Banana Republic 2014 Annual Report Download - page 21

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9
by persons with whom we have commercial relationships that result in the unauthorized release of personal or
confidential information. In addition, the regulatory environment surrounding information security, cybersecurity,
and privacy is increasingly demanding, with new and changing requirements, and customers have a high
expectation that the Company will adequately protect their personal information from cyber-attack or other
security breaches. Security breaches and cyber incidents could result in a violation of applicable privacy and other
laws, significant legal and financial exposure, and a loss of consumer confidence in our security measures, which
could have an adverse effect on our results of operations and our reputation.
The failure to attract and retain key personnel, or effectively manage succession, could have an adverse
impact on our results of operations.
Our ability to anticipate and effectively respond to changing apparel trends depends in part on our ability to attract
and retain key personnel in our design, merchandising, marketing, and other functions. In addition, several of our
strategic initiatives, including our technology initiatives and supply chain initiatives require that we hire and/or
develop employees with appropriate experience. Competition for this personnel is intense, and we cannot be sure
that we will be able to attract and retain a sufficient number of qualified personnel in future periods. If we are
unable to retain, attract, and motivate talented employees with the appropriate skill sets, or if changes to our
organizational structure, operating results, or business model adversely affect morale or retention, we may not
achieve our objectives and our results of operations could be adversely impacted. In addition, the loss of one or
more of our key personnel or the inability to effectively identify a suitable successor to a key role could have a
material adverse effect on our business. At the end of fiscal 2014 and beginning of fiscal 2015, there were several
changes made to the members of our senior leadership team, including our Chief Executive Officer, Global
President, Gap, and Global President, Banana Republic. The effectiveness of the new leaders in these roles, and
any further transition as a result of these changes, could have a significant impact on our results of operations.
Our investments in omni-channel shopping initiatives may not deliver the results we anticipate.
One of our strategic priorities is to further develop an omni-channel shopping experience for our customers
through the integration of our store and digital shopping channels. Examples of our recent omni-channel initiatives
include our ship-from-store, reserve-in-store, and order-in-store programs. We continue to explore additional ways
to develop an omni-channel shopping experience, including further digital integration and customer
personalization. These initiatives involve significant investments in IT systems and significant operational
changes. In addition, our competitors are also investing in omni-channel initiatives, some of which may be more
successful than our initiatives. If the implementation of our omni-channel initiatives is not successful, or we do not
realize the return on our omni-channel investments that we anticipate, our operating results would be adversely
affected.
We experience fluctuations in our comparable sales and margins.
Our success depends in part on our ability to improve sales, in particular at our largest brands. A variety of factors
affect comparable sales or margins, including apparel trends, competition, current economic conditions, the timing
of new merchandise releases and promotional events, changes in our merchandise mix, the success of marketing
programs, foreign currency fluctuations, and weather conditions. These factors may cause our comparable sales
results to differ materially from prior periods and from expectations. Our comparable sales, including the
associated comparable online sales, have fluctuated significantly in the past on an annual, quarterly, and monthly
basis. Over the past 12 months, our reported monthly comparable sales have ranged from an increase of 9
percent in April 2014 to a decrease of 7 percent in February 2014. Over the past five years, our reported gross
margins have ranged from a high of 40.2 percent in fiscal 2010 to a low of 36.2 percent in fiscal 2011. In addition,
over the past five years, our reported operating margins have ranged from a high of 13.4 percent in fiscal 2010 to
a low of 9.9 percent in fiscal 2011.