Express 2013 Annual Report Download - page 12

Table of Contents
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.
If we are unable to successfully develop and maintain a relevant and reliable omni-channel experience for our customers, our financial
performance and brand image could be adversely affected.
Our business continues to evolve from a largely brick-and-mortar retail business to an omni-channel retail business. While historically we interacted with our
customers largely through our in-store experience, increasingly we interact with our customers across a variety of different channels, including in-store, online
at www.express.com, mobile technologies, and social media. Our customers are increasingly using computers, tablets, mobile phones and other devices to
shop in our stores and online and provide feedback and public commentary about all aspects of our business. Omni-channel retailing is rapidly evolving and
our success depends on our ability to anticipate and implement innovations in sales and marketing technology and logistics in order to appeal to existing and
potential customers who increasingly rely on multiple channels to meet their shopping needs. If for any reason we are unable to implement improvements to
our customer facing technology in a timely manner, provide a convenient and consistent experience for our customer across all channels, or provide our
customers the products they want, when and where they want them, then our financial performance and brand image could be adversely affected.
We rely significantly on information systems and any failure, inadequacy, interruption, or security failure of those systems could harm our ability
to effectively operate our business, harm our net sales, increase our expenses, and harm our reputation.
Our ability to effectively manage and maintain our inventory, ship products to our stores and our customers on a timely basis, communicate with our
customers, and conduct customer transactions depends significantly on our information systems. To manage the growth of our 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.
We may be exposed to risks and costs associated with credit card fraud and identity theft that would cause us to incur unexpected expenses and
loss of revenues.
A significant portion of our customer orders are placed through our website. In addition, a significant portion of sales made through our retail stores requires
the collection of certain customer data, such as credit card information. For our sales channels to function and develop successfully, we and other parties
involved in processing customer transactions must be able to transmit confidential information, including credit card information, securely over public
networks. Third parties may have the technology or knowledge to breach the security of customer transaction data. Although we have security measures related
to our systems and the privacy of our customers, we cannot guarantee these measures will effectively prevent others from obtaining unauthorized access to our
information and our customers’ information. Any person who circumvents our security measures could destroy or steal valuable information or disrupt our
operations. If such a breach were to occur, customers could lose confidence in the security of our websites or stores and choose not to purchase from us. Any
security breach could also
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