Stein Mart 2011 Annual Report Download - page 8

Table of Contents
Our results of operations and financial condition can be adversely affected by numerous risks and uncertainties. In evaluating the Company, the
risks and uncertainties described below should be considered carefully. Should any of these risks actually materialize, our business, financial
condition, and future prospects could be negatively impacted.
Consumer sensitivity to economic conditions
. The retail apparel business is dependent upon consumer spending and, as a fashion retailer, we
rely on the expenditure of discretionary income for most, if not all, of our sales. Economic factors, including levels of employment, the housing
market, prevailing interest rates, personal bankruptcies, energy costs and availability of credit can impact consumer spending. Consumer
confidence is also affected by both domestic and international events. Deterioration in the level of consumer spending could have a material
adverse effect on our results of operations.
Intense competition in the retail industry . We face intense competition for customers from department stores, specialty stores and regional
and national off-price retail chains. Many of these competitors are larger and have significantly greater financial and marketing resources than
we do. In addition, many department stores and other competitors have become more promotional and have reduced their price points. Certain
department stores and certain of our vendors have opened outlet stores which offer merchandise at prices that are competitive with ours. Many
of our competitors also have significant Internet sales. While we maintain an Internet site, we currently only sell gift cards and a narrow
selection of merchandise online. If we fail to successfully compete, our profitability and results of operations could be harmed.
Unanticipated changes in fashion trends and changing consumer preferences . Our success depends in part upon our ability to anticipate
and respond to changing consumer preferences and fashion trends in a timely manner. Although we attempt to stay abreast of the fashion tastes
of our customers and provide merchandise that satisfies customer demand, fashion trends can change rapidly and we cannot assure that we will
accurately anticipate shifts in fashion trends and adjust our merchandise mix to appeal to changing consumer tastes in a timely manner. If we
misjudge the market for our products or are unsuccessful in responding to changes in fashion trends or in market demand, we could experience
insufficient inventory levels and missed opportunities, or excess inventory levels and higher markdowns, either of which would have a material
adverse effect on our financial condition and results of operations.
Our advertising, marketing and promotional strategies may be ineffective and inefficient. Our profitability and results of operations may
be materially affected by the effectiveness and efficiency of our marketing expenditures and our ability to select the right markets and media in
which to advertise. In particular, we may not be successful in our efforts to create greater awareness of our stores and promotions, identify the
most effective and efficient level of spending in each market and specific media vehicle and determine the appropriate creative message and
media mix for our advertising, marketing and promotional expenditures. While we utilize different types of media, daily newspapers are an
important delivery vehicle for both run of press advertising and circular insertions. The newspaper business is under increasing economic
pressure, and the demise of certain newspapers would jeopardize an important distribution method for our advertising. As readers shift away
from newspapers, our success will depend more on our effective use of other forms of media for our advertising, marketing and promotional
strategies. Our planned marketing expenditures may not result in increased revenues. In addition, if we are not able to manage our marketing
expenditures on a cost-effective basis, our profitability and results of operations could be materially adversely affected. If our de-emphasis of
discount coupons and emphasis of our everyday value proposition does not resonate with our customers, our business could also be materially
adversely affected.
We may be unable to raise additional capital, if needed, or to raise capital on favorable terms. We believe we have more than adequate
capital to fund our business operations, including capital expenditures. If our existing cash, cash generated from operations and funds available
under our revolving credit agreement were insufficient to fund our future operations, including capital expenditures, or repay debt when it
becomes due, we may need to raise additional funds through public or private equity or debt financing. If unfavorable capital or credit market
conditions exist if and when we were to seek additional financing, we may not be able to raise sufficient capital on favorable terms or on a
timely basis, if at all. Failure to obtain capital on acceptable terms when required could have a material adverse effect on our business including
an inability to fund new growth and other capital expenditures.
We may be unable to negotiate acceptable lease terms with current and potential landlords.
Our continued growth and success depends in
part on our ability to renew and enter into new leases for successful stores. There is no assurance that we will be able to re-negotiate leases at
similar or satisfactory terms at the end of the lease, and we could be forced to move or exit trade areas if another favorable arrangement cannot
be made. There is also no assurance that we will be able to negotiate satisfactory terms on new or replacement stores.
6
ITEM 1A.
RISK FACTORS