Famous Footwear 2012 Annual Report Download - page 21

2012 BROWN SHOE COMPANY, INC. FORM 10-K 19
control quality and maintain positive relationships with their customers, our business, results of operations and financial
position may be adversely aected. While we would likely have the ability to terminate an underperforming license, it may
be dicult and costly to locate an acceptable substitute distributor or licensee, and we may experience a disruption in our
sales and brand visibility. In addition, although many of our license agreements prohibit the licensees from entering into
licensing arrangements with certain of our competitors, they are generally not prohibited from oering, under other brands,
the types of products covered by their license agreements with us.
Trademarks
We believe that our trademarks and trade names are important to our success and competitive position because our
distinctive marks create a market for our products and distinguish our products from other products. We cannot, however,
guarantee that we will be able to secure protection for our intellectual property in the future or that such protection will
be adequate for future operations. Furthermore, we face the risk of ineective protection of intellectual property rights
in jurisdictions where we source and distribute our products, some of which do not protect intellectual property rights to
the same extent as the United States. If we are unsuccessful in challenging a party’s products on the basis of infringement
of our intellectual property rights, continued sales of these products could adversely aect our sales, devalue our brands
and result in a shift in consumer preference away from our products. We may face significant expenses and liability in
connection with the protection of our intellectual property rights, and if we are unable to successfully protect our rights or
resolve intellectual property conflicts with others, our business or financial condition could be adversely aected.
Our retail business depends on our ability to secure aordable and desirable leased locations without creating a
competitive concentration of stores.
Our Famous Footwear and Specialty Retail segments operate leased retail footwear stores. Accordingly, the success of our
retail business depends, in part, on our ability to secure aordable, long-term leases in desirable locations and to secure
renewals of such leases. No assurance can be given that we will be able to successfully negotiate lease renewals for existing
stores or obtain acceptable terms for new stores in desirable locations. In addition, opening new Famous Footwear stores
in our existing markets may result in reduced net sales in existing stores as our stores become more concentrated in the
markets we serve. As a result, the number of consumers and financial performance of individual stores may decline and the
average sales per square foot at our stores may be reduced.
If we are unable to maintain working relationships with our major branded suppliers, our business, results of operations,
financial condition and cash flows may be adversely impacted.
Our Famous Footwear segment purchases a substantial portion of its footwear products from major branded suppliers.
As is common in the industry, we do not have any long-term contracts with our suppliers. In addition, the success of our
financial performance is dependent on the ability of Famous Footwear to obtain products from our suppliers on a timely
basis and on acceptable terms. While we believe our relationships with our current suppliers are good, the loss of any of
our major suppliers or product developed exclusively for Famous Footwear could have a material adverse eect on our
business, financial condition and results of operations. In addition, negative trends in global economic conditions may
adversely impact our suppliers. If these third-parties do not perform their obligations or are unable to provide us with the
materials and services we need at prices and terms that are acceptable to us, our ability to meet our consumers’ demand
could be adversely aected.
Our quarterly sales and earnings may fluctuate, and securities analysts may not accurately estimate our financial results,
which may result in volatility in, or a decline in, our stock price.
Our quarterly sales and earnings can vary due to a number of factors, many of which are beyond our control, including
the following:
• Our Famous Footwear retail business is seasonally weighted to the back-to-school season, which falls in our third
fiscal quarter. As a result, the success of our back-to-school oering, which is aected by our ability to anticipate
consumer demand and fashion trends, could have a disproportionate impact on our full year results.
• In our wholesale business, sales of footwear are dependent on orders from our major customers, and they may
change delivery schedules, change the mix of products they order or cancel orders without penalty.
• Our wholesale customers set the delivery schedule for shipments of our products, which could cause shifts of sales
between quarters.
• Our estimated annual tax rate is based on projections of our domestic and international operating results for the year,
which we review and revise as necessary each quarter.
• Our earnings are also sensitive to a number of factors that are beyond our control, including manufacturing and
transportation costs, changes in product sales mix, geographic sales trends, consumer sentiment and currency
exchange rate fluctuations.
As a result of these specific and other general factors, our operating results will vary from quarter to quarter, and the
results for any particular quarter may not be indicative of results for the full year. Any shortfall in sales or earnings from the
levels expected by investors or securities analysts could cause a decrease in the trading price of our common stock.