Foot Locker 2006 Annual Report Download - page 18

2
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 these forward-
looking statements could differ materially from those stated in the forward-looking statements.
Our actual results may differ materially due to the risks and uncertainties discussed in this Annual Report, including
those discussed below. Additional risks and uncertainties that we do not presently know about or that we currently
consider to be insignificant may also affect our business operations and financial performance. Accordingly, readers of
the Annual Report should consider these risks and uncertainties 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 when it is offered for
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 anticipate accurately 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 could 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
could 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, 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 our
business results. In addition, some of our vendors distribute products directly through the Internet and others may
follow. Some vendors operate retail stores and some have indicated that further retail stores will open. Should this
continue to occur, and if our customers decide to purchase directly from our vendors, it could have a material adverse
effect on our business, financial condition, and results of operations.