Famous Footwear 2013 Annual Report Download - page 20

18 2013 BROWN SHOE COMPANY, INC. FORM 10-K
to import, or the loss of our import privileges. Possible violations of United States or foreign laws or regulations could include
inadequate record keeping of our imported products, misstatements or errors as to the origin, classification, marketing or
valuation of our imported products, fraudulent visas, or labor violations. The eects of these factors could render our conduct
of business in a particular country undesirable or impractical and have a negative impact on our operating results.
Our success depends on our ability to retain senior management and recruit and retain other key associates.
Our success depends on our ability to attract, retain and motivate qualified management, administrative, product
development, and sales personnel to support existing operations and future growth. In addition, our ability to successfully
integrate acquired businesses often depends on our ability to retain incumbent personnel, many of whom possess valuable
institutional knowledge and operating experience. Competition for qualified personnel in the footwear industry is intense,
and we compete for these individuals with other companies that in many cases have superior financial and other resources.
The loss of the services of any member of our senior management, the inability to attract and retain other qualified
personnel, or the inability to eectively transition senior management positions could adversely aect the sales, design
and production of our products as well as the implementation of our strategic initiatives.
Our reputation and competitive position are dependent on our ability to license well-recognized brands, license our own
brands under successful licensing arrangements, and protect our intellectual property rights.
Licenses – Company as Licensee
Although we own most of our wholesale brands, we also rely on our ability to attract, retain, and maintain good
relationships with licensors that have strong, well-recognized brands and trademarks. Our license agreements are generally
for an initial term of two to four years, subject to renewal, and there can be no assurance that we will be able to renew
these licenses. Even our longer-term or renewable licenses are typically dependent upon our ability to market and sell
the licensed products at specified levels, and the failure to meet such levels may result in the termination or non-renewal
of such licenses. Furthermore, many of our license agreements require minimum royalty payments, and if we are unable
to generate sucient sales and profitability to cover these minimum royalty requirements, we may be required to make
additional payments to the licensors that could have a material adverse eect on our business and results of operations.
In addition, because certain of our license agreements are non-exclusive, new or existing competitors may obtain licenses
with overlapping product or geographic terms, resulting in increased competition for a particular market.
Licenses – Company as Licensor
We have entered into numerous license agreements with respect to the brands and trademarks that we own. While we have
significant control over our licensees’ products and advertising, we generally cannot control their operational and financial
issues. If our licensees are not able to meet annual sales and royalty goals, obtain financing, manage their supply chain,
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.