Express 2010 Annual Report Download - page 32

department stores, to generate consumer traffic in the vicinity of our stores and the continuing popularity of the
shopping center as a shopping destination. Our sales volume and traffic generally may be adversely affected by,
among other things, a decrease in popularity of malls or other shopping centers in which our stores are located,
the closing of anchor stores important to our business, a decline in popularity of other stores in the malls or other
shopping centers in which our stores are located, or a deterioration in the financial condition of shopping center
operators or developers which could, for example, limit their ability to finance tenant improvements for us and
other retailers. A reduction in consumer traffic as a result of these or any other factors, or our inability to obtain
or maintain favorable store locations within malls or other shopping centers, could have a material adverse effect
on us.
We do not own or operate any manufacturing facilities and therefore depend upon independent third parties
for the manufacture of all of our merchandise, and any inability of a manufacturer to ship goods to our
specifications or to operate in compliance with applicable laws could negatively impact our business.
We do not own or operate any manufacturing facilities. As a result, we are dependent upon our timely receipt of
quality merchandise from third-party manufacturers. A manufacturer’s inability to ship orders to us in a timely
manner or meet our quality standards could cause delays in responding to consumer demands and negatively
affect consumer confidence in the quality and value of our brand or negatively impact our competitive position,
all of which could have a material adverse effect on our financial condition or results of operations. Furthermore,
we are susceptible to increases in sourcing costs, which we may not be able to pass on to customers, and changes
in payment terms from manufacturers, which could adversely affect our financial condition or results of
operations.
Failure by our manufacturers to comply with our guidelines also exposes us to various risks, including with
respect to use of acceptable labor practices and compliance with applicable laws. We do not independently
investigate whether our vendors and manufacturers use acceptable labor practices and comply with applicable
laws, such as child labor and other labor laws, and instead rely on audits performed by several third-party
auditors. Our business may be negatively impacted should any of our manufacturers experience an interruption in
operations, including due to labor disputes and failure to comply with laws, and our business may suffer from
negative publicity for using manufacturers that do not engage in acceptable labor practices and comply with
applicable laws. Any of these results could harm our brand image and have a material adverse effect on our
business and growth.
The raw materials used to manufacture our products and our distribution and labor costs are subject to
availability constraints and price volatility, which could result in increased costs.
The raw materials used to manufacture our merchandise are subject to availability constraints and price volatility
caused by high demand for cotton, high demand for petroleum-based synthetic and other fabrics, weather
conditions, supply conditions, government regulations, economic climate, and other unpredictable factors.
In addition, our transportation and labor costs are subject to price volatility caused by the price of oil, supply of
labor, governmental regulations, economic climate and other unpredictable factors. Increases in the demand for,
or the price of, raw materials used to manufacture our merchandise and increases in transportation and labor costs
could each have a material adverse effect on our cost of sales or our ability to meet our customers’ needs. We
may not be able to pass all or a material portion of such higher raw material costs on to our customers, which
could negatively impact our profitability. Any material costs that are passed on to customers may result in a
reduction in our net sales.
The interruption of the flow of merchandise from international manufacturers could disrupt our supply chain.
We purchase the majority of our merchandise outside of the United States through arrangements with
approximately 90 vendors, utilizing approximately 325 foreign manufacturing facilities located throughout the
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