Express 2011 Annual Report Download - page 23

Some of our competitors have greater financial, marketing, and other resources available. In many cases, our
competitors sell their products in stores that are located in the same shopping malls or lifestyle centers as our
stores. In addition to competing for sales, we compete for favorable site locations and lease terms in shopping
malls and lifestyle centers and our competitors may be able to secure more favorable locations than us as a result
of their relationships with, or appeal to, landlords. Our competitors may also sell substantially similar products at
reduced prices through the Internet or through outlet centers or discount stores, increasing the competitive pricing
pressure for those products. We cannot assure you that we will continue to be able to compete successfully
against existing or future competitors. Our expansion into markets served by our competitors and entry of new
competitors or expansion of existing competitors into our markets could have a material adverse effect on us.
Our ability to attract customers to our stores that are located in malls or other shopping centers depends
heavily on the success of these malls and shopping centers, and any decrease in customer traffic in these malls
or shopping centers could cause our net sales to be less than expected.
A significant number of our stores are located in malls and other shopping centers. Sales at these stores are
dependent, to a significant degree, upon the volume of traffic in those shopping centers and the surrounding area. Our
stores benefit from the ability of a shopping center’s other tenants, particularly anchor stores, such as 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.
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