Dillard's 2013 Annual Report Download - page 13

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significantly increase our healthcare coverage costs or we may not be able to offer competitive health care benefits to attract
and retain employees, either of which could have an adverse effect on our reputation and have a negative impact on our
financial results.
The Company depends on its ability to attract and retain quality employees, and failure to do so could adversely affect our
ability to execute our business strategy and our operating results.
The Company's business is dependent upon attracting and retaining quality employees. The Company has a large number
of employees, many of whom are in entry level or part-time positions with historically high rates of turnover. The Company's
ability to meet its labor needs while controlling the costs associated with hiring and training new employees is subject to
external factors such as unemployment levels, prevailing wage rates, minimum wage and health reform legislation and
changing demographics. In addition, as a complex enterprise operating in a highly competitive and challenging business
environment, the Company is highly dependent upon management personnel to develop and effectively execute successful
business strategies and tactics. Any circumstances that adversely impact the Company's ability to attract, train, develop and
retain quality employees throughout the organization could adversely affect the Company's business and results of operations.
Variations in the amount of vendor allowances received could adversely impact our operating results.
We receive vendor allowances for advertising, payroll and margin maintenance that are a strategic part of our operations.
A reduction in the amount of cooperative advertising allowances would likely cause us to consider other methods of advertising
as well as the volume and frequency of our product advertising, which could increase/decrease our expenditures and/or
revenue. Decreased payroll reimbursements would either cause payroll costs to rise, negatively impacting operating income, or
cause us to reduce the number of employees, which may cause a decline in sales. A decline in the amount of margin
maintenance allowances would either increase cost of sales, which would negatively impact gross margin and operating
income, or cause us to reduce merchandise purchases, which may cause a decline in sales.
Our operations are dependent on information technology systems, and disruptions in those systems could have an adverse
impact on our results of operations.
Our operations are dependent upon the integrity, security and consistent operation of various systems and data centers,
including the point-of-sale systems in the stores, our Internet website, data centers that process transactions, communication
systems and various software applications used throughout our Company to track inventory flow, process transactions and
generate performance and financial reports. The Company's computer systems are subject to damage or interruption from
power outages, computer and telecommunications failures, computer viruses, cyberattack or other security breaches,
catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism, and usage errors by the
Company's employees. If the Company's computer systems are damaged or cease to function properly, the Company may have
to make a significant investment to repair or replace them, and the Company may suffer loss of critical data and interruptions or
delays in its operations in the interim. Any material interruption in the Company's computer systems could adversely affect its
business or results of operations. Additionally, to keep pace with changing technology, we must continuously provide for the
design and implementation of new information technology systems and enhancements of our existing systems. We could
encounter difficulties in developing new systems or maintaining and upgrading existing systems. Such difficulties could lead to
significant expenses or to losses due to disruption in business operations.
A privacy breach could adversely affect our business, reputation and financial condition.
We receive certain personal information about our employees and our customers, including information permitting
cashless payments, both in our stores and through our online operations at www.dillards.com. In addition, our online operations
depend upon the secure transmission of confidential information over public networks.
We have a longstanding Information Security Program committed to regular risk assessment practices surrounding the
protection of confidential data. This program includes rigorous network segmentation and access controls around the computer
resources that house confidential data. In response to recent high profile security breaches at other companies, we have again
evaluated the security environment surrounding the handling and control of our critical data, especially the private data we
receive from our customers, and have instituted additional measures to help protect us from a privacy breach.
Despite our substantial security measures, it is possible that unauthorized persons (through cyberattacks, which are
evolving and becoming increasingly sophisticated, physical breach or other means) might defeat our security measures in the
future and obtain personal information of customers, employees or others that we hold. Such a compromise that results in
personal information being obtained by unauthorized persons could adversely affect our reputation with our customers,
employees and others, as well as our operations, results of operations, financial condition and liquidity, and could result in
litigation against us or the imposition of penalties. In addition, a security breach could require that we expend significant