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:
Because we source a significant portion of our merchandise directly
and indirectly from overseas,
we are subject to risks associated with changes, disruptions, increased
costs or other problems
affecting the Company’s merchandise supply chain, risks associated with trade policies, including
costs and uncertainties as the result of actual or threatened tariffs, the risks of conducting
international operations and risks that affect the prevailing social, economic, political,
public
health and other conditions in the areas from which we source
merchandise. These risks have and
could continue to materially and adversely affect the Company’s business, results of operations
and financial condition.
We
do
not
own
or
operate
any
manufacturing
facilities.
As
a
result,
the
continued
success
of
our
operations
is
tied
to
our
timely
receipt
of
quality
merchandise
from
third
party
manufacturers
at
a
reasonable
cost.
A
significant
amount
of
our
merchandise
is
manufactured
overseas,
principally
in
Southeast
Asia.
We
are
subject
to
supply
chain
disruptions
affecting
transit
times
and
costs,
including
issues related
to
a sustained
drought in
Panama that
is
causing longer
transit times
through the
Panama
Canal
and
limiting
the
number
of
containers
on
a
vessel
due
to
vessel
draft
restrictions.
We
also
face
disruptions from
issues related
to vessels
transiting the
Suez Canal
and Red
Sea, which
are being
forced
to travel a
much longer distance around
the Cape of
Good Hope due
to the hostilities
in the Middle
East.
These
continued
issues
have
and
may
continue
to
drive
up
our
ocean
freight
costs,
delay
merchandise
11
deliveries,
and
impact
our
ability
to
access
the
already
limited
supply
of
ocean
container
shipping
capacity that
we require.
Additionally,
we may
be subject
to additional
costs related
to our
supply chain
such as
increased facility fees,
fuel, peak surcharg
es and
other additional charges
to transport
our goods,
which may increase our costs. 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.
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,
and
our
costs
for
these
materials
are
likely
to
increase as
a result
of newly implemented
tariffs on
Chinese products. We
are subject
to numerous
risks
that can
cause significant
delays or
interruptions in
the supply
of our
merchandise or
increase our
costs.
These risks include political unrest,
labor disputes, terrorism, war,
public health threats, including but
not
limited
to
communicable diseases
(such
as
COVID-19 or
other
pandemics), 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.
In
addition,
geopolitical
tensions,
sanctions,
prohibitions,
additional
actual
or
threatened
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. If we are unable to
pass these increased sourcing costs onto our vendors or
our customers,
it may adversely impact our results of operations.
Any actual or perceived deterioration in the conditions that drive
consumer confidence and
spending have and may continue to materially and adversely affect consumer demand
for our
apparel and accessories and our results of operations.
Consumer
spending
habits,
including
spending
for
our
apparel
and
accessories,
are
affected
by,
among other
things, prevailing
social, economic,
political and
public health
conditions and
uncertainties
(such
as
matters
under
debate
in
the
U.S.
from
time
to
time
regarding
budgetary,
spending
and
tax
policies),
levels
of
employment, fuel,
inflation,
interest
rates,
energy
and
food
costs,
salaries
and
wage
rates
and
other
sources
of
income,
tax
rates,
home
values,
consumer
net
worth,
the
availability
of
consumer
credit,
consumer
confidence
and
consumer
perceptions
of
adverse
changes
in
or
trends
affecting any of these conditions. Any perception that these conditions may be worsening or continuing to
trend negatively
may significantly
weaken many
of
these drivers
of consumer
spending habits.
Adverse
perceptions of
these conditions
or
uncertainties regarding
them also
generally cause
consumers to
defer
purchases
of
discretionary
items,
such
as
our
merchandise,
or
to
purchase
cheaper
alternatives
to
our
merchandise, all