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.
These
disclosures
reflect
the
Company’s
beliefs
and
opinions
as
to
factors
that
could
materially
and
adversely
affect
the
Company
and
its
securities
in
the
future.
References
to
particular
events or contingencies are provided as
examples only and should not be
interpreted as a complete listing
or
as any
representation about
whether or
not such
events or
contingencies have
occurred in
the past
or
may occur in the future.
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 increased costs, changes, disruptions
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 economic, social,
geopolitical, 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
and
Egypt.
Geopolitical
tensions,
conflicts,
sanctions,
prohibitions,
additional
actual
or
threatened tariffs, compliance and reporting requirements
have resulted in increased costs associated with
11
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 subject to
supply chain disruptions
affecting
transit times
and costs,
including 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
issues have and may continue to drive
up our ocean freight costs,
delay
merchandise
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 costs,
peak surcharges
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.
If we
are unable
to pass
these
increased
sourcing
costs
onto
our
vendors
or
our
customers,
it
may
adversely
impact
our
results
of
operations.
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.
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
effects of pricing pressure on consumer confidence,
limited customer disposable income to purchase our
products,
sentiment
or
financial
outlook.
Moreover,
the
persistence
or
worsening
of
these
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.
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