Express 2011 Annual Report Download - page 24

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 80 vendors, utilizing approximately 355 foreign manufacturing facilities located throughout the
world, primarily in Asia and Central and South America. Political, social or economic instability in Asia, Central
or South America, or in other regions in which our manufacturers are located, could cause disruptions in trade,
including exports to the United States. Other events that could also cause disruptions to exports to the United
States include:
• the imposition of additional trade law provisions or regulations;
• the imposition of additional duties, tariffs, and other charges on imports and exports;
• quotas imposed by bilateral textile agreements;
• foreign currency fluctuations;
• natural disasters;
• restrictions on the transfer of funds;
• the financial instability or bankruptcy of manufacturers; and
• significant labor disputes, such as dock strikes.
We cannot predict whether the countries in which our merchandise is manufactured, or may be manufactured in
the future, will be subject to new or additional trade restrictions imposed by the United States or other foreign
governments, including the likelihood, type, or effect of any such restrictions. Trade restrictions, including new
or increased tariffs or quotas, embargos, safeguards, and customs restrictions against apparel items, as well as
United States or foreign labor strikes and work stoppages or boycotts, could increase the cost or reduce the
supply of apparel available to us and adversely affect our business, financial condition, or results of operations.
If we encounter difficulties associated with distribution facilities or if they were to shut down for any reason,
we could face shortages of inventory, delayed shipments to our online customers, and harm to our reputation.
Any of these issues could have a material adverse effect on our business operations.
Our distribution facilities are operated by third parties. Our Columbus facility operates as our central distribution
facility and supports our entire domestic business, as all of our merchandise is shipped to the central distribution
facility from our vendors and is then packaged and shipped to our stores or the e-commerce distribution facility
in Groveport for further distribution to our online customers. The success of our stores and the satisfaction of our
online customers depend on their timely receipt of merchandise. The efficient flow of our merchandise requires
that the third parties who operate the distribution facilities have adequate capacity in both distribution facilities to
support our current level of operations and any anticipated increased levels that may follow from the growth of
our business. If we encounter difficulties with the distribution facilities or in our relationships with the third
parties who operate the facilities, or if either facility were to shut down for any reason, including as a result of
fire or other natural disaster, we could face shortages of inventory, resulting in “out of stock” conditions in our
stores, incur significantly higher costs and longer lead times associated with distributing our products to both our
stores and online customers, and experience dissatisfaction from our customers. Any of these issues could have a
material adverse effect on our business and harm our reputation.
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