Express 2014 Annual Report Download - page 18

We sell merchandise through our website, www.express.com. Our online sales may be adversely affected by
interruptions in our ability to conduct sales through our website, due to failure of computer systems, failure of
third-party technology and service providers on which we rely, telecommunications failures, security breaches,
and similar disruptions. Furthermore, functionality on our website may be limited or interrupted to the extent
technology we are use becomes the subject of a patent or other intellectual property dispute and we are unable to
secure a license to use such technology or develop alternative functionality.
Any person who circumvents our security measures could destroy, steal, or expose Company, customer, or
employee information and create systems and operational disruptions for us. In addition, employee error,
malfeasance, or other errors in the storage, use, or transmission of any such information could result in a
disclosure of confidential information to third parties outside of our network. Any of these events could result in
litigation and legal liability, harm to our reputation, loss of confidence in our ability to protect sensitive
information, a distraction to our business, and the need to divert resources to remedy the issues, any of which
could have a material adverse effect on our business.
We may be exposed to risks and costs associated with credit card fraud and identity theft that would cause us
to incur unexpected expenses and loss of revenues.
We collect customer data, including credit card information, in our stores and online. For our sales channels to
function successfully, we and third parties involved in processing customer transactions for us must be able to
transmit confidential information, including credit card information, securely over public networks. We cannot
guarantee that any of our security measures or the security measures of third parties with whom we work will
effectively prevent others from obtaining unauthorized access to our customers’ information. If such a breach
were to occur, customers could lose confidence in our ability to secure their information and choose not to
purchase from us. Any unauthorized access to customer information could expose us to data loss or
manipulation, litigation and legal liability, and could seriously disrupt operations, negatively impact our
marketing capabilities, cause us to incur significant expenses to notify customers of the breach and for other
remediation activities, and harm our reputation and brand, any of which could adversely affect our financial
condition and results of operations.
In addition, state, federal, and foreign governments are increasingly enacting laws and regulations to protect
consumers against identity theft. These laws and regulations will likely increase the costs of doing business, and
if we fail to implement appropriate security measures or detect and provide prompt notice of unauthorized access
as required by some of these laws and regulations, we could be subject to potential claims for damages and other
remedies, which could adversely affect our business and results of operations.
We do not own or operate any manufacturing facilities and therefore depend upon third parties for the
manufacture of all of our merchandise, and any inability of a manufacturer to ship goods on-time to our
specifications or to operate in compliance with our Vendor Code of Conduct or applicable laws could
negatively impact our business.
We do not own or operate any manufacturing facilities. As a result, we are dependent upon our timely receipt of
quality merchandise from third-party vendors. A manufacturer’s inability to ship orders to us in a timely manner
or meet our quality standards could cause inventory shortages or high levels of out-of-season inventory and
negatively affect consumer confidence in the quality and value of our brand and our competitive position, all of
which could have a material adverse effect on our financial condition or results of operations. Furthermore, we
are susceptible to increases in sourcing costs, which we may not be able to pass on to customers, and changes in
payment terms from manufacturers, which could adversely affect our financial condition or results of operations.
If any of our manufacturers fail to comply with laws or our Vendor Code of Conduct, or engage in any socially
unacceptable business practices such as poor working conditions, child labor, disregard for environmental
standards, or otherwise, our brand reputation could be negatively impacted and our results of operations could in
turn be materially adversely affected.
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