Express 2015 Annual Report Download - page 10

Table of Contents
Our sales, profitability, and cash levels fluctuate on a seasonal basis and are affected by a variety of factors, including consumer demand, our product
offerings relative to customer demand, the mix of merchandise we offer, promotions, and inventory levels.
Our sales and results of operations are affected on a seasonal basis by a variety of factors, including consumer demand, our product offerings relative to
customer demand, changes in our merchandise mix, the timing, number, and types of promotions we offer, actions of our competitors or mall anchor tenants,
the ratio of online sales to store sales, the effectiveness of our inventory management, holiday and seasonal periods, changes in general economic conditions
and consumer spending patterns, customer traffic, and weather conditions. As a result, our results of operations fluctuate on a quarterly basis and relative to
corresponding periods in prior years, and any of these factors could adversely affect our business and could cause our financial results to decline. For
example, our third and fourth quarter net sales are impacted by early Fall shopping trends and the holiday season. Any significant decrease in net sales during
the early Fall selling period or the holiday season would have a material adverse effect on us. In addition, in order to prepare for these seasons, we must order
and keep in stock significantly more merchandise than we carry during other parts of the year. This inventory build-up may require us to expend cash faster
than we generate it by our operations during this period. Any unanticipated decrease in demand for our products during these peak shopping seasons could
require us to sell excess inventory at a substantial markdown, which could have a material adverse effect on our business, results of operations, financial
condition, and our brand image with customers.
We face significant competition from other retailers that could adversely affect our ability to generate higher net sales and margins as well as our ability
to obtain favorable store locations.
We face substantial competition in the specialty retail apparel and accessories industry and expect to face increased competition as retail brands increasingly
expand their reach across the world, including into the United States. Some of our competitors have greater financial, marketing, and other resources
available. Many of our competitors sell their products in stores that are located in the same shopping malls or lifestyle centers as our stores and many also sell
their products online either exclusively or in addition to brick-and-mortar stores. Our competitors may sell substantially similar products at reduced prices,
increasing the competitive pricing pressure for those products. In addition to competing for sales, we compete for favorable site locations and lease terms in
shopping malls and lifestyle centers, and our competitors may be able to secure more favorable locations than us as a result of their relationships with, or
appeal to, landlords or their willingness and ability to pay more for leased space. We also compete with other retailers for personnel. The competition for
retail talent is increasing, and we may not be able to secure the talent we need to operate our stores without increasing wages. We cannot assure you that we
will be able to compete successfully against existing or future competitors, and our inability to do so could have a material adverse effect on us.
Our ability to attract customers to our stores that are located in malls or other shopping centers depends heavily on the success of these malls and shopping
centers, and continued decreases in customer traffic in these malls or shopping centers could cause our net sales and our profitability to be less than
expected.
A significant number of our stores are located in malls and other shopping centers and many of these malls and shopping centers have been experiencing
declines in customer traffic. Our sales at these stores are dependent, to a significant degree, upon the volume of traffic in those shopping centers and the
surrounding area, however our costs associated with these stores are essentially fixed. In times of declining traffic and sales, our ability to leverage these costs
and our profitability are negatively impacted. Our stores benefit from the ability of a shopping center's other tenants to generate consumer traffic in the
vicinity of our stores and the continuing popularity of the shopping center as a shopping destination. Our sales volume and traffic has been and may continue
to be adversely affected by, among other things, a decrease in popularity of malls or other shopping centers in which our stores are located, the closing of
anchor stores important to our business, a decline in popularity of other stores in the malls or shopping centers in which our stores are located, or a
deterioration in the financial condition of shopping center operators or developers which could, for example, limit their ability to finance tenant
improvements for us and other retailers. A reduction in consumer traffic as a result of these or any other factors could have a material adverse effect on us.
Our business depends in part on a strong brand image. If we are unable to maintain and enhance our brand, or our brand reputation is damaged for any
reason, we may fail to attract customers and suffer a significant decline in sales.
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, fail to maintain high ethical, social, and environmental standards for all of our operations and activities, or we fail to appropriately
respond to concerns associated with any of the foregoing or any other concerns from our customers. 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. We also
rely on franchisees to help us maintain our brand image and any failure to do so could have a negative impact on us. Damage to our
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