Abercrombie & Fitch 2010 Annual Report Download - page 18

Table of Contents
and an increase in competition from established companies. We face a variety of competitive challenges, including:
• anticipating and quickly responding to changing consumer demands or preferences better than our competitors;
• maintaining favorable brand recognition and effectively marketing our products to consumers in several diverse demographic
markets;
• sourcing merchandise efficiently;
• developing innovative, high-quality merchandise in styles that appeal to our consumers and in ways that favorably distinguish
us from our competitors; and
• countering the aggressive promotional activities of many of our competitors without diminishing the aspirational nature of our
brands and brand equity.
In light of the competitive challenges we face, we may not be able to compete successfully in the future. Further, increases in
competition could reduce our sales and harm our operating results and business.
Our Ability to Attract Customers to Our Stores Depends, in Part, on the Success of the Shopping Malls in Which Most of Our
Stores are Located.
In order to generate customer traffic, we locate many of our stores in prominent locations within successful shopping malls. Our
stores benefit from the ability of the malls' "anchor" tenants, generally large department stores and other area attractions, to generate
consumer traffic in the vicinity of our stores and the continuing popularity of malls in the United States and, increasingly, in many
international locations as shopping destinations. We cannot control the development of new shopping malls in the United States or
around the world; the availability or cost of appropriate locations within existing or new shopping malls; competition with other
retailers for prominent locations; or the success of individual shopping malls. All of these factors may impact our ability to meet our
productivity targets for our domestic stores and our growth objectives for our international Hollister Co. stores, which are primarily
mall-based, and could have a material adverse effect on our financial condition or results of operations. Unfavorable economic
conditions, particularly in certain regions, have affected mall traffic and resulted in the closing of certain anchor stores. The viability
of certain commercial and real estate firms which operate major shopping malls has also been threatened. In addition, some malls that
were in prominent locations when we opened stores may cease to be viewed as prominent. If this trend continues or if the popularity
of mall shopping continues to decline generally among our customers, our sales may decline, or we may fail to achieve our roadmap
goals for domestic productivity, which would impact our gross profits, net income or ability to achieve our roadmap goal for operating
margin by Fiscal 2012.
Part of our future growth is dependent on our ability to operate stores in desirable locations with capital investment and lease
costs providing the opportunity to earn a reasonable return. We cannot be sure as to when or whether such desirable locations will
become available at reasonable costs.
Our Net Sales Fluctuate on a Seasonal Basis, Causing Our Results of Operations to be Susceptible to Changes in
Back-to-School and Holiday Shopping Patterns.
Historically, our operations have been seasonal, with a significant amount of net sales and net income occurring in the fourth
fiscal quarter, due to the increased sales during the Holiday selling season and, to a
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