Pier 1 2015 Annual Report Download - page 16

ITEM 1A. RISK FACTORS.
The Company’s business is subject to seasonal variations, with a significant portion of its
sales and earnings occurring during two months of the year.
The Company generally has its highest sales volumes during the November and December holiday selling season. Severe
weather or failure to predict consumer demand correctly during these months could result in lost sales or gross margin erosion if
merchandise must be marked down significantly to clear inventory.
Factors that may or may not be controllable by the Company may negatively affect the
Company’s financial results.
Increases in the Company’s costs that are beyond the Company’s control, including items such as increases in fuel and
transportation costs, higher interest rates, increases in losses from damaged merchandise, inflation, litigation, fluctuations in
foreign currency exchange rates, higher costs of labor, labor disputes around the world, increases in the costs of insurance and
healthcare, increases in postage and media costs, higher tax rates and complying with changes in laws and regulations,
including accounting standards, may negatively impact the Company’s financial results.
The Company’s business may be harmed by adverse weather conditions and natural
disasters.
Extreme or undesirable weather can negatively affect customer traffic in retail stores as well as customer shopping behavior.
Natural disasters such as earthquakes, weather phenomena, and events causing infrastructure failures could negatively affect
any of the Company’s ‘1 Pier 1’ operations, including its distribution and fulfillment centers, administrative facilities, logistical
infrastructures, or operations of its suppliers domestically and in foreign countries.
Risks Associated with Dependence on Technology
The Company is heavily dependent on various kinds of technology in the operation of its
business.
Failure of any critical software applications including software-as-a-service and “cloud” operations, technology infrastructure,
telecommunications, data communications, data storage equipment, or networks could have a negative effect, including
additional expense, on the Company’s ability to manage the merchandise supply chain, sell merchandise, accomplish payment
functions, report financial data or manage labor and staffing. Although the Company maintains off-site data backups, a
concentration of technology-related risk exists in the Company’s headquarters located in Fort Worth, Texas.
Failure to protect the integrity and security of individually identifiable data of the Company’s
customers and associates could expose the Company to litigation and/or regulatory action
and damage the Company’s reputation.
The Company receives and maintains certain personal information of its customers, vendors and associates. The collection and
use of this information by the Company is regulated at the international, national, federal and other political subdivision levels, and
is subject to certain contractual restrictions in third party agreements. Although the Company has implemented processes to
collect and protect the integrity and security of personal information, there can be no assurance that this information will not be
obtained by unauthorized persons, or collected or used inappropriately. If the security and information systems of the Company
or of its internal or external business partners are compromised or its internal or external business associates fail to comply with
these laws and regulations and this information is obtained by unauthorized persons, or collected or used inappropriately, it could
negatively affect the Company’s reputation and marketing initiatives, as well as operations and financial results, and could result in
litigation and/or regulatory action against the Company including the imposition of penalties and fines. In addition, a compromise
of the Company’s systems could result in a disruption to operations and require expanded resources to remediate, investigate,
correct and upgrade systems. As privacy and information security laws and regulations change, the Company will incur additional
costs to remain in compliance.
Failure to successfully implement new information technology systems and enhance
existing systems could negatively impact the business and its financial results.
The Company regularly invests in new information technology systems and implements modifications and upgrades to existing
systems. These investments include replacing legacy systems, making changes to existing systems, building redundancies,
acquiring new systems and hardware with updated functionality and “cloud”-based solutions such as software-as-a-service
10 PIER 1 IMPORTS, INC. 2015 Form 10-K