Saks Fifth Avenue 2008 Annual Report Download - page 12

• The competition for suitable store sites;
• The ability to negotiate favorable lease terms with landlords;
• The availability of employees to staff new stores and the Company’s ability to hire, train, motivate and
retain store personnel; and
• The ability to attract customers and generate sales sufficient to operate new stores profitably.
In future years, the Company may enter into additional markets. These markets may have different
competitive conditions, consumer trends and discretionary spending patterns than its existing markets, which
may cause new stores in these markets to be less successful than stores in existing markets.
The loss of, or disruption in, the Company’s centralized distribution centers would have a material adverse
effect on the Company’s business and operations.
The Company depends on the orderly operation of the receiving and distribution process, which depends, in
turn, on adherence to shipping schedules and effective management of distribution centers. Although the
Company believes that its receiving and distribution process is efficient, and the Company has appropriate
contingency plans, unforeseen disruptions in operations due to fire, hurricanes or other catastrophic events, labor
disagreements or shipping problems, may result in delays in the delivery of merchandise to the Company’s
stores.
Additionally, freight cost is impacted by changes in fuel prices. Fuel prices affect freight cost both on
inbound freight from vendors to the distribution centers and outbound freight from the distribution centers to the
Company’s stores.
Although the Company maintains business interruption and property insurance, management cannot be
assured that the Company’s insurance coverage will be sufficient, or that insurance proceeds will be timely paid
to the Company, if any of the distribution centers are shut down for any reason.
Loss of the Company’s trademarks and service marks or damage to the Company’s brand could have a
material adverse effect on the Company’s results of operations.
The Company owns many trademarks and service marks including, but not limited to, “Saks Fifth Avenue,”
“SFA,” “S5A,” “The Fifth Avenue Club,” “SAKSFIRST,” “Clothes (Real)”, “SFA Signature,” “SFA Classic,”
“SFA Sport” and “OFF 5th.” Management believes its trademarks and service marks are important and that the
loss of certain of its trademarks or trade names, particularly the store nameplates, could have a material adverse
effect on the Company. Many of the Company’s trademarks and service marks are registered in the United States
Patent and Trademark Office. In addition, the Company has a well-recognized brand that it believes represents
unsurpassed customer service and quality merchandise. Any significant damage to the Company’s brand or
reputation may negatively impact same-store sales, lower employee morale and productivity, and diminish
customer trust, resulting in a reduction in shareholder value.
Fluctuations in foreign currency could have an adverse impact on the Company’s business.
The Company purchases a substantial portion of its inventory from foreign suppliers who price their
merchandise in currencies other than the U.S. dollar. Although fluctuations in the Euro-U.S. dollar exchange rate
have the largest impact on the Company’s business, it procures goods from many countries and, consequently, is
affected by fluctuations in the U.S. dollar relative to the currencies of the countries from which the Company
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