Express 2015 Annual Report Download - page 13

Table of Contents
likelihood, type, or effect of any such restrictions. Trade restrictions, including new or increased tariffs or quotas, embargoes, safeguards, and customs
restrictions against apparel items, as well as labor strikes and work stoppages or boycotts, could increase the cost or reduce or delay the supply of apparel
available to us and adversely affect our business, financial condition, or results of operations.
If we encounter difficulties associated with distribution facilities or if they were to shut down for any reason, we could face shortages of inventory in our
stores, delayed shipments to our online customers, and harm to our reputation. Any of these issues, as well as loss of the use of our corporate offices due to
natural disasters or otherwise could have a material adverse effect on our business operations.
Our distribution facilities are operated by third parties. Our Columbus facility operates as our central distribution facility and supports our entire North
American business. All of our merchandise is shipped to the central distribution facility from our vendors and is then packaged and shipped to our stores or
the e-commerce distribution facility in Groveport, Ohio for further distribution to our online customers. The success of our stores and the satisfaction of our
online customers depend on their timely receipt of merchandise. The efficient flow of our merchandise requires that the third parties who operate the
distribution facilities have adequate capacity to support our current level of operations and any anticipated increased levels that may follow from the growth
of our business or during peak seasons.
If we encounter difficulties with the distribution facilities or in our relationships with the third parties who operate the facilities, or if either facility were to
shut down for any reason, including as a result of fire or other natural disaster or work stoppage, we could face shortages of inventory, resulting in “out of
stock” conditions in our stores, incur significantly higher costs and longer lead times associated with distributing our products to both our stores and online
customers, and experience dissatisfaction from our customers. Any of these issues could have a material adverse effect on our business and harm our
reputation.
The agreement we have with the third party who operates the e-commerce distribution facility is scheduled to terminate May 31, 2016. We are currently in
the process of transitioning the e-commerce fulfillment services to another third-party service provider and are developing a new order management system
that will be required in order to transition the services. If we are unable to transition these services before May 31, 2016 or otherwise suffer any significant
disruption in service as a result of the transition, we may be unable to accept or fulfill customer orders placed online, which could cause a material adverse
effect on our business due to loss of sales, customer dissatisfaction, and harm to our reputation, among other things.
In addition to our distribution facilities, our corporate offices are also vulnerable to damage from natural disasters, fire, and other unexpected events which
could cause us to experience significant disruption in our business, resulting in lost sales and productivity, and causing us to incur significant expense to
repair, any of which could have a material adverse effect on our business.
We rely upon independent third-party transportation providers for substantially all of our product shipments and are subject to increased shipping costs as
well as the potential inability of our third-party transportation providers to deliver on a timely basis.
We currently rely upon independent third-party transportation providers for substantially all of our product shipments, including shipments to and from all of
our stores and to our customers. Our utilization of these delivery services for shipments is subject to risks, including increases in fuel prices, which would
increase our shipping costs, and employee strikes and inclement weather, which may impact a shipping company's ability to provide delivery services that
adequately meet our shipping needs. If we change the shipping companies we use, we could face logistical difficulties that could adversely affect deliveries,
and we would incur costs and expend resources in connection with such change. Moreover, we may not be able to obtain terms as favorable as those received
from our current independent third-party transportation providers which, in turn, would increase our costs.
We depend on key executive management and may not be able to retain or replace these individuals or recruit additional personnel, which could harm our
business.
We depend on the leadership and experience of our key executive management. The loss of the services of any of our key executives could have a material
adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis or without incurring
increased costs, or at all. We believe that our future success will depend greatly on our continued ability to attract and retain highly skilled and qualified
personnel. There is a high level of competition for experienced, successful personnel in the retail industry. Our inability to meet our talent requirements in the
future could impair our growth and harm our business.
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