Abercrombie & Fitch 2011 Annual Report Download - page 25

traffic to decline. Furthermore, an act of terrorism or war, or the threat thereof, or any other unforeseen
interruption of commerce, could negatively impact our business by interfering with our ability to obtain
merchandise from foreign manufacturers. Our inability to obtain merchandise from our foreign
manufacturers or substitute other manufacturers, at similar costs and in a timely manner, could adversely
affect our operating results and financial condition.
Our inability to obtain commercial insurance at acceptable prices or our failure to adequately reserve
for self-insured exposures might increase our expenses and adversely impact our financial results.
We believe that commercial insurance coverage is prudent for risk management in certain areas of our
business. Insurance costs may increase substantially in the future and may be affected by natural catastrophes,
fear of terrorism, financial irregularities and other fraud at publicly-held companies, intervention by the
government or a decrease in the number of insurance carriers. In addition, the carriers with which we hold our
policies may go out of business, or may be otherwise unable to fulfill their contractual obligations. Furthermore,
for certain types or levels of risk, such as risks associated with earthquakes, hurricanes or terrorist attacks, we
may determine that we cannot obtain commercial insurance at acceptable prices, if at all. Therefore, we may
choose to forego or limit our purchase of relevant commercial insurance, choosing instead to self-insure one or
more types or levels of risk. We are primarily self-insured for workers’ compensation and employee health
benefits. If we suffer a substantial loss that is not covered by commercial insurance or our self-insurance
reserves, the loss and attendant expenses could harm our business and operating results. In addition, exposures
could exist for which no insurance may be available and for which we have not reserved.
Operating results and cash flows at the store level may cause us to incur impairment charges.
Long-lived assets, primarily property and equipment, are reviewed at the store level at least annually
for impairment, or whenever changes in circumstances indicate that a full recovery of net asset values
through future cash flows is in question. The review could result in significant charges related to
underperforming stores which could impact our results of operations.
Furthermore, our impairment review requires us to make estimates and projections regarding, but not
limited to, future cash flows. We make certain estimates and projections in connection with impairment
analyses for our store locations and other property and equipment. If these estimates or projections change
or prove incorrect, we may be, and have been, required to record impairment charges on certain store
locations and other property and equipment. We have recognized significant impairment charges in the past
and may do so in the future.
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.
We are subject to numerous laws and regulations, including customs, truth-in-advertising, consumer
protection, general privacy, health information privacy, identity theft, online privacy, unsolicited
commercial communication and zoning and occupancy laws and ordinances that regulate retailers generally
and/or govern the importation, promotion and sale of merchandise and the operation of retail stores and
distribution centers. As our business becomes more international in scope and we enter more countries
internationally, the number of laws and regulations that we are subject to, as well as their scope and reach,
increase significantly and heighten our risks. If these laws and regulations were to change, or were violated
by our management, employees, suppliers, vendors or other parties with whom we do business, the costs of
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