DSW 2009 Annual Report Download - page 19

prevailing interest rates, income tax rates and policies, consumer confidence and consumer perception of economic
conditions. In addition, consumer purchasing patterns may be influenced by consumers’ disposable income.
Consumer confidence is also affected by the domestic and international political situation. The outbreak or
escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the United States, could lead to
a decrease in spending by consumers. In an economic slowdown, we could experience lower net sales than expected
on a quarterly or annual basis and be forced to delay or slow our retail expansion plans.
The current economic slowdown is also impacting credit card processors and financial institutions which hold
our credit card receivables. We depend on credit card processors to obtain payments for us. In the event a credit card
processor ceases operations or the financial institution holding our funds fails, there can be no assurance that we
would be able to access funds due to us on a timely basis, which could have a material adverse effect on our
business, financial condition, results of operations and cash flows.
We rely on foreign sources for our merchandise, and our business is therefore subject to risks associated
with international trade.
We purchase merchandise from domestic and foreign vendors. In addition, many of our domestic vendors
import a large portion of their merchandise from abroad, primarily from China, Brazil and Italy. We believe that
almost all the merchandise we purchased during fiscal 2009 was manufactured outside the United States. For this
reason, we face risks inherent in purchasing from foreign suppliers, such as:
•economic and political instability in countries where these suppliers are located;
•international hostilities or acts of war or terrorism affecting the United States or foreign countries from
which our merchandise is sourced;
•increases in shipping costs;
•transportation delays and interruptions, including increased inspections of import shipments by domestic
authorities;
•work stoppages;
•adverse fluctuations in currency exchange rates;
•U.S. laws affecting the importation of goods, including duties, tariffs and quotas and other non-tariff
barriers;
•expropriation or nationalization;
•changes in local government administration and governmental policies;
•changes in import duties or quotas;
•compliance with trade and foreign tax laws; and
•local business practices, including compliance with local laws and with domestic and international labor
standards.
We require our vendors to operate in compliance with applicable laws and regulations and our internal
requirements. However, we do not control our vendors or their labor and business practices. The violation of labor or
other laws by one of our vendors could have an adverse effect on our business.
Restrictions in our secured revolving credit facility could limit our operational flexibility.
We have a $150 million secured revolving credit facility with a term expiring July 2010. Under this facility, we
and our subsidiaries are named as co-borrowers. This facility is subject to a borrowing base restriction and provides
for borrowings at variable interest rates based on the London Interbank Offered Rate, or LIBOR, the prime rate and
the Federal Funds effective rate, plus a margin. Our obligations under our secured revolving credit facility are
secured by a lien on substantially all of our and one of our subsidiary’s personal property and a pledge of our shares
15