Rue 21 2011 Annual Report Download - page 18

We depend on key personnel and may not be able to retain or replace these individuals or recruit additional
personnel, which could harm our business.
Much of our future success depends on the continued availability and service of senior management personnel.
The loss of any of our executive officers or other key senior management personnel may have a material adverse
effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on
a timely basis. In addition, any such departure could be viewed in a negative light by investors and analysts, which
could cause our common stock price to decline.
Failure to attract and retain qualified field and store management and to control labor costs, as well as other
labor issues, could adversely affect our financial performance.
Our success depends in part upon our ability to attract, motivate and retain a sufficient number of store
employees, including store managers, who understand and appreciate our corporate culture and customers, and are
able to adequately and effectively represent our culture and establish credibility with our customers. If we are
unable to hire and retain store personnel capable of consistently providing a high level of customer service, our
ability to open new stores may be impaired, the performance of our existing and new stores could be materially
adversely affected and our brand image may be negatively impacted. We are also dependent upon temporary
personnel to adequately staff our stores and distribution facility. Any failure to meet our staffing needs or any
material increases in employee turnover rates could have a material adverse effect on our business or results of
operations.
Currently, none of our employees is represented by a union. However, our employees have the right at any time
under the National Labor Relations Act to form or affiliate with a union. If some or all our workforce were to
become unionized and the terms of the collective bargaining agreement were significantly different from our current
compensation arrangements, it could increase our costs and adversely impact our profitability. In addition, we are
evaluating the potential future impact of recently enacted comprehensive healthcare reform legislation, which will
likely cause our healthcare costs to increase.
Our ability to attract customers to our stores that are located in strip centers, regional malls and outlet centers
depends heavily on the success of the shopping centers in which our stores are located, and any decrease in
customer traffic in these shopping centers could cause our net sales to be less than expected.
Our sales are derived, to a significant degree, from the volume of traffic in the shopping centers where our
stores are located. We benefit from the ability of other shopping centers’ tenants, particularly anchor stores such as
Walmart, Target and Kohl’s, to generate consumer traffic in the vicinity of our stores and the continuing popularity
of the strip centers, regional malls and outlet centers as shopping destinations. Our sales volume and traffic may be
adversely affected by, among other things, economic downturns nationally or regionally, high fuel prices, increased
competition, changes in consumer demographics, a decrease in popularity of shopping centers or of stores in the
shopping centers in which our stores are located, the closing of anchor stores important to our business, or a
deterioration in the financial condition of shopping center operators or developers which could, for example, limit
their ability to finance shopping center improvements for us and other retailers. A reduction in consumer traffic as a
result of any of these or other factors could have a material adverse effect on us.
We plan to use cash from operations to fund our expanding business and execute on our growth strategy and
risks associated with leasing substantial amounts of space, including future increases in occupancy costs,
could have a negative impact on our cash flow.
To support our expanding business and execute our growth strategy, we will need significant amounts of cash
from operations, including funds to pay our lease obligations, build out new store space, purchase inventory, pay
personnel, further invest in our infrastructure and facilities, and pay for the increased costs associated with operating
as a public company. In particular, payments under the operating leases associated with our stores and our
distribution facility account for a significant portion of our operating expenses.
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