Abercrombie & Fitch 2011 Annual Report Download - page 22

circumstances. If our operations are disrupted, our ability to replace inventory in our stores and process
direct-to-consumer orders could be interrupted and sales could be negatively impacted.
Our reliance on third parties to deliver merchandise from our distribution centers to our stores and
direct-to-consumer customers could result in disruptions to our business.
The efficient operation of our stores and direct-to-consumer business depends on the timely receipt of
merchandise from our distribution centers. We deliver our merchandise to our stores and
direct-to-consumer customers using independent third parties. We utilize primarily one contract carrier to
ship merchandise and related materials to our North American stores and direct-to-consumer customers,
and a separate contract carrier for our European and Asian stores and direct-to-consumer customers. The
independent third parties employ personnel that may be represented by labor unions. Disruptions in the
delivery of merchandise or work stoppages by employees or contractors of any of these third parties could
delay the timely receipt of merchandise. There can be no assurance that such stoppages or disruptions will
not occur in the future. Any failure by a third party to respond adequately to our distribution needs would
disrupt our operations and could have a material adverse effect on our financial condition or results of
operations. Furthermore, we are susceptible to increases in fuel costs which may increase the cost of
distribution. If we are not able to pass this cost on to our customers, our financial condition and results of
operations could be adversely affected.
We may be exposed to risks and costs associated with credit card fraud and identity theft that would
cause us to incur unexpected expenses and loss of revenues.
A significant portion of our customer orders are placed through our websites. In addition, a significant
portion of sales made through our retail stores requires the collection of certain customer data, such as
credit card information. In order for our sales channels to function and develop successfully, we and other
parties involved in processing customer transactions must be able to transmit confidential information,
including credit card information, securely over public networks. Third parties may have the technology or
knowledge to breach the security of customer transaction data. Although we have security measures related
to our systems and the privacy of our customers, we cannot guarantee these measures will effectively
prevent others from obtaining unauthorized access to our information and our customers’ information. Any
person who circumvents our security measures could destroy or steal valuable information or disrupt our
operations. A security breach could cause customers to lose confidence in the security of our websites or
stores and choose not to purchase from us. Any security breach could also expose us to risks of data loss,
litigation and liability, and could seriously disrupt operations and harm our reputation, any of which could
adversely affect our financial condition and results of operations.
In addition, state, federal and foreign governments are increasingly enacting laws and regulations to
protect consumers against identity theft. These laws and regulations will likely increase the costs of doing
business and if we fail to implement appropriate security measures, or to detect and provide prompt notice of
unauthorized access as required by some of these laws and regulations, we could be subject to potential
claims for damages and other remedies, which could adversely affect our business and results of operations.
Modifications and/or upgrades to our information technology systems may disrupt our operations.
We regularly evaluate our information technology systems and requirements and are currently
implementing modifications and/or upgrades to the information technology systems that support our
business. Modifications include replacing existing systems with successor systems, making changes to
19