Foot Locker 2013 Annual Report Download - page 27

We may experience fluctuations in and cyclicality of our comparable-store sales results.
Our comparable-store sales have fluctuated significantly in the past, on both an annual and a quarterly basis,
and we expect them to continue to fluctuate in the future. A variety of factors affect our comparable-store sales
results, including, among others, fashion trends, product innovation, the highly competitive retail sales environ-
ment, economic conditions, timing of promotional events, changes in our merchandise mix, calendar shifts of
holiday periods, and weather conditions. Many of our products represent discretionary purchases. Accordingly,
customer demand for these products could decline in a recession or if our customers develop other priorities
for their discretionary spending. These risks could have a material adverse effect on our business, financial
condition, and results of operations.
Our operations may be adversely affected by economic or political conditions in other countries.
A significant portion of our sales and operating income for 2013 was attributable to our operations in Europe,
Canada, Australia, and New Zealand. As a result, our business is subject to the risks associated with doing
business outside of the United States such as foreign customer preferences, political unrest, disruptions or
delays in shipments, changes in economic conditions in countries in which we operate, foreign currency fluctua-
tions, real estate costs, and labor and employment practices in non-U.S. jurisdictions that may differ significantly
from those that prevail in the United States. 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 merchan-
dise 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 products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions.
Fluctuations in tax rates and duties and changes in tax legislation or regulation could have a material adverse
effect on our results of operations and financial condition.
Fluctuations in the value of the euro may affect the value of our European earnings when translated into U.S.
dollars. Although we enter into foreign exchange forward 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 foreign currencies relative to the U.S. dollar.
Macroeconomic developments may adversely affect our business.
Our performance is subject to global economic conditions and the related impact on consumer spending
levels. Continued uncertainty about global economic conditions poses a risk as consumers and businesses
postpone spending in response to tighter credit, unemployment, negative financial news, and/or declines in
income or asset values, which could have a material negative effect on demand for our products.
As a retailer that is dependent upon consumer discretionary spending, our results of operations are sensitive to
changes in macroeconomic conditions. Our customers may have less money for discretionary purchases as a
result of job losses, foreclosures, bankruptcies, increased fuel and energy costs, higher interest rates, higher
taxes, reduced access to credit, and lower home prices. There is also a risk that if negative economic conditions
persist for a long period of time or worsen, consumers may make long-lasting reductions to their discretionary
purchasing behavior. These and other economic factors could adversely affect demand for our products and
services and our financial condition and operating results.
Instability in the financial markets may adversely affect our business.
Past disruptions in the U.S. and global credit and equity markets made it difficult for many businesses to obtain
financing on acceptable terms. Although we currently have a revolving credit agreement in place until
January 27, 2017, and other than amounts used for standby letters of credit, do not have any borrowings under
it, tightening of credit markets could make it more difficult for us to access funds, refinance our existing indebt-
edness, enter into agreements for new indebtedness or obtain funding through the issuance of the Company’s
securities. Additionally, our borrowing costs can be affected by independent rating agencies’ ratings, which are
based largely on our performance as measured by credit metrics, including lease-adjusted leverage ratios.
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