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 Our Business:
Increasing interest rates and inflationary conditions have and may continue
to adversely impact
our customers’ discretionary income or willingness to purchase discretionary
items, which may
adversely affect our business, margins, results of operations and financial condition.
Increasing interest
rates have
adversely affected
our customers’
discretionary income,
in part
due to
increased
interest
costs
associated
with
credit
accounts
including
revolving
credit
accounts,
car
loans,
mortgage loans and other credit accounts.
In addition, the increased payments due to
higher interest rates
deter our customers from
purchasing discretionary items such as
apparel, shoes and jewelry.
Inflationary
pressures
limit
our
customers’
willingness
to
purchase
apparel,
shoe
or
jewelry
products,
as
prices
associated
with
non-discretionary
products
including
food
and
fuel
are
increasing,
reducing
our
customers’ discretionary income. Any reduction in our customers’ discretionary spending on our products
could erode our sales volume and adversely affect our results of operations and
financial condition.
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, have and may continue to adversely
affect our business,
margins, results of operations and financial condition.
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.
In addition,
inflationary pressures
on
labor
and
raw
materials
used
to
make
our
products
may
continue
to
increase
the
cost
we
pay
for
our
products.
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
is
limited,
in
part
due
to
our
customers’
unwillingness
to
pay
higher
prices
for
discretionary
items
in
light
of
actual
or
perceived
11
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.
Because we source a significant portion of our merchandise directly
and indirectly from overseas,
we are subject to risks associated with international operations and risks
that affect the prevailing
social, economic, political, public health and other conditions in
the areas from which we source
merchandise; changes, disruptions, increased costs
or other problems affecting the Company’s
merchandise supply chain have and could continue to materially and
adversely affect the
Company’s business, results of operations and financial condition.
A significant amount of our merchandise is
manufactured overseas, principally in Southeast Asia. We
directly import some of this merchandise and
indirectly import the remaining merchandise from domestic
vendors
who
acquire
the
merchandise
from
foreign
sources.
Further,
our
third-party
vendors
are
dependent
on
materials
primarily
sourced
from
China.
As
a
result,
political
unrest,
labor
disputes,
terrorism,
war,
public
health
threats,
including
but
not
limited
to
communicable
diseases
(such
as
COVID-19), financial or other forms of instability or other events resulting in the disruption of trade from
countries
affecting
our
supply
chain,
increased
security
requirements
for
imported
merchandise,
or
the
imposition of, or changes
in, laws, regulations or
changes in duties, quotas, tariffs,
taxes or governmental
policies
regarding
or
responses
to
these
matters
or
other
factors
affecting
the
availability
or
cost
of
imports,
can
cause
significant delays
or
interruptions in
the
supply of
our
merchandise or
increase our
costs.
In
addition,
geopolitical
tensions,
sanctions,
prohibitions,
additional
tariffs,
compliance
and
reporting requirements
have resulted
in increased
costs associated
with merchandise
produced in
certain
regions.
Any new sanctions, tariffs and
reporting requirements enacted in the future may further
increase
our costs associated with sourcing products from those regions
or limit our ability to procure the
products
we
source,
and
our
ability
to
source
these
products
from
other
regions
may
be
limited
or
result
in
increased sourcing costs.
We
are
also
subject
to
supply
chain
disruptions
affecting
ocean
freight,
including
lack
of
overall
ocean container shipping
capacity versus the
current demand for
container shipping capacity,
lack of our
ability to
access the
ocean container capacity
that we
require, lack
of equipment
such as
containers, port
congestion,
including
increased
dwell
times
for
ocean
container
ships,
and
other
conditions
impacting
ocean
freight.
We
also
are
subject
to
domestic
supply
chain
disruptions,
including
lack
of
domestic
intermodal transportation (trucks
and drivers), domestic
port congestion, including
increased dwell times
for incoming container ships, lack of container
yard capacity and lack of available drayage from
the ports
and
other
conditions
that
impact
our
domestic
supply
chain.
These
supply
chain
risks
have
and
may
continue to
result in
both higher
costs to
transport our
merchandise and
delayed merchandise
arrivals to
our stores, which adversely affect our ability to sell this merchandise and increase
markdowns of it.
Our costs are
also affected by currency
fluctuations, and changes in
the value of the
dollar relative to
foreign
currencies
have
and
may
continue
to
impact
our
cost
of
goods
sold.
Any
of
these
factors
can
materially and
adversely affect
our business
and results of
operations.
In addition,
increased energy
and
transportation
costs
have
caused
us
significant
cost
increases
from
time