Stein Mart 2014 Annual Report Download - page 10

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information. The systems we utilize for credit card transactions, as well as the technology utilized in such transactions, are determined and
controlled by the credit card industry. Recent breaches of security measures at major retailers have resulted in the theft and dissemination
of the confidential information of millions of customers throughout the United States. 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 and results of operations.
We rely on a single supplier for shoes sold by our shoe department and disruptions with that supplier could materially affect our
reputation, operations or financial results. We have an agreement with DSW to be the exclusive supplier of shoes sold in our shoe
departments. We rely on DSW to determine the quantity and mix of shoes to be sold, the prices at which such items are to be sold and the
fulfillment and continuing supply of inventory. If DSW was unable to provide us with sufficient amounts of inventory or inventory that meets
the fashion preferences of our customers or if DSW was unable to continue being our supplier of shoes, we may attract fewer customers
and experience a loss in net sales, which could materially affect our reputation, operations or financial results.
We have engaged a single third-party provider to create, operate and maintain our e-commerce website operations, and
disruptions with the provider or in the services it provides to us could adversely affect our reputation, operations or financial
results. We have contracted with a single third party to create, operate and host our e-commerce website and provide related order
fulfillment and customer service. We will rely on that party's operational, privacy and security procedures and controls to operate and host
our e-commerce business. Failure by such third party to adequately service these aspects of our e-commerce business could result in a
prolonged disruption that affects our customers' ability to utilize our website or receive product in a timely manner. As a result, we may
lose customer sales and/or experience increased costs, which could affect our reputation, operations or financial results. In addition, the e-
commerce operations also involve other risks that could have an impact on our results of operations including but not limited to diversion of
sales from our physical stores, liability for online content, credit card fraud and risks related to the failure of the computer systems that
operate the website and its related support systems, any of which could have an adverse effect on our business.
Acts or threats of terrorism, violence or unfavorable political conditions could harm our business. 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.
Failure to comply with legal and regulatory requirements may adversely impact our business and results of operations. Our
business is subject to many legal and regulatory requirements, including, among others, employment, trade, healthcare, tax, securities and
privacy laws and regulations. Our policies, procedures and internal controls are designed to help us comply with all applicable laws;
however, the current high level of regulatory reform across many different areas and jurisdictions has led, and may continue to lead, to
substantial new regulations and disclosure obligations. Additional legal or regulatory requirements or more stringent interpretations of
applicable requirements could increase the complexity of the regulatory environment in which we operate and the cost of compliance.
Failure to comply with the various laws and regulations, as well as changes in laws and regulations, could have an adverse impact on our
reputation, operations or financial results.
The Securities and Exchange Commission (the SEC) Investigation could materially and adversely affect our business, our
financial condition and results of operations. On July 24, 2013, the SEC informed the Company that it was conducting an investigation
of the Company and made a request for voluntary production of documents and information. Based upon the request, the Company
believes the investigation is focused on the Companys restatement of 2012 and prior financial statements and the Companys2013
change in auditors. The Company is cooperating fully with the SEC in this matter. A protracted investigation could impose substantial
costs and distractions, regardless of its outcome. There can be no assurance that any final resolution of this investigation will not have a
material and adverse effect on the Companys financial condition and results of operations.
We previously identified and have now remediated material weaknesses in our internal control over financial reporting which
may, if our remediation measures are insufficient, result in additional material misstatements in our consolidated financial
statements. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. In prior fiscal years, our management identified certain material
weaknesses in our internal control over financial reporting. We believe all such material weaknesses have been fully addressed by the
remediation measures put in place during the 2013 and 2014 fiscal years. However, if our remediation measures are insufficient to
address the material weaknesses, or if additional material weaknesses in our internal control are discovered or occur in the future, our
financial statements may contain material misstatements and we could be required to restate our financial results.