Rue 21 2012 Annual Report Download - page 22

• failure by us to process on-line customer orders properly and on time, which may negatively impact future
on-line and in-store purchases by such customers; and
• failure to integrate or execute fulfillment services into our distribution center, which may negatively impact
future on-line and in store purchases by customers.
If we are not able to provide satisfactory service to our internet customers, our future growth will be adversely
affected. Further, we may be vulnerable to the special competitive pressures from the growing e-commerce activity
in our market, both as they may impact our own e-commerce business, and as they may impact the operating results
and investment values of our existing physical stores.
We may be subject to liability if we infringe upon the trademarks or other intellectual property rights of third
parties.
We sometimes purchase merchandise from vendors who hold manufacturing and distribution rights under the
terms of certain licenses or who themselves own intellectual property rights to the merchandise. In addition, we
purchase merchandise that may be subject to design copyrights, design patents, or otherwise may incorporate
protected intellectual property. We rely upon vendors’ representations set forth in our purchase orders and vendor
agreements concerning their right to sell us the products that we purchase from them. If a third party claims to have
licensing rights with respect to merchandise we purchased from a vendor, or we acquire unlicensed merchandise, we
could be obligated to remove such merchandise from our stores, incur costs associated with destruction of such
merchandise if the distributor or vendor is unwilling or unable to reimburse us, and be subject to liability under
various civil and criminal causes of action, including actions to recover unpaid royalties and other damages and
injunctions. Although our purchase orders and vendor agreement with each vendor require the vendor to indemnify
us against such claims, a vendor may not have the financial resources to defend us, in which case we may have to
pay the costs and expenses associated with defending such claim. Any of these results could harm our brand image
and have a material adverse effect on our business and growth.
If we were to be found liable for any infringement, we could be required to pay substantial damages and could
be subject to injunctions preventing further infringement. Such infringement claims could harm our brand image. In
addition, any payments we are required to make and any injunctions we are required to comply with as a result of
such infringement actions could adversely affect our financial results.
Failure to comply with existing laws or regulations, or changes in such laws and regulations, including
employment laws and laws related to our merchandise, could make conducting our business more expensive or
otherwise change the way we do business.
We are subject to numerous laws and regulations, including labor and employment, customs, truth-in-
advertising, consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally
and/or govern the importation, promotion and sale of merchandise and the operation of stores and warehouse
facilities. Our policies, procedures and internal controls are designed to comply with all applicable laws and
regulations, including those imposed by the Sarbanes-Oxley Act of 2002, the Securities Exchange Act of 1934,
Payment Card Industry Data Security Standards (PCI/DSS) and the NASDAQ stock market rules. Failure to comply
with such laws and regulations could have a material adverse impact on our financial condition or the price of our
common stock.
Changes in international, federal, state or local laws, rules or regulations, including but not limited to laws,
rules or regulations related to employment, wages, data privacy, information security, intellectual property, taxes,
products, product safety, health and safety, and imports and exports, could increase the Company’s costs of doing
business or otherwise impact the Company’s business. These laws and regulations are complex, continuously
evolving and the related enforcement is increasingly aggressive, particularly in the state of California, which has
increased the cost of compliance. If these laws and regulations were to change or were violated by our management,
employees, vendors, buying agents or trading companies, the costs of certain goods could increase, we could be
subject to damage to our reputation, class action lawsuits, legal and settlement costs, civil and criminal liability,
restatements of our financial statements, disruption of our business and loss of customers which could hurt our
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