DSW 2013 Annual Report Download - page 14

Table of Contents
net sales. The performance of our Affiliated Business Group is highly dependent on the performance of Stein Mart and Gordmans. If Stein Mart or Gordmans
were to terminate our supply agreements, close a significant number of stores or liquidate, it could have a material adverse effect on our business and financial
performance.
Our sales and quarterly financial performance may fluctuate for a variety of reasons, including seasonal variability.
Our business is sensitive to customers’ spending patterns, which in turn are subject to prevailing regional and national economic conditions and the general
level of economic activity. Our comparable sales and quarterly 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 quarterly financial performance, including: uncertain U.S. economic conditions and, in particular,
the retail sales environment; changes in our merchandising strategy; timing and concentration of new DSW store openings and related new store and other
start-up costs;levels of new store expenses associated with new DSW stores; changes in our merchandise mix; changes in and regional variations in
demographic and population characteristics; timing of promotional events; seasonal fluctuations due to weather conditions; and actions by our competitors.
Accordingly, our results for any one fiscal quarter are not necessarily indicative of the results to be expected for any other quarter, and comparable sales for
any particular future period may increase or decrease. Our future financial performance may fall below the expectations of securities analysts and investors.
In addition, our business is subject to seasonal merchandise trends when our customers’ interest in new seasonal styles increases. New spring styles are
introduced in the first quarter, and new fall styles are introduced in the third quarter. As a result of seasonal merchandise trends, any factors negatively
affecting us during these periods, including adverse weather, the timing and level of markdowns, fashion trends or unfavorable economic conditions, could
have a material adverse effect on our business.
The loss or disruption of information technology services could affect our ability to implement our growth strategy and have a material adverse
effect on our business.
Our information systems are an integral part of our growth strategy in efficiently operating our business, in managing the operations of a growing store base
and dsw.com and resolving security risks related to our electronic processing and transmitting of confidential customer and associate data. The requirements
to keep our information systems operating at peak performance may be higher than anticipated and could strain our capital resources, management of any
upgrades and our ability to protect ourselves from any future information security breaches. In addition, any significant disruption of our data center could
have a material adverse effect on those operations dependent on those systems, most specifically, store operations, dsw.com, our distribution and fulfillment
centers and our merchandising team. While we maintain business interruption and property insurance, in the event our data center was to be shut down, our
insurance may not be sufficient to cover the impact to the business, or insurance proceeds may not be paid timely.
We sell merchandise through our dsw.com sales channel. We are subject to various risks of operating an online selling channel such as: the failure of our
information technology infrastructure, including any third-party hardware or software, resulting in downtime or other technical issues; reliance on third-party
logistics providers to deliver our products to customers; inability to respond to technological changes; violations of state or federal laws; credit card fraud; or
other information security breaches. Failure to mitigate these risks could have a material adverse effect on our business.
We face security risks related to our electronic processing of sensitive and confidential customer and associate data; which data, if breached, could
damage our reputation and have a material adverse effect on our business.
Given the nature of our business, we collect, process and retain sensitive and confidential customer data, including credit card information. Despite our
current security measures, our facilities and systems, and those of our third-party service providers, may be vulnerable to information security breaches, acts
of vandalism, computer viruses or other similar attacks. An information security breach involving the disclosure of confidential data could damage our
reputation and our customers' willingness to shop in our stores and on dsw.com, and subject us to possible legal liability. In addition, we may incur material
remediation costs as a result of an information security breach, including liability for stolen customer or associate data, repairing system damage or providing
credit monitoring or other benefits to customers or associates affected by the breach. While we have insurance, in the event we experience an information
security breach, our insurance may not be sufficient to cover the impact to the business, or insurance proceeds may not be paid timely. Failure to mitigate these
risks could have a material adverse effect on our business.
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Source: DSW Inc., 10-K, March 27, 2014 Powered by Morningstar® Document Research℠
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.