Abercrombie & Fitch 2009 Annual Report Download - page 12

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in Asia and Central and South America. In addition, many of the Company’s domestic manufacturers
maintain production facilities overseas. Political, social or economic instability in Asia, Central or South
America, or in other regions in which the Company’s manufacturers are located, could cause disruptions in
trade, including exports to the U.S. Other events that could also cause disruptions to exports to the
U.S. include:
• the imposition of additional trade law provisions or regulations;
• the imposition of additional duties, tariffs and other charges on imports and exports;
• quotas imposed by bilateral textile agreements;
• foreign currency fluctuations;
• restrictions on the transfer of funds;
• the potential of manufacturer financial instability, inability to access needed liquidity or
bankruptcy; and
• significant labor disputes, such as dock strikes.
In addition, the Company cannot predict whether the countries in which its merchandise is manufac-
tured, or may be manufactured in the future, will be subject to new or additional trade restrictions imposed by
the U.S. or other foreign governments, including the likelihood, type or effect of any such restrictions. Trade
restrictions, including new or increased tariffs or quotas, embargoes, safeguards and customs restrictions
against apparel items, as well as U.S. or foreign labor strikes and work stoppages or boycotts, could increase
the cost or reduce the supply of apparel available to the Company and adversely affect its business, financial
condition or results of operations.
The Company Does not Own or Operate any Manufacturing Facilities and Therefore Depends Upon
Independent Third Parties for the Manufacture of all its Merchandise.
The Company does not own or operate any manufacturing facilities. As a result, the continued success of
the Company’s operations is tied to its timely receipt of quality merchandise from third-party manufacturers.
A manufacturer’s inability to ship orders in a timely manner or meet the Company’s quality standards could
cause delays in responding to consumer demands and negatively affect consumer confidence in the quality
and value of the Company’s brands or negatively impact the Company’s competitive position, all of which
could have a material adverse effect on the Company’s financial condition or results of operations.
Furthermore, the Company is susceptible to increases in sourcing costs from manufacturers which the
Company may not be able to pass on to the customer and could adversely affect the Company’s financial
condition or results of operations.
Additionally, while the Company utilizes third-party compliance auditors to visit and monitor the
operations of the Company’s manufacturers, the Company does not have control of the independent
manufacturers or their labor practices. A violation of labor laws or other laws, including consumer and
product safety laws, by the Company or its manufacturers, could adversely affect the Company’s reputation
and sales.
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