Rue 21 2010 Annual Report Download - page 18

excess inventories, markdowns and write-offs, which could materially adversely affect us and our brand image.
Because our success depends significantly on our brand image, damage to our brand in particular would have a
negative impact on us. There can be no assurance that our new product offerings will be met with the same level of
acceptance as our past product offerings or that we will be able to adequately and timely respond to the preferences
of our customers. The failure of any new product offerings could have a material adverse effect on our business plan,
results of operations and financial condition.
Our growth strategy depends upon our ability to successfully open and operate a significant number of
new stores each year in a timely and cost-effective manner without affecting the success of our existing
store base.
Our net sales have grown appreciably during the past several years, primarily as a result of the opening of new
stores. We intend to continue to pursue our growth strategy of opening new stores for the foreseeable future, and our
future operating results will depend largely upon our ability to successfully open and operate a significant number
of new stores each year in a timely and cost-effective manner, and to profitably manage a significantly larger
business. We believe there is a significant opportunity to expand our store base from 638 locations as of January 29,
2011 to more than 1,000 stores. In fiscal year 2011, we plan to open 110 new stores, and convert 35 stores.
Our ability to successfully open and operate new stores depends on many factors including, among others, our
ability to:
• identify suitable store locations primarily in strip centers and regional malls, the availability of which is
largely outside of our control;
• negotiate acceptable lease terms, desired tenant allowances and assurances from operators and developers
that they can complete the project, which depend in part on the financial resources of the operators and
developers;
• obtain or maintain adequate capital resources on acceptable terms;
• source sufficient levels of inventory at acceptable costs;
• hire, train and retain an expanded workforce of store managers and other personnel;
• successfully integrate new stores into our existing control structure and operations, including information
system integration;
• maintain adequate distribution facility, information system and other operational system capabilities;
• identify and satisfy the merchandise and other preferences of our customers in new geographic areas and
markets; and
• address competitive, merchandising, marketing, distribution and other challenges encountered in connection
with expansion into new geographic areas and markets.
In addition, as the number of our stores increases, we may face risks associated with market saturation of our
product offerings. To the extent our new store openings are in markets where we have existing stores, we may
experience reduced net sales in existing stores in those markets. Finally, there can be no assurance that any newly
opened stores will be received as well as, or achieve net sales or profitability levels comparable to those of, our
existing stores in the time periods estimated by us, or at all. If our stores fail to achieve, or are unable to sustain,
acceptable net sales and profitability levels, our business may be materially harmed and we may incur significant
costs associated with closing those stores.
Our failure to effectively address challenges such as these could adversely affect our ability to successfully
open and operate new stores in a timely and cost-effective manner, and could have a material adverse effect on our
business, results of operations and financial condition. In addition, our current expansion plans are only estimates.
The actual number of new stores we open each year and actual number of suitable locations for our new stores could
differ significantly from these estimates. Any failure to successfully open and operate new stores in the time frames
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