Abercrombie & Fitch 2011 Annual Report Download - page 12

• we are subject to customs, advertising, consumer protection, privacy, zoning and occupancy and
labor and employment laws that could require us to modify our current business practices, incur
increased costs or harm our reputation if we do not comply;
• changes in the regulatory or compliance landscape could adversely affect our business and results of
operations;
• our unsecured Amended and Restated Credit Agreement (the “Amended and Restated Credit
Agreement”) and our Term Loan Agreement include financial and other covenants that impose
restrictions on our financial and business operations;
• our operations may be affected by regulatory changes related to climate change and greenhouse gas
emissions; and
• compliance with changing regulations and standards for accounting, corporate governance and
public disclosure could adversely affect our business, results of operations and reported financial
results.
The following sets forth a description of the preceding risk factors that we believe may be relevant to
an understanding of our business. These risk factors could cause actual results to differ materially from
those expressed or implied in any of our forward-looking statements.
Changes in economic and financial conditions, and the resulting impact on consumer confidence and
consumer spending, could have a material adverse effect on our business, results of operations and
liquidity.
Our business depends on consumer demand for our merchandise. Consumer purchases of
discretionary items, including our merchandise, generally decline during recessionary periods and other
periods where disposable income is adversely affected. Our performance is subject to factors that affect
worldwide economic conditions including unemployment, consumer credit availability, consumer debt
levels, reductions in net worth based on declines in the financial, residential real estate and mortgage
markets, sales tax rates and rate increases, fuel and energy prices, interest rates, consumer confidence in
future economic and political conditions, consumer perceptions of personal well-being and security, the
value of the U.S. dollar versus foreign currencies and other macroeconomic factors.
During Fiscal 2008 and Fiscal 2009, the combination of these factors caused consumer spending in the
U.S. to deteriorate significantly. While consumer spending began to improve in Fiscal 2010 and continued
to improve in Fiscal 2011, these factors may cause levels of spending to remain depressed relative to
historical levels for the foreseeable future. In addition, these factors may cause consumers to purchase
products from lower-priced competitors or to defer purchases of apparel and personal care products
altogether.
In addition, we have significantly expanded our presence in the European market. The ongoing Euro
financial crisis may impact consumer demand for our merchandise. The economic conditions and factors
described above could adversely affect the productivity of our stores, as well as adversely affect the pace of
opening new international stores, or their productivity once opened.
Economic uncertainty could have a material adverse effect on our results of operations, liquidity, and
capital resources if reduced consumer demand for our merchandise should occur. It could also impact our
ability to fund growth and/or result in our becoming reliant on external financing, the availability of which
may be uncertain.
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