Express 2012 Annual Report Download - page 23

negotiating acceptable leases, completing projects on budget, supplying proper levels of merchandise and
successfully hiring and training store managers and sales associates. In order to optimize profitability for new
stores, we must secure desirable retail lease space when opening stores in new and existing markets. We must
choose store sites, execute favorable real estate transactions on terms that are acceptable to us, hire competent
personnel and effectively open and operate these new stores. We historically have received landlord allowances
for store build outs, which offset certain capital expenditures we must make to open a new store. If landlord
allowances cease to be available to us in the future or are decreased, opening new stores would require more
capital outlay, which could adversely affect our ability to continue opening new stores. To the extent we open
new stores in markets where we have existing stores, our existing stores in those markets may experience
reduced net sales.
Additionally, we plan to expand our business internationally through franchise agreements, joint ventures, and
company-owned and operated stores in select markets, and these plans could be negatively impacted by a variety
of factors. We may be unable to find acceptable partners with whom we can enter into agreements with, negotiate
acceptable terms for these agreements, and gain acceptance from consumers outside of the United States.
Franchise agreements also create the inherent risk as to whether such third parties are able to both effectively
operate the businesses and appropriately project our brand image in their respective markets. Ineffective or
inappropriate operation of the franchise businesses or projection of our brand image could create difficulties in
the execution of our international expansion plan.
Our domestic growth and international expansion plans will place increased demands on our financial,
operational, managerial, and administrative resources. These increased demands may cause us to operate our
business less efficiently, which in turn could cause deterioration in the performance of our existing stores.
Furthermore, relating to our international expansion, our ability to conduct business in international markets may
be affected by legal, regulatory, political, and economic risks, including our unfamiliarity with local business and
legal environments in other areas of the world. Our international expansion strategy and success could also be
adversely impacted by the global economy, as well as by fluctuations in the value of the dollar against foreign
currencies. Our planned growth will also require additional infrastructure for the development, maintenance, and
monitoring of new stores and our e-commerce business. In addition, if our current management systems and
information systems are insufficient to support this expansion, our ability to open new stores and to manage our
existing stores, e-commerce business, and franchise arrangements would be adversely affected. If we fail to
continue to improve our infrastructure, we may be unable to implement our growth strategy or maintain current
levels of operating performance in our existing stores.
Our business depends in part on a strong brand image, and if we are not able to maintain and enhance our
brand, particularly in new markets where we have limited brand recognition, we may be unable to attract
sufficient numbers of customers to our stores or sell sufficient quantities of our products.
Our ability to maintain our reputation is critical to our brand image. Our reputation could be jeopardized if we
fail to maintain high standards for merchandise quality and integrity. Any negative publicity about these types of
concerns may reduce demand for our merchandise. Failure to maintain high ethical, social, and environmental
standards for all of our operations and activities or adverse publicity regarding our responses to these concerns
could also jeopardize our reputation. Failure to comply with local laws and regulations, to maintain an effective
system of internal controls, or to provide accurate and timely financial statement information could also hurt our
reputation. Damage to our reputation or loss of consumer confidence for any of these reasons could have a
material adverse effect on our business, financial condition, and results of operations, as well as require
additional resources to rebuild our reputation.
We are subject to risks associated with leasing substantial amounts of space, including future increases in
occupancy costs.
We lease all of our store locations, our corporate offices and our central distribution facility. We typically occupy
our stores under operating leases with terms of ten years, with options to renew for additional multi-year periods
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