Foot Locker 2008 Annual Report Download - page 18

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Item 1A. Risk Factors
The statements contained in this Annual Report on Form 10-K (“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. Please also see “Disclosure Regarding 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.
We reported a material weakness in our internal control over financial reporting, and if we are unable to improve
our internal controls, our financial results may not be accurately reported.
Management’s assessment of the effectiveness of our internal control over financial reporting as of January 31,
2009 identified a material weakness in its internal control over financial reporting designed to ensure proper
accounting for income taxes, as described in “Item 9A. Controls and Procedures.” This material weakness, or difficulties
encountered in implementing new or improved controls or remediation, could prevent us from accurately reporting our
financial results, result in material misstatements in our financial statements or cause us to fail to meet our reporting
obligations. Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business,
the price of our common stock and market confidence in our reported financial information.
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 the bulk of our 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.