Express 2011 Annual Report Download - page 22

In addition, recessionary periods may exacerbate some of the risks noted below, including consumer demand,
strain on available resources, store growth, interruption of the flow of merchandise from key vendors, and
foreign exchange rate fluctuations. The risks could be exacerbated individually or collectively.
Our business is highly dependent upon our ability to identify and respond to new and changing fashion trends,
customer preferences and other related factors, and our inability to identify and respond to these new trends
may lead to inventory markdowns and write-offs, which could adversely affect us and our brand image.
Our focus on fashion-conscious young women and men means that we have a target market of customers whose
preferences cannot be predicted with certainty and are subject to change. Our success depends in large part upon
our ability to effectively identify and respond to changing fashion trends and consumer demands and to translate
market trends into appropriate, saleable product offerings. Our failure to identify and react appropriately to new
and changing fashion trends or tastes or to accurately forecast demand for certain product offerings could lead to,
among other things, excess inventories, markdowns, and write-offs, which could materially adversely affect our
business and our brand image. Because our success depends significantly on our brand image, damage to our
brand image as a result of our failure to respond to changing fashion trends could have a negative impact on us.
We often place orders for the manufacture and purchase of merchandise well ahead of the season in which that
merchandise will be sold. Therefore, we are vulnerable to changes in consumer preference and demand between
the time we design and order our merchandise and the season in which this merchandise will be sold. There can
be no assurance that our new product offerings will have the same level of acceptance as our product offerings in
the past or that we will be able to adequately and timely respond to the preferences of our customers. The failure
of any new product offerings to appeal to our customers could have a material adverse effect on our business,
results of operations, and financial condition.
Our sales and profitability fluctuate on a seasonal basis and are affected by a variety of other factors.
Our sales and results of operations are affected by a variety of factors, including fashion trends, changes in our
merchandise mix, the effectiveness of our inventory management, actions of competitors or mall anchor tenants,
holiday or seasonal periods, changes in general economic conditions and consumer spending patterns, the timing
of promotional events, and weather conditions. As a result, our results of operations fluctuate on a quarterly basis
and relative to corresponding periods in prior years, and any of these factors could adversely affect our business
and could cause our results of operations to decline. For example, our third and fourth quarter net sales are
impacted by early Fall shopping trends and the holiday season. Likewise, we typically experience lower net sales
in the first and second quarter relative to other quarters. Any significant decrease in net sales during the early Fall
selling period or the holiday season would have a material adverse effect on us. In addition, in order to prepare
for these seasons, we must order and keep in stock significantly more merchandise than we carry during other
parts of the year. This inventory build-up may require us to expend cash faster than we generate it by our
operations during this period. Any unanticipated decrease in demand for our products during these peak shopping
seasons could require us to sell excess inventory at a substantial markdown, which could have a material adverse
effect on our business, profitability, ability to repay indebtedness, and our brand image with customers.
We could face increased competition from other retailers that could adversely affect our ability to generate
higher net sales and our ability to obtain favorable store locations.
We face substantial competition in the specialty retail apparel and accessory industry. We compete on the basis
of a combination of factors, including, among others, price, breadth, quality and style of merchandise offered,
in-store experience, level of customer service, ability to identify and offer new and emerging fashion trends, and
brand image. We compete with a wide variety of large and small retailers for customers, vendors, suitable store
locations, and personnel. We face competition from major specialty retailers that offer their own private label
assortment, department stores, regional retail chains, web-based retail stores, and other direct retailers that
engage in the retail sale of apparel, accessories, footwear, and similar merchandise to fashion-conscious young
women and men.
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