Foot Locker 2007 Annual Report Download - page 20

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Our operations may be adversely affected by economic or political conditions in other countries.
Approximately 27 percent of our sales and a significant portion of our operating results for 2007 were attributable
to our sales in Europe, Canada, New Zealand, and Australia. As a result, our business is subject to the risks associated with
doing business outside of the United States, such as foreign governmental regulations, foreign customer preferences,
political unrest, disruptions or delays in shipments, and changes in economic conditions in countries in which we
operate. Although we enter into forward foreign exchange contracts and option contracts to reduce the effect of
foreign currency exchange rate fluctuations, our operations may be adversely affected by significant changes in the
value of the U.S. dollar as it relates to certain foreign currencies.
In addition, because we and our suppliers have a substantial amount of our products manufactured in foreign
countries, our ability to obtain sufficient quantities of merchandise on favorable terms may be affected by governmental
regulations, trade restrictions, and economic, labor, and other conditions in the countries from which our suppliers
obtain their product.
Our business is subject to economic cycles and retail industry conditions. Purchases of discretionary athletic
footwear, apparel, and related products, tend to decline during recessionary periods when disposable income is low and
customers are hesitant to use available credit.
Complications in our distribution centers and other factors affecting the distribution of merchandise may affect
our business.
We operate four distribution centers worldwide to support our athletic business. In addition to the distribution
centers that we operate, we have additional third-party arrangements related to our operations in Canada, Australia
and New Zealand. If complications arise with any facility or any facility is severely damaged or destroyed, the other
distribution centers may not be able to support the resulting additional distribution demands. This may adversely
affect our ability to deliver inventory on a timely basis. We depend upon UPS for shipment of a significant amount of
merchandise. An interruption in service by UPS for any reason could cause temporary disruptions in our business, a loss
of sales and profits, and other material adverse effects.
Our freight cost is affected by changes in fuel prices through surcharges. Increases in fuel prices and surcharges
and other factors may increase freight costs and thereby increase our cost of sales.
A major failure of our information systems could harm our business.
We depend on information systems to process transactions, manage inventory, operate our website, purchase,
sell and ship goods on a timely basis and maintain cost-efficient operations. Any material disruption or slowdown
of our systems could cause information to be lost or delayed which could have a negative effect on our business.
We may experience operational problems with our information systems as a result of system failures, viruses, computer
“hackers” or other causes. We cannot be assured that our systems will be adequate to support future growth.
Unauthorized disclosure of sensitive or confidential customer information, whether through a breach of the
Company’s computer system or otherwise, could severely harm our business.
As part of the Company’s normal course of business, it collects, processes, and retains sensitive and confidential
customer information. Despite the security measurers the Company has in place, its facilities and systems may be
vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or
human error, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized
disclosure of confidential information by the Company could severely damage its reputation, expose it to the risks of
litigation and liability, disrupt its operations and harm its business.
Item 1B. Unresolved Staff Comments
None.