Sears 2013 Annual Report Download - page 10

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10
be harmed. Any material interruption in our computer operations may have a material adverse effect on our business
or results of operations, including on our Shop Your Way program and participation in or engagement with that
program. In addition, we are pursuing initiatives to transform our information technology processes and systems.
These initiatives are highly complex and include replacing legacy systems, upgrading existing systems, and
acquiring new systems and hardware with updated functionality. The risk of disruption is increased in periods when
such complex and significant systems changes are undertaken.
If we do not maintain the security of our member and customer, associate or company information, we could
damage our reputation, incur substantial additional costs and become subject to litigation.
Any significant security compromise, breach of member and customer, associate or company data (either held
or maintained by the Company or our third-party providers) or disruption or delay on the ability for our members to
earn or redeem points in our Shop Your Way program, could significantly damage our reputation and brands and
result in additional costs, lower participation in or engagement with our Shop Your Way program, lost sales,
exposure to fraudulent sales, government investigations, government enforcement actions, fines and/or lawsuits. The
regulatory environment related to information security and privacy is increasingly rigorous, with new and constantly
changing requirements applicable to our business, and compliance with those requirements could result in additional
costs or accelerate these costs. There is no guarantee that the procedures that we have implemented to protect against
unauthorized access to secured data are adequate to safeguard against all data security breaches. A data security
breach could result in a loss of customer or member confidence and negatively impact our business, including our
Shop Your Way program, and our results of operations.
Due to the seasonality of our business, our annual operating results would be adversely affected if our
business performs poorly in the fourth quarter.
Our business is seasonal, with a high proportion of revenues, operating income and operating cash flows being
generated during the fourth quarter of our year, which includes the holiday season. As a result, our fourth quarter
operating results significantly impact our annual operating results. Our fourth quarter operating results may fluctuate
significantly, based on many factors, including holiday spending patterns and weather conditions.
Our sales may fluctuate for a variety of reasons, which could adversely affect our results of operations.
Our business is sensitive to customers' spending patterns, which in turn are subject to prevailing economic
conditions. Our sales and results of operations have fluctuated in the past, and we expect them to continue to
fluctuate in the future. A variety of other factors affect our sales and financial performance, including:
• actions by our competitors, including opening of new stores in our existing markets or changes to the
way these competitors go to market online,
• seasonal fluctuations due to weather conditions,
• changes in our merchandise strategy and mix,
• changes in population and other demographics, and
• timing of our promotional events.
Accordingly, our results for any one quarter are not necessarily indicative of the results to be expected for any
other quarter, and comparable store sales for any particular future period may increase or decrease. For more
information on our results of operations, see “Management's Discussion and Analysis of Financial Condition and
Results of Operations” in Item 7 of this report on Form 10-K.
We rely on foreign sources for significant amounts of our merchandise, and our business may therefore be
negatively affected by the risks associated with international trade.
We depend on a large number of products produced in foreign markets. We face risks, including reputational
risks, associated with the delivery of merchandise originating outside the United States, including:
• potential economic and political instability in countries where our suppliers are located,