Foot Locker 2013 Annual Report Download - page 30

Our business involves the storage and transmission of customers’ personal information, such as consumer prefer-
ences and credit card information. We invest in security technology to protect the Company’s data and business
processes against the risk of data security breaches and cyber-attacks. Our data security management program
includes enforcement of standard data protection policies such as Payment Card Industry compliance. Addition-
ally, we certify our major technology suppliers and any outsourced services through accepted security certification
measures. We maintain and routinely test backup systems and disaster recovery, along with external network secu-
rity penetration testing by an independent third party as part of our business continuity preparedness.
While we believe that our security technology and processes are adequate in preventing security breaches and
in reducing cyber security risks, given the ever-increasing abilities of those intent on breaching cyber security
measures and given our reliance on the security and other efforts of third-party vendors, the total security effort
at any point in time may not be completely effective, and any such security breaches and cyber incidents could
adversely affect our business. Failure of our systems, including failures due to cyber-attacks that would prevent
the ability of systems to function as intended, could cause transaction errors, loss of customers and sales, and
could have negative consequences to us, our employees, and those with whom we do business. Any security
breach involving the misappropriation, loss, or other unauthorized disclosure of confidential information by us
could also severely damage our reputation, expose us to the risks of litigation and liability, and harm our busi-
ness. While we carry insurance that would mitigate the losses to an extent, such insurance may be insufficient
to compensate us for potentially significant losses.
Risks associated with digital operations.
Our digital operations are subject to numerous risks, including risks related to the failure of the computer
systems that operate our websites and mobile sites and their related support systems, computer viruses, tele-
communications failures, and similar disruptions. Also, we may require additional capital in the future to sustain
or grow our digital commerce. Business risks related to digital commerce include risks associated with the need
to keep pace with rapid technological change, Internet security risks, risks of system failure or inadequacy,
governmental regulation, legal uncertainties with respect to the Internet, and collection of sales or other taxes
by additional states or foreign jurisdictions. If any of these risks materializes, it could have a material adverse
effect on our business.
Our reliance on key management.
Future performance will depend upon our ability to attract, retain, and motivate our executive and senior
management team. Our executives and senior management team have substantial experience and expertise in
our business and have made significant contributions to our growth and success. Our success depends to a
significant extent both upon the continued services of our current executive and senior management team, as
well as our ability to attract, hire, motivate, and retain additional qualified management in the future. While we
feel that we have adequate succession planning and executive development programs, competition for key
executives in the retail industry is intense, and our operations could be adversely affected if we cannot retain
and attract qualified executives.
Risks associated with attracting and retaining store and field associates.
Many of the store and field associates are in entry level or part-time positions with historically high rates of
turnover. If we are unable to attract and retain quality associates, our ability to meet our growth goals or to
sustain expected levels of profitability may be compromised. Our ability to meet our labor needs while control-
ling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage
legislation, overtime regulations, and changing demographics. In addition, a large number of our retail employ-
ees are paid the prevailing minimum wage which, if increased, would negatively affect our profitability.
We face risks arising from recent activity by the National Labor Relations Board in the United States.
The National Labor Relations Board continually considers changes to labor regulations, many of which could
significantly affect the nature of labor relations in the U.S. and how union elections and contract negotiations
are conducted. In 2011, the National Labor Relations Board’s definition of a bargaining unit changed, making it
possible for smaller groups of employees to organize labor unions.
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