Express 2010 Annual Report Download - page 37

We sell merchandise over the Internet through our website, express.com. Our Internet operations may be affected
by our reliance on third-party hardware and software providers, technology changes, risks related to the failure of
computer systems that operate the Internet business, telecommunications failures, electronic break-ins, and
similar disruptions. Furthermore, our ability to conduct business on the Internet may be affected by liability for
online content, patent infringement, and state and federal privacy laws.
In addition, we may now, and in the future, implement new systems to increase efficiencies and profitability. To
manage growth of our operations and personnel, we will need to continue to improve and expand our operational
and financial systems, transaction processing, internal controls, and business processes. When implementing new
or changing existing processes, we may encounter transitional issues and incur substantial additional expenses.
Experienced computer programmers and hackers, or even internal users, may be able to penetrate our network
security and misappropriate our confidential information or that of third parties, including our customers, create
system disruptions or cause shutdowns. In addition, employee error, malfeasance or other errors in the storage,
use or transmission of any such information could result in a disclosure to third parties outside of our network.
As a result, we could incur significant expenses addressing problems created by any such inadvertent disclosure
or any security breaches of our network. This risk is heightened because we collect and store customer
information, including credit card information, and use certain customer information for marketing purposes.
Any compromise of customer information could subject us to customer or government litigation and harm our
reputation, which could adversely affect our business and growth.
There are claims made against us from time to time that can result in litigation or regulatory proceedings
which could distract management from our business activities and result in significant liability.
We face the risk of litigation and other claims against us. Litigation and other claims arise in the ordinary course
of our business and include commercial disputes, intellectual property issues, consumer protection and privacy
matters, product-oriented allegations, and slip and fall claims. In addition, we could face a wide variety of
employee claims against us, including general discrimination, privacy, labor and employment, ERISA and
disability claims. For example, Express, LLC is named as a defendant in a purported class action lawsuit alleging
various California state labor law violations. See “Item 3. Legal Proceedings.” Any claims could result in
litigation against us and could also result in regulatory proceedings being brought against us by various federal
and state agencies that regulate our business, including the United States Equal Employment Opportunity
Commission. Often these cases raise complex factual and legal issues, which are subject to risks and
uncertainties and which could require significant management time. Litigation and other claims and regulatory
proceedings against us could result in unexpected expenses and liability, and could also materially adversely
affect our operations and our reputation.
In addition, we may be subject to liability if we infringe the trademarks or other intellectual property rights of
third parties. If we were to be found liable for any such infringement, we could be required to pay substantial
damages and could be subject to injunctions preventing further infringement. Such infringement claims could
subject us to boycotts by our customers and harm to our brand image. In addition, any payments we are required
to make and any injunctions we are required to comply with as a result of such infringement actions could
adversely affect our financial results.
Changes in laws, including employment laws and laws related to our merchandise, could make conducting
our business more expensive or otherwise change the way we do business.
We are subject to numerous regulations, including labor and employment, customs, truth-in-advertising,
consumer protection, privacy, and zoning and occupancy laws and ordinances that regulate retailers generally
and/or govern the importation, promotion and sale of merchandise, and the operation of stores and warehouse
facilities. If these regulations were to change or were violated by our management, employees, vendors, buying
agents or trading companies, the costs of certain goods could increase, or we could experience delays in
shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand
for our merchandise and hurt our business and results of operations.
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