Express 2012 Annual Report Download - page 21

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, environmental, or other
socially responsible practices or fail to 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.
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 70 vendors, utilizing approximately 335 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. Other events that could also cause disruptions to exports 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
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