Saks Fifth Avenue 2008 Annual Report Download - page 10

military action or terrorist activity (including threats of terrorist activity). Any future events arising as a result of
terrorist activity, natural disasters or other world events may have a material impact on the Company’s business,
its ability to source products, results of operations and financial condition in the future.
The Company’s flagship SFA New York store is especially susceptible to volatility in the financial markets
and employment and compensation trends in the financial sector.
The Company is restricted in its ability to incur additional debt which may affect its ability to adequately
finance its operations.
The Company is a party to a revolving credit agreement which generally prohibits additional debt, subject to
exceptions for certain unsecured debt and certain other items. The revolving credit agreement also prohibits the
Company from granting liens on its property, with limited exceptions. Subject to certain exceptions, the notes
restrict the Company from incurring secured debt or entering into sale/leaseback transactions that are, in the
aggregate greater than 15% (17.5% in the case of the senior notes due in 2013 and the convertible notes) of
consolidated net tangible assets of the Company. These restrictions under the revolving credit agreement and the
senior notes and convertible notes may affect the Company’s ability to obtain additional debt financing or
financing on favorable terms if its cash flow from operations and funds available under its revolving credit
facility are insufficient to satisfy its capital requirements.
We are unable to predict the impact of the recent downturn in the credit markets and the resulting costs or
constraints in obtaining financing on our business and financial results.
The Company’s principal sources of cash come from the Company’s operating activities and borrowings
under its revolving credit facility. The extraordinary ongoing disruption in the credit markets has had a
significant adverse impact on a number of financial institutions and has affected the cost of capital available to
the Company. The Company will continue to closely monitor its liquidity and the credit markets. The Company
cannot predict with any certainty the impact of any further disruption in the credit environment or any resulting
material impact on its liquidity, future financing costs or financial results.
The Company is dependent on its relationships with certain designers, vendors and other sources of
merchandise.
The Company’s relationships with established and emerging designers are a key factor in its position as a
retailer of luxury merchandise, and a substantial portion of its revenues are attributable to its sales of designer
merchandise. Many of the Company’s key vendors limit the number of retail channels they use to sell their
merchandise and competition among luxury retailers to obtain and sell these goods is intense. The Company’s
relationships with its designers have been a significant contributor to its past success. The Company has no
guaranteed supply arrangements with its principal merchandising sources. Accordingly, there can be no
assurance that such sources will continue to meet the Company’s quality, style and volume requirements.
Moreover, nearly all of the top designer brands sold by the Company are also sold by competing retailers, and
many of these top designer brands also have their own dedicated retail stores. If one or more of these top
designers were to cease providing the Company with adequate supplies of merchandise or, conversely, were to
increase sales of merchandise through its own stores or to the stores of other competitors, the Company’s
business could be adversely affected. In addition, any decline in the popularity or quality of any of these designer
brands could adversely affect the Company’s business.
The Company’s business and results of operations may be adversely affected by weather conditions and
natural disasters.
The Company’s business is adversely affected by unseasonable weather conditions. Periods of unseasonably
warm weather in the fall or winter or unseasonably cold or wet weather in the spring or summer affect consumer
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