Sears 2015 Annual Report Download - page 11

of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide
these services to us, or if their systems are compromised, it could disrupt our business.
The payment methods that we offer also subject us to potential fraud and theft by persons who seek to obtain
unauthorized access to or exploit any weaknesses that may exist in the payment systems. The payment card industry
established October 1, 2015 as the date on which it will shift liability for certain transactions to retailers who are not
able to accept EMV card transactions. The Company did not implement the EMV technology and receive
certification prior to October 1, 2015, and accordingly may be liable for costs incurred by payment card issuing
banks and other third parties as a result of fraudulent use of credit card information improperly obtained from
information captured by us until such time as the technology has been implemented and certified. The Company
presently expects to complete the implementation and receive certification in its second quarter 2016.
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 Annual 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,
• increases in shipping costs,
• manufacturing and transportation delays and interruptions,
• supplier compliance with applicable laws, including labor and environmental laws, and with our global
compliance program for suppliers and factories,
• adverse fluctuations in currency exchange rates, and
• changes in U.S. and foreign laws affecting the importation and taxation of goods, including duties,
tariffs and quotas, or changes in the enforcement of those laws.
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