Item 1A.
Risk Factors:
An investment in our common stock involves numerous types of risks.
You
should carefully consider
the
following
risk
factors,
in
addition
to
the
other
information
contained
in
this
report,
including
the
disclosures
under
“Forward-looking
Information”
above
in
evaluating
our
Company
and
any
potential
investment
in
our
common
stock.
If
any
of
the
following
risks
or
uncertainties
occur
or
persist,
our
business, financial condition and
operating results could
be materially and
adversely affected, the
trading
price
of
our
common
stock
could
decline
and
you
could
lose
all
or
a
part
of
your
investment
in
our
common
stock.
The
risks
and
uncertainties
described
in
this
section
are
not
the
only
ones
facing
us.
Additional risks
and uncertainties
not presently
known to
us or
that we
currently deem
immaterial
may
also materially
and adversely
affect
our business,
operating results,
financial condition
and value
of our
common stock.
Risks Relating to the COVID-19 Pandemic:
The outbreak and persistence of the COVID-19 pandemic has and may continue
to adversely affect our
business, financial condition and results of operations.
The
COVID-19
pandemic
has
adversely
impacted
the
Company's
business,
financial
condition
and
operating results through fiscal 2021 and will likely
continue to do so in fiscal 2022 and
possibly beyond.
Adverse financial impacts
associated with the
outbreak include, but
are not limited
to, (i)
lower net sales
in markets affected by actual or
potential adverse changes in conditions relating to the pandemic,
whether
due to
increases in
case counts,
state and
local orders,
reductions in
store traffic
and customer
demand,
labor shortages, or all of these factors, (ii) lower net sales caused by the delay of inventory production and
fulfillment,
(iii)
and
incremental
costs
associated
with
efforts
to
mitigate
the
effects
of
the
outbreak,
including increased freight and logistics costs and other expenses.
Though
recent
developments
in
the
U.S.
have
led
to
the
relaxation
of
many
of
the
restrictions
and
mitigation measures
that adversely
affected
the Company’s
operations, store
traffic,
sales
and results
of
operations
since
March
2020,
there
continues
to
be
significant
uncertainty
regarding
the
course
of
COVID-19 and
its continuing
effects on
commercial behavior.
These uncertainties
include the
potential
emergence of additional variants, seasonal weather
changes or other factors that may
lead to a resurgence
of the virus
and a reinstitution
of mandated restrictions, public
health advisories or decreased
willingness
of customers,
suppliers, associates
and other
constituencies on
whom our
business depends
to engage
in
commercial activities.
Other uncertainties
include the
extent
to
which and
pace at
which
governments,
businesses and
individuals may adapt
to COVID-19 as
endemic and
no longer
a meaningful
impediment
or deterrent
to commercial activity.
The resurgence
of the
virus and its
related effects
on the
global and
U.S.
economy,
or
the
lingering
uncertainties
and
time
it
may
take
to
transition
to
wide
acceptance
of
11
COVID-19
as
endemic,
will
likely
continue
to
materially
and
adversely
affect
our
business,
operating
results and financial condition.
While
the
Company
currently
anticipates
that
our
results
for
fiscal
2022
and
possibly
beyond
will
likely be adversely impacted,
whether and the extent
to which COVID-19 impacts the
Company’s results
will
depend
on
the
course
of
future
developments,
which
are
highly
uncertain,
including
potential
sporadic
surges
of
the
virus,
the
extent
and
pace
of
public
acceptance
of
COVID-19
as
endemic,
the
continuing
evolution,
acceptance
and
success
of
baseline
mitigation
measures
such
as
vaccines,
and
possible new information, understanding or innovation
that could alter the course and
duration of current
measures to combat the spread of the virus.
It is also possible
COVID-19 and its continuing effects
may result in longer term
behavioral changes
by customers and others
that could adversely affect
our business, including but
not limited to a
consumer
shift to greater
reliance on online
versus in-person shopping, which
could reduce traffic
to our stores
and
more
broadly
to
the
strip
shopping
centers
and
malls
in
which
most
of
our
stores
are
located
and
disadvantage us relative to
competitors who are better
established in e-commerce sales,
and reductions in
face-to-face work, travel and socializing occasions, which may lead
customers to less frequently desire or
perceive the need to update their wardrobes.
The
far-reaching
impacts
of
COVID-19 may
also
intensify other
risks we
discuss
in
this
report and
other filings we make from time to time with the SEC.
Future
outbreaks of
disease
or
similar
public
health
threats,
or
the
fear
of
such
an
occurrence,
may
also have a material adverse effect on the Company’s business, financial condition and operating results.
Risks Relating to Our Business:
Increased product costs, freight costs, wage increases and operating costs due to
inflation and other factors,
as well as limitations in our ability to offset these cost increases by increasing
the retail
prices of our
products or otherwise,
may adversely affect our business, margins, results of operations and
financial
condition.
The impact
of inflation
on the
labor and
raw materials
used to
make our
products, coupled
with the
higher
cost of
ocean freight
from Asia
resulting from
supply chain
disruption, is
continuing to
increase
the
cost
we
pay
for
our
products.
Tight
labor
markets
are
causing
wages
to
increase
at
the
store,
distribution center
and home office
levels, as
well as
making it
more difficult
to hire
new associates
and
retain existing associates.
The tight labor market
and inflation also are
driving up our operating
costs.
If
we are unable to offset the effects of these increased costs to our business by increasing the retail prices of
our
products,
reducing
other
expenses
or
otherwise,
our
business,
margins,
results
of
operations
and
financial condition may be adversely affected.
Our ability to
raise retail
prices in response
to these
cost increases may
be limited,
in part
due to
our
customers’
unwillingness
to
pay
higher
prices
for
discretionary
items
in
light
of
actual
or
perceived
effects
of
inflation
in
increasing
our
customers’
cost
of
essential
items
and
diminishing
customers’
disposable
income
or
financial
outlook.
Moreover,
the
persistence
or
worsening
of
inflationary
conditions could also
lead our customers
to reduce their
amount of current
discretionary spending on our
products even in the
absence of price increases,
which could erode our
sales volume and adversely
affect
our results of operations and financial condition.
Unusual weather, natural disasters, public
health threats or similar events may adversely affect
our sales or
operations.
12
Extreme
changes
in
weather,
natural
disasters,
public
health
threats
or
similar
events
can
influence
customer trends
and shopping
habits.
For example,
heavy rainfall
or other
extreme weather
conditions,
including
but
not
limited
to
winter
weather
over
a
prolonged
period,
might
make
it