DSW 2014 Annual Report Download - page 14

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Table of Contents
Our failure to retain our existing senior management team and to continue to attract qualified new personnel could adversely affect our business.
Our business requires disciplined execution at all levels of our organization which requires an experienced and talented management team. If we were to lose
the benefit of the experience, efforts and abilities of any of our key executive and buying personnel, our business could be adversely affected. We have
entered into employment agreements with several key executives and also offer compensation packages designed to attract and retain talent. Furthermore, our
ability to manage our expansion will require us to continue to train, motivate and develop our employees to maintain a high level of talent for future
challenges and succession planning. Competition for these types of personnel is intense, and we may not be successful in attracting and retaining the
personnel required to grow and operate our business.
We are dependent on our DSW Rewards program and marketing to drive traffic, sales and loyalty, and any decrease in membership or purchases from
members could have a material adverse effect on our business.
DSW Rewards is a customer loyalty program that we rely on to drive customer traffic, sales and loyalty. DSW Rewards members earn reward certificates that
offer discounts on future purchases. In both fiscal 2014 and 2013, shoppers in the loyalty program generated approximately 90% of DSW sales. As of
January 31, 2015, approximately 23 million members were enrolled in DSW Rewards and have made at least one purchase over the course of the last two
fiscal years, compared to approximately 22 million members as of February 1, 2014. In the event that our DSW Rewards members do not continue to shop at
DSW or the number of members decreases, this could have a material adverse effect on our business.
We are constantly exploring new business opportunities. The failure to successfully execute our plans may have a material adverse effect on our business,
results of operations or financial condition.
The continued development of new business opportunities could distract management from our core business. In the event that we lose focus on our core
business or are unsuccessful in the execution of our concept, it may have a material adverse effect on our business, results of operations or financial
condition.
We are exposed to risk through leases of certain portions of our properties.
In fiscal 2012, we purchased our corporate office headquarters, our distribution center and a trailer parking lot. Certain portions of the properties are leased to
both unrelated and related parties, which provides rental income. The largest tenant's lease, which is not with a related party, renewed for another two-year
term in June 2013, but either party can terminate after each two-year renewal option and the tenant can terminate at any time with 60 days notice. In the event
that one or more tenants do not renew their leases, the foregoing circumstances or events could have a material adverse effect on our financial condition.
In connection with the Merger, Merger Sub assumed RVI’s responsibilities under a lease dated September 2003 for an office building in Columbus, Ohio (the
"Premises"). In April 2005, RVI sublet the Premises to an unrelated third party at a rent that is lower than its expenses under the lease. In fiscal 2012, DSW Inc.
assumed responsibility for the lease. The sublease is through the lease expiration date, but either party can terminate after each two-year renewal option.
Merger Sub remains liable under the lease through the lease expiration date in 2024, and if the subtenant does not pay the rent or vacates the Premises,
Merger Sub would be required to make full rent payments to the landlord without any rental income. All of the foregoing circumstances or events could have
a material adverse effect on our financial condition.

We may be unable to compete favorably in our highly competitive market, which could have a material adverse effect on our business.
The retail footwear market is highly competitive with few barriers to entry. We compete against a diverse group of retailers, both small and large, including
department stores, mall-based shoe stores, national chains, independent shoe retailers, single-brand specialty retailers, online shoe retailers, multi-channel
specialty retailers and brand-oriented discounters. Our success depends on our ability to remain competitive with respect to style, price, brand availability
and customer service. The performance of our competitors, as well as a change in their pricing policies as a result of the current economic environment,
marketing activities and other business strategies, could have a material adverse effect on our business.
Our failure to identify and respond to rapidly changing customer behavior and the impact that social media and comparison shopping has on our customer
could have a material adverse effect on our business.
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Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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