.2 million in fiscal 2004, representing a compound annual growth rate of 6.3%;

·     maintained net sales per square foot in excess of $440 for our last five fiscal years ending with fiscal 2004;

·     increased net sales from approximately $44.5 million in fiscal 1999 to approximately $153.6 million in fiscal 2004, representing a compound annual growth rate of 28.1%;

·     increased operating profit from $3.1 million in fiscal 1999 to $12.0 million in fiscal 2004, representing a compound annual growth rate of 31.1%; and

·     been profitable in every fiscal year of our 26-year history.

In fiscal 2002, certain affiliates (the “Brentwood Affiliates”) of Brentwood Private Equity III, LLC, a private equity firm, acquired an indirect minority interest in us through Zumiez Holdings LLC, or “Zumiez Holdings.” Since the investment by the Brentwood Affiliates, we have positioned ourselves for accelerated growth by enhancing our infrastructure and deepening our management team. We believe that these initiatives will improve our ability to continue to expand our business. On May 11, 2005, we completed our

1

initial public offering in which we sold 1,875,000 shares of our common stock and certain selling shareholders sold 1,718,750 shares of our common stock. We received net proceeds from the offering of approximately $29.7 million, after payment of underwriting discounts and commissions and offering expenses. We did not receive any proceeds from the sale of the shares of our common stock by the selling shareholders in our initial public offering.

Competitive Strengths

We believe that the following competitive strengths differentiate us from our competitors and are critical to our continuing success:

·     attractive lifestyle retailing concept targeting the large action sports segment;

·     differentiated merchandising strategy in which we offer an extensive selection of relevant brands and styles encompassing apparel, equipment and accessories;

·     deep-rooted corporate culture that we believe allows us to successfully attract and retain passionate and knowledgeable employees;

·     distinctive store experience that is designed to enhance our image as an authentic action sports retailer;

·     disciplined operating philosophy and comprehensive training programs driven by our experienced management team; and

·     high-impact, integrated marketing approach designed to reach our target customer audience through interactive events, promotions, live entertainment and contests.

However, as further described below in “Risk Factors,” our business operates in a highly competitive market and some of our competitors have longer operating histories, greater brand recognition and significantly greater financial and other resources than we do. As a result, these competitors may be able to undertake more extensive sales and marketing campaigns than our own; adopt more aggressive pricing policies than our own; and make more attractive offers to potential employees and customers than we can.

Growth Strategy

We intend to expand our presence as a leading action sports lifestyle retailer by:

·     opening new store locations;

·     continuing to generate sales growth through improved store level productivity;

·     enhancing our operating efficiency; and

·     enhancing our brand awareness through continued marketing and promotion.

Recent Developments

On August 31, 2005, we issued a press release announcing our sales results for August 2005. Total net sales for the four-week period ended August 27, 2005 increased 25.1% to $24.7 million, compared to $19.7 million for the four-week period ended August 28, 2004. Our comparable store sales for the four-week period ended August 27, 2005 increased 9.4%, versus a comparable store sales decrease of 3.3% for the four-week period ended August 28, 2004.

On October 5, 2005, we issued a press release announcing our sales results for September 2005. Total net sales for the five-week period ended October 1, 2005 increased 26.8% to $19.5 million, compared to $15.4 million for the five-week period ended October 2, 2004. Our comparable store sales for the five-week period ended October 1, 2005 increased 10.1%, versus a comparable store sales increase of 27.3% for the five-week period ended October 2, 2004.

On November 1, 2005, we issued a press release announcing our sales results for October 2005 and the thirteen-week period ended October 29, 2005.  Total net sales for the four-week period ended October 29, 2005

2

increased 29.5% to $13.2 million, compared to $10.2 million for the four-week period ended October 30, 2004.  Our comparable store sales for the four-week period ended October 29, 2005 increased 10.0%, versus a comparable store sales increase of 11.9% for the four-week period ended October 30, 2004. For the thirteen-week period ended October 29, 2005, our total net sales increased 26.7% to $57.4 million, compared to $45.3 million for the thirteen-week period ended October 30, 2004. Our comparable store sales for the thirteen-week period ended October 29, 2005 increased 9.8%, versus a comparable store sales increase of 9.0% for the thirteen-week period ended October 30, 2004.

See note (2) under “—Summary Financial Data—Other Financial Data” below for information as to how we compute changes in comparable store sales.

We opened four new stores during the four-week period ended August 27, 2005, four new stores during the five-week period ended October 1, 2005 and six new stores during the four-week period ended October 29, 2005. As of October 29, 2005 we had a total of 164 stores.

Corporate Information

We were founded in 1978 as a Washington corporation. In 2002, we reincorporated in Delaware and, on April 29, 2005, we reincorporated back to Washington. Our principal executive offices are located at 6300 Merrill Creek Parkway, Suite B, Everett, WA 98203. Our telephone number is (425) 551-1500 and our principal website address is www.zumiez.com. The information contained on our website does not constitute part of, nor is it incorporated into, this prospectus.

Through and including December 31, 2002, our fiscal year ended on December 31 and was the same as the calendar year. After December 31, 2002, we changed our fiscal year to end on the Saturday closest to January 31. As a result of this change in our fiscal year, our financial statements included elsewhere in this prospectus include our statement of operations for the one month period ended February 1, 2003, which was the one month transition period following the end of fiscal 2002 and prior to the beginning of fiscal 2003. Information in this prospectus regarding the compound annual growth rates of our net sales, net sales per store and operating profit, as well as the annual percentage changes in our comparable store net sales and other data regarding changes in our results of operations, for periods encompassing fiscal 2002 and fiscal 2003 do not take into account the one month transition period. In this prospectus, we refer to our fiscal year ended January 31, 2004 as “fiscal 2003” and to our fiscal year ended January 29, 2005 as “fiscal 2004,” and we refer to the twenty-six week periods ended July 31, 2004 and July 30, 2005 as the “six month” periods ended on those dates.

The Offering

The number of shares of common stock outstanding immediately prior to and after this offering is based on the number of shares outstanding on July 30, 2005 and excludes the following shares:

·     1,578,327 shares issuable upon exercise of outstanding options at July 30, 2005, with a weighted average exercise price of $3.87 per share;

and

·     an aggregate of 3,425,000 additional shares that were available for future awards under our 2005 Equity Incentive Plan (the “2005 Incentive Plan”) and our 2005 Employee Stock Purchase Plan (the “Stock Purchase Plan”) at July 30, 2005, plus scheduled annual increases and other potential increases in the number of shares available for issuance under the 2005 Incentive Plan.

During the period from July 31, 2005 through October 1, 2005, we issued a total of 153,997 shares of our common stock upon the exercise of outstanding stock options mentioned in the first bullet point above.

Unless otherwise expressly stated or the context otherwise requires, the information in this prospectus:

·     assumes no exercise of the underwriters’ over-allotment option to purchase up to 356,250 additional shares of common stock from the selling shareholders;

·     assumes no exercise of outstanding options; and

·     is based upon the number of our shares and options outstanding on July 30, 2005.

4

Summary Financial Data

The following tables provide summary historical financial data for the periods indicated. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus.

Through and including December 31, 2002, our fiscal year ended on December 31 and was the same as the calendar year. Subsequent to December 31, 2002, we changed our fiscal year to end on the Saturday closest to January 31 and, as a result, the following tables include financial data as of and for the one month ended February 1, 2003, which was the one month transition period following the end of the fiscal year ended December 31, 2002 and prior to the beginning of the fiscal year ended January 31, 2004. Each fiscal year ending subsequent to December 31, 2002 consists of four 13-week quarters, with an extra week added to the fourth quarter every five or six years. Our fiscal years ended December 31, 2000, 2001 and 2002, January 31, 2004 and January 29, 2005 each consisted of 52 weeks. In this prospectus, we refer to the fiscal year ended January 31, 2004 as “fiscal 2003” and to the fiscal year ended January 29, 2005 as “fiscal 2004,” and we refer to the twenty-six week periods ended July 31, 2004 and July 30, 2005 as the “six month” periods ended on those dates.

The summary statement of operations data for the fiscal year ended December 31, 2002, the one month ended February 1, 2003, the fiscal year ended January 31, 2004 and the fiscal year ended January 29, 2005 and the summary balance sheet data as of January 31, 2004 and January 29, 2005 are derived from our audited financial statements, which are included elsewhere in this prospectus. The summary statement of operations data for the fiscal years ended December 31, 2000 and 2001 and the summary balance sheet data as of December 31, 2000, 2001 and 2002 and February 1, 2003 are derived from our audited financial statements not included in this prospectus. The summary statement of operations data for the six month periods ended July 31, 2004 and July 30, 2005 and the summary balance sheet data as of July 30, 2005 are derived from our unaudited financial statements included elsewhere in this prospectus. Our unaudited financial statements as of and for the six month periods ended July 31, 2004 and July 30, 2005 have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly our financial position and results of operations as of and for those periods.  Our financial position and results of operations as of and for the six months ended July 30, 2005 are not necessarily indicative of our financial position or results of operations to be expected as of or for the fiscal year ending January 28, 2006 and there can be no assurance that any trend reflected in the following summary financial data for such six month period will continue in the future.

(1)       For fiscal 2000 and 2001 and for the portion of fiscal 2002 ended November 3, 2002, we were treated as a Subchapter S corporation for federal income tax purposes and, as a result, we were exempt from paying federal and state income taxes for those periods. As a result, our results of operations for fiscal 2000 and 2001 do not reflect any provision for income taxes and our provision for income taxes for fiscal 2002 reflects a provision for only the last two months of fiscal 2002. Accordingly, our provision for income taxes and our total and per share net income for fiscal 2000, 2001 and 2002 are not comparable to our provision for income taxes and our total and per share net income for the subsequent periods reflected in this table. See note 1 to our financial statements included elsewhere in this prospectus.

5

(1)       Gross margin percentage represents gross margin divided by net sales.

(2)       Comparable store sales percentage changes are calculated by comparing comparable store sales for the applicable fiscal year or six month period to comparable store sales for the prior fiscal year or the same six month period in the prior fiscal year, as the case may be, or, in the case of the one month ended February 1, 2003, by comparison to comparable store sales for the one month ended February 2, 2002. Comparable store sales are based on net sales, and stores are considered comparable beginning on the first anniversary of their first day of operation. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—General” for more information about how we compute comparable store sales.

(3)       Comparable store sales, net sales per store and net sales per square foot include our in-store sales and our Internet sales. Our Internet sales represented less than 1.0% of our total net sales in each of the periods presented.

(4)       Net sales per store represents net sales for the period divided by the average number of stores open during the period. For purposes of this calculation, the average number of stores open during the period is equal to the sum of the number of stores open as of the end of each month during the period divided by the number of months in the period.

(5)       Total square footage at end of period includes retail selling, storage and back office space.

(6)       Average square footage per store at end of period is calculated on the basis of the total square footage at end of period, including retail selling, storage and back office space, of all stores open at the end of the period.

(7)       Net sales per square foot represents net sales for the period divided by the average square footage of stores open during the period. For purposes of this calculation, the average square footage of stores open during the period is equal to the sum of the total square footage of the stores open as of the end of each month during the period divided by the number of months in the period.

6

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the financial statements and other information contained in this prospectus, before making a decision to buy our common stock. If any of the following risks actually occurs, our business, financial condition and results of operations could suffer. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment in our common stock.

Risks Related to Our Business

Our growth strategy depends on our ability to open and operate a significant number of new stores each year, which could strain our resources and cause the performance of our existing stores to suffer.

Our growth largely depends on our ability to open and operate new stores successfully. However, our ability to open new stores is subject to a variety of risks and uncertainties, and we may be unable to open new stores as planned, and any failure to successfully open and operate new stores would have a material adverse effect on our results of operations and on the market price of our common stock. We opened 27 stores in fiscal 2004 and 15 stores in fiscal 2003. We plan to open approximately 35 stores in our fiscal year ending in January 2006, which we refer to as “fiscal 2005” (including 11 stores that we opened during the six months ended July 30, 2005), an increase of 25.0% over our store base as of the end of fiscal 2004. We intend to continue to open a significant number of new stores in future years while remodeling a portion of our existing store base annually. However, there can be no assurance that we will open the planned number of new stores in fiscal 2005 or thereafter. In addition, our proposed expansion will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of our individual stores and our overall business. To the extent our new store openings are in markets where we already have stores, we may experience reduced net sales in existing stores in those markets. In addition, successful execution of our growth strategy may require that we obtain additional financing, and we cannot assure you that we will be able to obtain that financing on acceptable terms or at all.

If we fail to effectively execute our expansion strategy, we may not be able to successfully open new store locations in a timely manner, if at all, which could have an adverse affect on our net sales and results of operations.

Our ability to open and operate new stores successfully depends on many factors, including, among others, our ability to:

·         identify suitable store locations, the availability of which is outside of our control;

·         negotiate acceptable lease terms, including desired tenant improvement allowances;

·         source sufficient levels of inventory at acceptable costs to meet the needs of new stores;

·         hire, train and retain store personnel;

·         successfully integrate new stores into our existing operations; and

·         identify and satisfy the merchandise preferences of new geographic areas.

In addition, many of our planned new stores are to be opened in regions of the United States in which we currently have few, or no, stores. The expansion into these markets may present competitive, merchandising and distribution challenges that are different from those currently encountered in our existing markets. Any of these challenges could adversely affect our business and results of operations.

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

Customer tastes and fashion trends in the action sports lifestyle 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

7

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, 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.

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

In order to generate customer traffic we depend heavily on locating our stores in prominent locations within successful shopping malls. Sales at these stores are derived, in part, from the volume of traffic in those malls. Our stores benefit from the ability of a mall’s other tenants to generate consumer traffic in the vicinity of our stores and the continuing popularity of malls as shopping destinations. Our sales volume and mall traffic generally may be adversely affected by, among other things, economic downturns in a particular area, competition from Internet retailers, non-mall retailers and other malls, increases in gasoline prices and the closing or decline in popularity of other stores in the malls in which we are located. A reduction in mall traffic as a result of these or any other factors could have a material adverse effect on our business, results of operations and financial condition.

Our sales and inventory levels fluctuate on a seasonal basis, leaving our operating results particularly susceptible to changes in back-to-school and holiday shopping patterns.

Our sales 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. Our sales in the first and second fiscal quarters are typically lower than in our third and fourth fiscal quarters due, in part, to the traditional retail slowdown immediately following the winter holiday season. Any significant decrease in sales during the back-to-school and winter holiday seasons would have a material adverse effect on our financial condition and results of operations. 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 parts 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 volatile and may decline.

Our quarterly results of operations have fluctuated significantly in the past and can be expected to continue to fluctuate significantly in the future. As discussed above, our sales and operating results are typically lower in the first and second quarters of our fiscal year due, in part, to the traditional retail slowdown immediately following the winter holiday season. 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;

·         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.

8

Our business is susceptible to weather conditions that are out of our control, and 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 could render a portion of our inventory incompatible with those unseasonable conditions. These prolonged unseasonable weather conditions, particularly in the western United States where we have a concentration of stores, could have a material adverse effect on our business and 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, hardgoods and accessories industry is highly competitive. We compete with other retailers for vendors, teenage and young adult customers, suitable store locations, qualified store associates and management personnel. In the softgoods markets, which includes apparel, accessories and footwear, we currently compete with other teenage-focused retailers such as Abercrombie & Fitch Co., Aeropostale, Inc., American Eagle Outfitters, Inc., Anchor Blue Clothing Company, Charlotte Russe Inc., Claire’s Stores, Inc., Forever 21, Inc., Hollister Co., Hot Topic, Inc., Old Navy, Inc., Pacific Sunwear of California, Inc., The Buckle, Inc., The Wet Seal, Inc. and Urban Outfitters, Inc. In addition, in the softgoods market we compete with independent specialty shops, department stores, and direct marketers that sell similar lines of merchandise and target customers through catalogs and e-commerce. In the hardgoods markets, which includes skateboards, snowboards, bindings, components and other equipment, we compete directly or indirectly with the following categories of companies: other specialty retailers that compete with us across a significant portion of our merchandising categories, such as local snowboard and skate shops; large-format sporting goods stores and chains, such as Big 5 Sporting Goods Corporation, Dick’s Sporting Goods, Inc., Sport Chalet, Inc. and The Sports Authority Inc., which operates stores under the brand names Sports Authority, Gart Sports, Oshman’s and Sportmart; and Internet retailers.

Some of our competitors are larger than we are and have substantially greater financial, marketing and other resources than we do. 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.

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

Our business is dependent on continued good relations with our vendors. In particular, we believe that we generally are able to obtain attractive pricing and other terms from vendors because we are perceived as a desirable customer, and a deterioration in our relationship with our vendors would likely have a material adverse effect on our business. We do not have any contractual relationships with our vendors and, accordingly, there can be no assurance that our vendors will provide us with an adequate supply or quality of products or acceptable pricing. Our vendors could discontinue selling to us or raise the prices they charge at any time. 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. Also, 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 lesser quality items, raise the prices they charge us or focus on selling their products directly. Any inability to acquire suitable merchandise at acceptable prices, or the loss of one or more key vendors, would have a material adverse effect on our business, results of operations and financial condition.

If we lose key management 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 senior management, including our Co-Founder and Chairman, Thomas D. Campion, our President and Chief Executive Officer,

9

Richard M. Brooks, our Chief Financial Officer, Brenda I. Morris, and our General Merchandising Manager, Lynn K. Kilbourne. None of our employees, except Mr. Brooks, has an employment agreement with us and we do not have, and do not plan to obtain, key person life insurance covering any of our employees. If we lose the services of one or more of our key executives, we may not be able to successfully manage our business or achieve our growth objectives. As our business grows, we will need to attract and retain additional qualified management personnel in a timely manner and we may not be able to do so.

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

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees, including regional managers, district managers, store managers and store associates, who understand and appreciate our corporate culture based on a passion for the action sports lifestyle and are able to adequately represent this culture to our customers. Qualified individuals of the requisite caliber, skills and number needed to fill these positions may be in short supply in some areas, and the employee turnover rate in the retail industry is high. Competition for qualified employees could require us to pay higher wages to attract a sufficient number of suitable employees. If we are unable to hire and retain store managers and store associates capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and knowledge of our merchandise, our ability to open new stores may be impaired and the performance of our existing and new stores could be materially adversely affected. We are also dependent upon temporary personnel to adequately staff our stores and distribution center, particularly during busy periods such as the back-to-school and winter holiday seasons. There can be no assurance that we will receive adequate assistance from our temporary personnel, or that there will be sufficient sources of temporary personnel. Although none of our employees is 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 or interruptions or strikes could have a material adverse effect on our business or results of operations.

Our operations, including our sole distribution center, are concentrated in the western United States, which makes us susceptible to adverse conditions in this region.

Our home office and sole distribution center are located in a single facility in Washington, and a substantial number of our stores are located in Washington and the western half of the United States. As a result, our business may be more susceptible to regional factors than the operations of more geographically diversified competitors. These factors include, among others, economic and weather conditions, demographic and population changes and fashion tastes. In addition, we rely on a single distribution center in Everett, Washington to receive, store and distribute merchandise to all of our stores and to fulfill our Internet sales. As a result, a natural disaster or other catastrophic event, such as an earthquake affecting western Washington, in particular, or the West Coast, in general, could significantly disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.

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

We do not own any of our retail stores or our combined home office and distribution center, but instead we lease all of these facilities under operating leases. Payments under these operating leases account for a significant portion of our operating expenses. For example, total rental expense, including additional rental payments (or “percentage rent”) based on sales of some of the stores, common area maintenance charges and real estate taxes, under operating leases was $13.9 million and $17.1 million for fiscal year 2003 and fiscal year 2004, respectively, and $7.6 million and $9.6 million for the six months ended July 31, 2004 and July 30, 2005, respectively, and, as of July 30, 2005, we were a party to operating leases requiring future minimum lease payments aggregating approximately $49.0 million through fiscal year 2009 and approximately $34.1 million thereafter. In addition, substantially all of our store leases provide for additional rental payments based on sales of the respective stores, as well as common area maintenance charges, and require that we pay real estate

10

taxes, none of which is included in the amount of future minimum lease payments. We expect that any new stores we open will also be leased by us under operating leases, which will further increase our operating lease expenses.

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

·         increasing our vulnerability to general adverse economic and industry conditions;

·         limiting our ability to obtain additional financing;

·         requiring that a substantial portion of our available cash be applied to pay our rental obligations, thus reducing cash available for other purposes;

·         limiting our flexibility in planning for or reacting to changes in our business or in the industry in which we compete; and

·         placing us at a disadvantage with respect to some of our competitors.

We depend on cash flow from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from the remaining net proceeds we received from our initial public offering in May 2005, borrowings under bank loans or from other sources, we may not be able to service our operating lease expenses, grow our business, respond to competitive challenges or to fund our other liquidity and capital needs, which would have a material adverse effect on us.

The terms of our revolving credit facility impose operating and financial restrictions on us that may impair our ability to respond to changing business and economic conditions. This impairment could have a significant adverse impact on our business.

We have a $20 million revolving credit facility with Bank of America, N.A., which we use for inventory financing and other general corporate purposes, that contains a number of significant restrictions and covenants that generally limit our ability to, among other things, (1) incur additional indebtedness or certain lease obligations outside the ordinary course of business; (2) enter into sale/leaseback transactions; (3) make certain changes in our management; and (4) undergo a change in ownership. In addition, our obligations under the revolving credit facility are secured by almost all of our personal property, including, among other things, our inventory, equipment and fixtures. Our revolving credit facility also contains financial covenants that require us to meet certain specified financial ratios, including a debt to earnings ratio, an earnings to interest expense ratio and an inventory to debt ratio. Our ability to comply with these ratios may be affected by events beyond our control.

A breach of any of these restrictive covenants or our inability to comply with the required financial ratios could result in a default under the revolving credit facility. If a default occurs, the lender may elect to declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable. If we are unable to repay outstanding borrowings when due, whether at their maturity or if declared due and payable by the lender following a default, the lender has the right to proceed against the collateral granted to it to secure the indebtedness. As a result, any breach of these covenants or failure to comply with these ratios could have a material adverse effect on us. In that regard, in fiscal 2002 we breached certain financial covenants in a prior credit facility which required that we obtain waivers from the lender. These breaches did not have a material adverse impact on our financial condition or results of operations. There can be no assurance that we will not breach the covenants or fail to comply with the ratios in our revolving credit facility or any other debt agreements we may enter into in the future and, if a breach occurs, there can be no assurance that we will be able to obtain necessary waivers or amendments from the lenders.

The restrictions contained in our revolving credit facility 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.

11

Our business could suffer as a result of United Parcel Service being unable to distribute our merchandise.

We rely upon United Parcel Service for our product shipments, including shipments to, from and between our stores. Accordingly, we are subject to risks, including employee strikes and inclement weather, which may affect United Parcel Service’s ability to meet our shipping needs. Among other things, any circumstances that require us to use other delivery services for all or a portion of our shipments could result in increased costs and delayed deliveries and could harm our business materially. In addition, although we have a contract with United Parcel Service that expires in June 2008, United Parcel Service has the right to terminate the contract upon 30 days written notice. Although the contract with United Parcel Service provides certain discounts from the shipment rates in effect at the time of shipment, the contract does not limit United Parcel Services’ ability to raise the shipment rates at any time. Accordingly, we are subject to the risk that United Parcel Service may increase the rates they charge, that United Parcel Service may terminate their contract with us, that United Parcel Service may decrease the rate discounts provided to us when an existing contract is renewed or that we may be unable to agree on the terms of a new contract with United Parcel Service, any of which could materially adversely affect our operating results.

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 United States, 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 sold in our stores 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 United States.

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 accounted for 12.8% of our net sales in fiscal 2004. 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. Because our private label merchandise generally carries higher gross margins than other merchandise, our failure to anticipate, identify and react in a timely manner to fashion trends with our private label merchandise, particularly if the percentage of net sales derived from private label merchandise increases, may have a material adverse effect on our comparable store sales, financial condition and results of operations.

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

Most of our merchandise is produced by manufacturers in Asia and Central America. Some of these facilities are also 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 affect the importation of merchandise generally and 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. Although the prices charged by vendors for the merchandise we purchase are all denominated in United States dollars, a decline in the relative value of the United States dollar to foreign currencies could lead to increased merchandise costs, which could negatively affect our competitive position and our results of operation.

12

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.

Over the past several years, we have made improvements to our existing hardware and software systems, as well as implemented new systems. If these or any other information systems 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. 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 which could harm our financial results. In addition, as discussed below, we will be required to improve our financial and managerial controls, reporting systems and procedures to comply with Section 404 of the Sarbanes-Oxley Act of 2002.

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 brand, our store concept, our private label brands or our goodwill and cause a decline in our net sales. At this time, we have not secured protection for our trademarks in any jurisdiction outside of the United States, and thus we cannot prevent other persons from using our trademarks outside of the United States, which also could materially adversely affect our business. We are also subject to the risk that we may infringe on the intellectual property rights of third parties. Any infringement or other intellectual property claim made against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays or require us to pay royalties or license fees. As a result, any such claim could have a material adverse effect on our operating results.

The effects of war or acts of terrorism could adversely affect our business.

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

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

We may from time to time acquire other retail stores, individually or in groups, or businesses. We may experience difficulties in assimilating any stores or businesses we may acquire, and any such acquisitions may also result in the diversion of our capital and our management’s attention from other business issues and opportunities. We may not be able to successfully integrate any stores or businesses that we may acquire, including their facilities, personnel, financial systems, distribution, operations and general operating procedures. If we fail to successfully integrate acquisitions, we could experience increased costs and other operating inefficiencies, which could have an adverse effect on our results of operations.

Our executive officers and directors and the Brentwood Affiliates have significant influence over, and acting collectively have the ability to control, our management and affairs.

Our executive officers and directors and the Brentwood Affiliates will, in the aggregate, beneficially own approximately 50.1% of our outstanding common stock immediately following the completion of this offering, or approximately 47.5% of our outstanding common stock if the underwriters’ over-allotment option is exercised in full. Specifically, the Brentwood Affiliates will beneficially own approximately 7.5% of our outstanding common stock immediately following this offering, and Thomas D. Campion, our Chairman of the Board, and Richard M. Brooks, our President and Chief Executive Officer, will beneficially own

13

approximately 25.4% and 16.8%, of our outstanding common stock, respectively, immediately following this offering. If the underwriters’ over-allotment option is exercised in full, then the Brentwood Affiliates will beneficially own approximately 6.0% of our outstanding common stock, and Mr. Campion and Mr. Brooks will beneficially own approximately 25.4% and 15.7% of our outstanding common stock, respectively, immediately following this offering. For purposes of calculating the foregoing percentages, we have assumed that shares held by the Campion Foundation, one of the selling shareholders, are beneficially owned by Mr. Campion.

As a result, the Brentwood Affiliates and Messrs. Campion and Brooks individually have significant influence over, and acting together 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. These shareholders may take actions with which you do not agree, including actions that delay, defer or prevent a change of control of our company and that could cause the price that investors are willing to pay for our common stock to decline.

Our Internet operations subject us to numerous risks that could have an adverse effect on our results of operations.

Although Internet sales constitute only a small portion of our overall sales, our Internet operations subject us to certain risks that could have an adverse effect on our operational results, including:

·         diversion of traffic and sales from our stores;

·         liability for online content; and

·         risks related to the computer systems that operate our website and related support systems, including computer viruses and electronic break-ins and similar disruptions.

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

The outcome of litigation could have a material adverse effect on our business.

We are involved, from time to time, in litigation incidental to our business. Management believes, after considering a number of factors and the nature of the legal proceedings to which we are subject, that the outcome of current litigation will not have a material adverse effect upon our results of operations or financial condition. However, management’s assessment of our current litigation could change in light of the discovery of facts not presently known to us or determinations by judges, juries or other finders of fact that are not in accord with management’s evaluation of the possible liability or outcome of such litigation. As a result, there can be no assurance that the actual outcome of pending or future litigation will not have a material adverse effect on our results of operations or financial condition.

We have incurred and will continue to incur significant expenses as a result of being a public company, which will negatively impact our financial performance.

We completed our initial public offering in May 2005 and we have incurred and will continue to incur significant legal, accounting, audit, insurance and other expenses as a result of being a public company. The Sarbanes-Oxley Act of 2002, as well as related rules implemented by the SEC and The Nasdaq Stock Market, have required changes in corporate governance practices of public companies. Compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act as discussed in the following risk factor, have increased and will substantially increase our expenses, including our legal, audit and accounting costs, and have made and will continue to make some activities more time-consuming and costly. These laws, rules and regulations have made and will continue to make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors (our “Board”) or as officers. As a result of the foregoing, we expect a substantial increase in legal, accounting, audit, insurance and

14

certain other expenses in the future, which will negatively impact our financial performance and could have a material adverse effect on our results of operations and financial condition.

In addition, we currently have only two directors who qualify as independent directors under the rules of the SEC and The Nasdaq Stock Market, and those rules require that we appoint additional independent directors as needed so that, by May 6, 2006, a majority of our directors are independent and all members of our Board committees are independent. Any failure to appoint additional independent directors as required by The Nasdaq Stock Market would allow The Nasdaq Stock Market to de-list our common stock and could result in adverse publicity and other sanctions, which could have a material adverse effect on our results of operations and the market value of our common stock.

Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting and could harm our ability to manage our expenses.

Reporting obligations as a public company and our anticipated growth have placed and will continue to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel. In addition, as a public company we will be required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 so that our management can certify as to the effectiveness of our internal controls and our independent registered public accounting firm can render an opinion on management’s assessment and on the effectiveness of our internal control over financial reporting by the time our annual report for fiscal 2006 is due and thereafter, which will require us to document and make significant changes to our internal controls over financial reporting. As a result, we will be required to improve our financial and managerial controls, reporting systems and procedures, to incur substantial expenses to test our systems and to make such improvements and to hire additional personnel. If our management is unable to certify the effectiveness of our internal controls or if our independent registered public accounting firm cannot render an opinion on management’s assessment and on the effectiveness of our internal control over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could have a material adverse effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in our stock price and adversely affect our ability to raise capital.

Risks Related to this Offering

The price of our common stock is likely to be volatile and may decline.

The stock market in general, and the market for stocks of some retailers, have been highly volatile. As a result, the market price of our common stock is likely to be similarly volatile, and investors in our common stock may experience a decrease, which could be substantial, in the value of their stock, including decreases unrelated to our operating performance or prospects. The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those listed elsewhere in this “Risk Factors” section and other such as:

·         variations in our operating performance and the performance of our competitors;

·         actual or anticipated fluctuations in our quarterly or annual operating results;

·         changes in our net sales or earnings estimates or recommendations by securities analysts;

·         publication of research reports by securities analysts about us or our competitors or our industry;

·         our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;

·         additions and departures of key personnel;

·         strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

·         the passage of legislation or other regulatory developments affecting us or our industry;

15

·         speculation in the press or investment community;

·         changes in accounting principles;

·         terrorist acts, acts of war or periods of widespread civil unrest; and

·         changes in general market and economic conditions.

In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management's attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

Future sales of our common stock in the public market could cause our stock price to fall.

Sales of our common stock in the public market, or the perception that such sales might occur, could cause the market price of our common stock to decline. Immediately after completion of this offering, we will have 13,457,330 shares of common stock outstanding, including approximately 1,010,795 shares (or 804,545 shares if the underwriters’ over-allotment option is exercised in full) that will be beneficially owned by the Brentwood Affiliates, in each case based on shares outstanding as of July 30, 2005. In general, the 2,375,000 shares (or 2,731,250 shares if the underwriters’ over-allotment option is exercised in full) sold in this offering will be, and 3,579,499 of the shares of common stock that were sold in our initial public offering are, freely transferable without restriction or additional registration under the Securities Act of 1933, or the “Securities Act” unless held by our “affiliates,” as that term is defined in Rule 144 promulgated under the Securities Act.

In addition to the freely transferable shares referred to in the preceding paragraph, we will have 7,502,831 (or 7,146,581 if the underwriters’ over-allotment option is exercised in full) additional shares of our common stock outstanding immediately after completion of this offering, based on shares outstanding as of July 30, 2005. Of these shares, (a) 277,069 shares may at any time be sold in the public markets pursuant to Rule 144 (subject, in some cases, to volume limitations) or Rule 701 under the Securities Act, (b) an additional 2,466 shares will be available for sale in the public markets pursuant to Rule 144 (subject, in some cases, to volume limitations) or Rule 701 under the Securities Act on November 2, 2005 (subject to possible extension by up to an additional 34 days under limited circumstances or, as described below, possible waiver) following the expiration of the lock-up agreements entered into by some of our shareholders in connection with our initial public offering, (c) an additional 130,535 shares will be available for sale in the public markets pursuant to Rule 144 on the day after the closing date of this offering (or, if earlier, November 30, 2005) following the expiration of lock-up agreements entered into by some of our shareholders in connection with this offering, and (d) the remaining 7,092,761 shares (or 6,736,511 shares if the underwriters’ over-allotment option is exercised in full) will be available for sale in the public markets pursuant to Rule 144 (subject, in some cases, to volume limitations) or Rule 701 under the Securities Act 90 days (subject to possible extension by up to an additional 34 days under limited circumstances as described under “Underwriting” or, as described below, possible waiver ) after the date of this prospectus following the expiration of lock-up agreements entered into by our directors, some of our officers, the selling shareholders and certain other shareholders in connection with this offering. In addition, subsequent to July 30, 2005, one of our officers acquired 55,136 newly issued shares of common stock upon the exercise of stock options and pledged those shares as collateral for a loan. The lock-up agreement entered into by that officer in connection with our initial public offering was waived to permit, and the lock-up agreement entered into by such officer in connection with this offering permits, the pledge and, in the event of a default under such loan, transfer of such shares. Furthermore, immediately after completion of this offering and based on shares outstanding as of July 30, 2005, the holders of 7,211,511 shares (or 6,855,261 shares if the underwriters’ over-allotment option is exercised in full) of our outstanding common stock, including the Brentwood Affiliates, will also have the right to include those shares in any registration statement we file with the SEC, subject to exceptions, which would enable those shares to be sold in the public markets, subject in some cases to the restrictions under the lock-up agreements referred to above.

In addition, as of July 30, 2005, options to purchase 1,578,327 shares of our common stock were issued and outstanding and 3,425,000 additional shares of our common stock were available for future awards under our stock option and stock purchase plans, plus scheduled annual increases and other potential increases in the number of shares available for issuance under our 2005 Incentive Plan. We have filed a registration

16

statement under the Securities Act covering all of the shares of common stock currently reserved for issuance under these plans. This registration statement has become effective and permits the resale of shares issued upon exercise of those stock options or pursuant to those stock purchase plans in the public markets without restriction under the Securities Act.

Any or all of the shares subject to the lock-up agreements referred to above may be released for sale in the public market prior to expiration of the applicable lock-up periods at the discretion of Wachovia Capital Markets, LLC and Piper Jaffray & Co. For additional information, see “Shares Eligible for Future Sale” and “Underwriting.”

We have outstanding options that have the potential to dilute shareholder value and cause the price of our common stock to decline.

In the past, we have offered, and we expect to continue to offer, stock options or other forms of stock-based compensation to our directors, officers and employees. Stock options issued in the past have per share exercise prices below the public offering price per share in this offering. As of July 30, 2005, we had options outstanding to purchase 1,578,327 shares of our common stock at exercise prices ranging from $0.46 to $7.73 per share, and a weighted average exercise price of $3.87 per share. If some or all of these options are exercised and such shares are sold into the public market, the market price of our common stock may decline.

Washington law and our articles of incorporation and bylaws contain antitakeover provisions that could delay, discourage or prevent takeover attempts that shareholders may consider favorable or attempts to replace or remove our management that would be beneficial to our shareholders.

Certain provisions of our articles of incorporation and our bylaws and of Washington law may delay, discourage or prevent transactions that our shareholders may consider favorable, including transactions that could provide for payment of a premium over the prevailing market price of our common stock, and also may limit the price that investors are willing to pay in the future for our common stock. For example, our articles of incorporation contain provisions, such as allowing our Board to issue preferred stock with rights superior to those of our common stock without the consent of our shareholders and prohibitions on cumulative voting in the election of directors, which could make it more difficult for a third party to acquire us without the consent of our Board. In addition, our articles of incorporation provide for our Board to be divided into three classes serving staggered terms of three years each, permit removal of directors only for cause, provide that vacancies on the Board may be filled only by the affirmative vote of a majority of directors then in office, and require two-thirds shareholder approval of certain types of business transactions and to amend our bylaws. Furthermore, our bylaws require advance notice of shareholder proposals and nominations of candidates for election to our Board and eliminate the ability of shareholders to call for special shareholder meetings. In addition, Chapter 23B.19 of the Washington Business Corporation Act prohibits certain business combinations between us and certain significant shareholders unless certain conditions are met. These provisions may have the effect of delaying, deterring or preventing a third-party from acquiring us. See “Description of Capital Stock—Antitakeover Effects of Washington Law and Certain Provisions of Our Articles of Incorporation and Our Bylaws.”

17

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

This prospectus includes forward-looking statements that are based on our expectations regarding net sales, selling, general and administrative expenses, profitability, financial position, business strategy, new store openings, and plans and objectives of management. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions, as they relate to us and our business, industry, markets and consumers, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among others, those described in “Risk Factors” and elsewhere in this prospectus, and the following:

·         our ability to open and operate new stores successfully;

·         our ability to anticipate, identify and respond to fashion trends and customer preferences;

·         our dependence on mall traffic for our sales;

·         seasonal fluctuations in our business;

·         unseasonable weather conditions;

·         competition, including promotional and pricing competition; and

·         changes in the availability or cost of merchandise, labor or delivery services.

These risks are not exhaustive. Other sections of this prospectus describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We assume no obligation to update any forward-looking statements as a result of new information, future events or developments.

You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those projected or implied in the forward-looking statements.

The market and demographic data included in this prospectus concerning our business and markets, including data regarding retail sales of skateboard, snowboard and surf/bodyboard merchandise, data regarding participation in board sports and data regarding spending by teenagers in the United States is estimated and is based on data made available by market research firms, industry trade associations or other publicly available information.

18

USE OF PROCEEDS

The selling shareholders will receive all of the net proceeds from the sale of shares of our common stock offered by this prospectus. We will not receive any of the proceeds from the sale of the shares of our common stock by the selling shareholders.

PRICE RANGE OF COMMON STOCK

As of July 30, 2005, there were 13,457,330 shares of our common stock outstanding held by approximately 12 holders of record. Our common stock has traded on the Nasdaq National Market under the symbol “ZUMZ” since it began trading on May 6, 2005. Our initial public offering was priced at $18.00 per share on May 5, 2005. The following table shows the high and low last reported sales prices for our common stock on the Nasdaq National Market for the periods presented.

DIVIDEND POLICY

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We anticipate that we will retain all of our available funds for use in the operation and expansion of our business. Any future determination as to the payment of cash dividends will be at the discretion of our Board and will depend on our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that our Board considers to be relevant. In addition, financial and other covenants in any instruments and agreements that we enter into in the future may restrict our ability to pay cash dividends on our common stock.

19

CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of July 30, 2005. You should read this information together with the sections of this prospectus entitled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes appearing elsewhere in this prospectus.

(1)                 All of the indebtedness outstanding under our $20.0 million revolving credit facility is classified as short-term debt. As of July 30, 2005, we had no short-term debt, and $1,568,000 of letters of credit, outstanding under our revolving credit facility. See note 5 to our financial statements included elsewhere in this prospectus. In addition, we have substantial obligations under operating leases which are not reflected in the above table. See note 9 to our financial statements appearing elsewhere in this prospectus for information as to our obligations under operating leases.

(2)                 The outstanding share information in the table above excludes: 1,578,327 shares issuable upon exercise of outstanding options with a weighted average exercise price of $3.87 per share and an aggregate of 3,425,000 additional shares available for future awards under our 2005 Incentive Plan and our Stock Purchase Plan, plus scheduled annual increases and other potential increases in the number of shares available for issuance under our 2005 Incentive Plan. During the period from July 31, 2005 through October 1, 2005, we issued a total of 153,997 shares of our common stock upon the exercise of outstanding stock options mentioned in the previous sentence.

20

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus.

Through and including December 31, 2002, our fiscal year ended on December 31 and was the same as the calendar year. Subsequent to December 31, 2002, we changed our fiscal year to end on the Saturday closest to January 31 and, as a result, the following tables include financial data as of and for the one month ended February 1, 2003, which was the one month transition period following the end of the fiscal year ended December 31, 2002 and prior to the beginning of the fiscal year ended January 31, 2004. Each fiscal year ending subsequent to December 31, 2002 consists of four 13-week quarters, with an extra week added to the fourth quarter every five or six years. Our fiscal years ended December 31, 2000, 2001 and 2002, January 31, 2004 and January 29, 2005 each consisted of 52 weeks. In this prospectus, we refer to the fiscal year ended January 31, 2004 as “fiscal 2003” and to the fiscal year ended January 29, 2005 as “fiscal 2004,” and we refer to the twenty-six week periods ended July 31, 2004 and July 30, 2005 as the “six month” periods ended on those dates.

The selected statement of operations data for the fiscal year ended December 31, 2002, the one month ended February 1, 2003, the fiscal year ended January 31, 2004 and the fiscal year ended January 29, 2005 and the selected balance sheet data as of January 31, 2004 and January 29, 2005 are derived from our audited financial statements, which are included elsewhere in this prospectus. The selected statement of operations data for the fiscal years ended December 31, 2000 and 2001 and the selected balance sheet data as of December 31, 2000, 2001 and 2002 and February 1, 2003 are derived from our audited financial statements not included in this prospectus. The selected statement of operations data for the six month periods ended July 31, 2004 and July 30, 2005 and the selected balance sheet data as of July 30, 2005 are derived from our unaudited financial statements included elsewhere in this prospectus. Our unaudited financial statements as of and for the six month periods ended July 31, 2004 and July 30, 2005 have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus and, in the opinion of our management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly our financial position and results of operations as of and for those periods.  Our financial position and results of operations as of and for the six months ended July 30, 2005 are not necessarily indicative of our financial position or results of operations to be expected as of or for the fiscal year ending January 28, 2006 and there can be no assurance that any trend reflected in the following selected financial data for such six month period will continue in the future.

(1)                     For fiscal 2000 and 2001 and for the portion of fiscal 2002 ended November 3, 2002, we were treated as a Subchapter S corporation for federal income tax purposes and, as a result, we were exempt from paying federal and state income taxes for those periods. As a result, our results of operations for fiscal 2000 and 2001 do not reflect any provision for income taxes and our provision for income taxes for fiscal 2002 reflects a provision for only the last two months of fiscal 2002. Accordingly, our provision for income taxes and our total and per share net income for fiscal 2000, 2001 and 2002 are not comparable to our provision for income taxes and our total and per share net income for the subsequent periods reflected in this table. See note 1 to our financial statements included elsewhere in this prospectus.

21