Foot Locker 2005 Annual Report Download - page 18

Item 1A. Risk Factors
The statements contained in this Annual Report on Form 10-K and incorporated by reference (“Annual Report”) that
are not historical facts, including, but not limited to, statements regarding our expected financial position, business and
financing plans found in “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” constitute “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. The words “may,” “believes,” “expects,” “plans,” “intends,” “anticipates” and similar
expressions identify forward-looking statements. The actual results of the future events described in such forward-looking
statements could differ materially from those stated in such forward-looking statements.
Our actual results may differ materially due to the risks and uncertainties discussed in this Annual Report, including
those discussed below. Accordingly, readers of the Annual Report should consider these facts in evaluating the information
and are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no
obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future
events or otherwise.
The industry in which we operate is dependent upon fashion trends, customer preferences and other fashion-
related factors.
The athletic footwear and apparel industry is subject to changing fashion trends and customer preferences. We cannot
guarantee that our merchandise selection will accurately reflect customer preferences on the date of sale or that we will be
able to identify and respond quickly to fashion changes, particularly given the long lead times for ordering much of our
merchandise from vendors. For example, we order athletic footwear four to six months prior to delivery to our stores. If we
fail to accurately anticipate either the market for the merchandise in our stores or our customers’ purchasing habits, we may
be forced to rely on markdowns or promotional sales to dispose of excess, slow-moving inventory, which would have a
material adverse effect on our business, financial condition and results of operations.
A substantial portion of our highest margin sales are to young males (ages 12–25), many of whom we believe purchase
athletic footwear and licensed apparel as a fashion statement and are frequent purchasers of athletic footwear. Any shift
in fashion trends that would make athletic footwear or licensed apparel less attractive to these customers would have
a material adverse effect on our business, financial condition and results of operations.
The businesses in which we operate are highly competitive.
The retail athletic footwear and apparel business is highly competitive with relatively low barriers to entry. Our athletic
footwear and apparel operations compete primarily with athletic footwear specialty stores, sporting goods stores and
superstores, department stores, discount stores, traditional shoe stores and mass merchandisers, many of which are units
of national or regional chains that have significant financial and marketing resources. The principal competitive factors in
our markets are price, quality, selection of merchandise, reputation, store location, advertising and customer service. We
cannot assure you that we will continue to be able to compete successfully against existing or future competitors. Our
expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into
our markets could have a material adverse effect on our business, financial condition and results of operations.
Although we sell merchandise via the Internet through Footlocker.com and its affiliates, a significant shift in
customer buying patterns to purchasing athletic footwear, athletic apparel and sporting goods via the Internet could have
a material adverse effect on us. In addition, some of the manufacturers of our products distribute products directly through
the Internet and others may follow. Should this occur and if our customers decide to purchase directly from our
manufacturers, it could have a material adverse effect on our business, financial condition and results of operations.
We depend on mall traffic and our ability to identify suitable store locations.
Our sales, particularly in the United States and Canada, are dependent in part on a high volume of mall traffic. Our
stores are located primarily in enclosed regional and neighborhood malls. Mall traffic may be adversely affected by, among
other things, economic downturns, the closing of anchor department stores or changes in customer preferences or acts
of terrorism. A decline in the popularity of mall shopping among our target customers could have a material adverse effect
on us.
To take advantage of customer traffic and the shopping preferences of our customers, we need to maintain or acquire
stores in desirable locations such as in regional and neighborhood malls anchored by major department stores. We cannot
assure you that desirable mall locations will continue to be available.
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