DSW 2014 Annual Report Download - page 13

Table of Contents
of either of these supply agreements, it is unlikely that we would be able to proportionately reduce expenses compared to the reduction of 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;expenses associated with new DSW stores, our omni-channel strategy and marketing expenses; 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 operations and protecting against
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 received timely.
We accept orders through dsw.com and m.dsw.com, the DSW mobile site. We are subject to various risks of operating online and mobile selling capabilities
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, are 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, on dsw.com and m.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 received
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 26, 2015 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.