Express 2011 Annual Report Download - page 28

operations, we will need to continue to improve and expand our operational and financial systems, real estate
management systems, transaction processing, internal controls, and business processes; in doing so, we could
encounter implementation issues and incur substantial additional expenses. The failure of our information
systems to operate effectively, problems with transitioning to upgraded or replacement systems or expanding
them into new stores, or a breach in security of these systems could adversely impact the promptness and
accuracy of our merchandise distribution, transaction processing, financial accounting and reporting, the
efficiency of our operations, and our ability to properly forecast earnings and cash requirements. We could be
required to make significant additional expenditures to remediate any such failure, problem, or breach. Such
events may have a material adverse effect on us.
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.
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, from time to time we may 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 claims under the Fair Labor Standards Act and other state labor law violations. See Note 15 to our
Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” in Part II
of this Annual Report on Form 10-K. 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.
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