Abercrombie & Fitch 2014 Annual Report Download - page 14

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Our reliance on two distribution centers domestically and third-party distribution centers internationally makes us susceptible
to disruptions or adverse conditions affecting our distribution centers.
Our two distribution centers located in New Albany, Ohio, manage the receipt, storage, sorting, packing and distribution of
merchandise to our North American stores and direct-to-consumer customers outside of Europe and Asia. We also use a third-
party distribution center in the Netherlands to manage the receipt, storage, sorting, packing and distribution of merchandise
delivered to our stores and direct-to-consumer customers in Europe; a third-party distribution center in Hong Kong and a third-
party distribution center in China to manage receipt, storage, sorting, packing and distribution of merchandise delivered to our
stores in Asia and Australia and direct-to-consumer customers in Asia; and a third-party distribution center in the United Arab
Emirates to manage, receipt, storage, sorting, packing and distribution of merchandise delivered to our stores in the Middle East.
As a result, our operations are susceptible to local and regional factors, such as system failures, accidents, economic and weather
conditions, natural disasters, demographic and population changes, as well as other unforeseen events and circumstances. If our
distribution operations were disrupted, our ability to replace inventory in our stores and process direct-to-consumer orders could
be interrupted and sales could be negatively impacted.
We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the
Foreign Corrupt Practices Act could have a material adverse effect on our business.
As we continue to expand our overseas operations, we are subject to certain U.S. laws, including the Foreign Corrupt Practices
Act, in addition to the laws of the foreign countries in which we operate. We must use all commercially reasonable efforts to ensure
our associates comply with these laws. If any of our overseas operations, or our associates or agents, violate such laws, we could
become subject to sanctions or other penalties that could negatively affect our reputation, business and operating results. Since
we use third parties to assist with our international expansion, we may be exposed to liability for the acts of those third parties, if
taken on our behalf, and if in violation of certain U.S. laws, including the Foreign Corrupt Practices Act.
In a number of our European stores, associates are represented by workers’ councils and unions, whose demands could
adversely affect our profitability or operating standards for our brands.
In a number of our European stores, particularly in France, Germany, Italy and Spain, associates are represented by workers'
councils and unions. These workers’ councils and unions, as well as government officials who support their positions, may make
demands that could adversely affect our profitability or have a negative effect on the operating standards we believe are critical
to our brands. We are committed to working with all of our associates, whether they are represented by a workers’ council or union
or not, and we believe we maintain good relations with our associates; however, there can be no assurance that we will not
experience work stoppages or other labor-related issues that could have an adverse effect on our profitability or on our operating
standards.
Our facilities, systems and stores, as well as the facilities and systems of our vendors and manufacturers, are vulnerable to
natural disasters, pandemic disease and other unexpected events, any of which could result in an interruption to our business
and adversely affect our operating results.
Our retail stores, corporate offices, distribution centers, infrastructure projects and direct-to-consumer operations, as well as
the operations of our vendors and manufacturers, are vulnerable to damage from natural disasters, pandemic disease and other
unexpected events. If any of these events result in damage to our facilities, systems or stores, or the facilities or systems of our
vendors or manufacturers, we may experience interruptions in our business until the damage is repaired, resulting in the potential
loss of customers and revenues. In addition, we may incur costs in repairing any damage which exceeds our applicable insurance
coverage.
Our litigation exposure could have a material adverse effect on our financial condition and results of operations.
We are involved, from time to time, in litigation arising in the ordinary course of business. Litigation matters may include,
but are not limited to, contract disputes, employment-related actions, labor relations, commercial litigation, intellectual property
rights and shareholder actions. Any litigation that we become a party to could be costly and time consuming and could divert our
management and key personnel from our business operations. Our current litigation exposure could change in the event of the
discovery of damaging facts with respect to legal matters pending against us or determinations by judges, juries or other finders
of fact that are not in accordance with management’s evaluation of the claims. Should management’s evaluation prove incorrect,
our exposure could greatly exceed expectations and have a material adverse effect on our financial condition, results of operations
or cash flows.