Abercrombie & Fitch 2014 Annual Report Download - page 13

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objectives for our international stores and could have a material adverse effect on our financial condition or results of operations.
In addition, some malls that were in prominent locations when we opened our 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,
which would impact our gross profits and net income.
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 failure to protect our reputation could have a material adverse effect on our brands.
Our ability to maintain our reputation is critical to our brands. Our reputation could be jeopardized if we fail to maintain high
standards for merchandise quality and integrity, if our third-party vendors fail to comply with our vendor code of conduct or as a
result of a cyber-attack. Any negative publicity about these types of concerns may reduce demand for our merchandise. Failure
to comply with ethical, social, product, labor, health and safety, accounting or environmental standards, or related political
considerations, could also jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts.
Public perception about our products or our stores, whether justified or not, could impair our reputation, involve us in litigation,
damage our brands and have a material adverse effect on our business. Damage to our reputation or loss of consumer confidence
for any of these or other reasons could have a material adverse effect on our results of operations and financial condition, as well
as require additional resources to rebuild our reputation.
We rely on the experience and skills of our senior executive officers, the loss of whom could have a material adverse effect
on our business.
Our senior executive officers closely supervise all aspects of our business including the design of our merchandise and the
operation of our stores. Our senior executive officers have substantial experience and expertise in the retail business and have an
integral role in the growth and success of our brands. If we were to lose the benefit of their involvement, our business could be
adversely affected. In addition, the new leadership for our major brands will play an important role in enhancing brand engagement
and profitability. Competition for such senior executive officers is intense, and we cannot be sure we will be able to attract, retain
and develop a sufficient number of qualified senior executive officers in future periods.
We depend upon independent third parties for the manufacture and delivery of all our merchandise, a disruption of which
could result in lost sales and could increase our costs.
We do not own or operate any manufacturing facilities. As a result, the continued success of our operations is tied to our
timely receipt of quality merchandise from third-party manufacturers. We source the majority of our merchandise outside of the
U.S. through arrangements with approximately 150 vendors which includes foreign manufacturers located throughout the world,
primarily in Asia and Central America. In addition, many of our domestic manufacturers maintain production facilities overseas.
Political, social or economic instability in Asia and Central America, or in other regions in which our manufacturers are located,
could cause disruptions in trade, including exports to the U.S. A manufacturer’s inability to ship orders in a timely manner or
meet our quality standards could cause delays in responding to consumer demands and negatively affect consumer confidence or
negatively impact our competitive position, any of which could have a material adverse effect on our financial condition and
results of operations. Other events that could also cause disruptions to exports to the U.S. include the imposition of additional
trade law provisions or regulations, reliance on a limited number of shipping and air carriers, significant labor disputes and
significant delays in the delivery of cargo due to port security considerations. In addition, 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 us and adversely affect
our business, financial condition or results of operations.
In addition, 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. The independent third parties employ personnel that may be represented by labor unions. Disruptions in the delivery of
merchandise or work stoppages by associates 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.