Stein Mart 2010 Annual Report Download - page 9

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increases in raw material, labor and energy costs could increase our cost to acquire merchandise which could negatively impact our
margins.
We are dependent on certain key personnel. Our continued success will depend to a significant extent upon the efforts and
abilities of our senior executives, and the loss of the services of one or more of these executives could have a material adverse effect
upon our results of operations. These executives include David H. Stovall, Jr., president and chief executive officer; D. Hunt Hawkins,
executive vice president and chief administrative officer; Gregory W. Kleffner, executive vice president and chief financial officer; Brian
R. Morrow, executive vice president and chief merchandising officer; and Gary Pierce, senior vice president and director of stores; as
well as Jay Stein, chairman of the board of directors. Our continued success is also dependent upon our ability to attract and retain
qualified employees to meet our needs.
The seasonality of our business and fluctuations in sales and operating results could cause volatility in the price of our
common stock. Our business is seasonal with our highest sales occurring in the first and fourth quarters, which include the spring
and holiday seasons. Our annual operating results depend significantly upon sales generated during these quarters, and any factor
that negatively impacts these selling seasons could have a material adverse effect on our results of operations for the entire year.
Comparable store sales and quarterly operating results have fluctuated in the past and are expected to continue to fluctuate in the
future. Our stock price is influenced by these financial fluctuations, as well as other factors, including economic conditions, timing of
promotional events, actions of competitors, inventory management, changes in fashion trends and unseasonable weather conditions.
If the third parties that we rely on for a majority of the distribution aspects of our business experience labor strikes,
increased fuel costs, or do not adequately perform our distribution functions, our business could be disrupted and our cost
of goods could increase. We are dependent on our ability to receive merchandise in our stores throughout the United States in a
timely manner. We depend on vendors to source, sort and pack substantially all of our merchandise and on third parties to deliver
this merchandise to our stores. These vendors and logistics providers may experience labor strikes or other disruptions in the future,
the resolution of which will be out of our control, and could result in a material disruption in our business. Any failure by these third
parties to respond adequately to our distribution needs, including labor strikes or other disruptions in the business, would disrupt our
operations and negatively impact our profitability. In addition, although fluctuations in the price of fuel have not materially affected our
cost of goods in recent years, an inability to mitigate cost increases, unless sufficiently offset by our pricing actions, could decrease
our profitability.
Unauthorized disclosure of sensitive or confidential customer or employee information could severely damage our
reputation, expose us to risks of litigation and liability, disrupt our operations and harm our business. As part of our normal
course of business, we collect, process and retain sensitive and confidential customer and employee information. Despite the
security measures we have in place, our facilities and systems, and those of our third-party service providers, may be vulnerable to
security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar
events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether
by us or our service providers, could severely damage our reputation, expose us to risks of litigation and liability, disrupt our
operations and harm our business.
Threats of terrorism or violence. Acts of terrorism or war may disrupt commerce and undermine consumer confidence, which could
negatively impact our sales revenue by causing consumer spending to decline. Also, an act of terrorism or war, or the threat thereof,
could negatively impact our business by interfering with our ability to obtain merchandise from vendors. Inability to obtain
merchandise from our vendors or substitute suppliers at similar costs in a timely manner could have a material adverse effect on our
operating results and financial condition.
Our failure to adequately protect our trademark Stein Mart®, and, to a lesser extent, the various other marks we use in
conjunction with our private label merchandise program, could have a negative impact on our brand image. We believe that
our trademark Stein Mart® and, to a lesser extent, the various other marks that we use in connection with our private label
merchandise program, are important to us because we feel that these brands have characteristics unique to our business. We have
obtained a federal registration of the Stein Mart® trademark and various other trademarks in the United States. We cannot assure
you that the registrations that we have obtained will prevent the imitation of our business or infringement of our intellectual property
rights by others. If we are unable to protect our brand or our brand becomes associated with lesser characteristics or otherwise
carries a negative connotation, our brand image, and consequently the results of our operations, could be materially adversely
affected.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.