Stein Mart 2011 Annual Report Download - page 9

Table of Contents
We may not be able to exit underperforming stores on acceptable terms. As part of our strategy, we close certain under-performing stores,
generally based on the lack of store profitability. Such closures subject us to costs, including lease termination payments and the write-down of
leasehold improvements, equipment, furniture and fixtures. For early terminations, we may remain liable for future lease obligations which
could adversely affect our profitability and results of operations.
Because of our focus on keeping our inventory at the forefront of fashion trends, extreme and/or unseasonable weather conditions
could force us to have higher inventory markdowns . Our business is susceptible to unseasonable weather conditions. For example,
extended periods of unseasonably warm temperatures during the fall season or cool weather during the spring season could render a portion of
our inventory incompatible with those unseasonable conditions. Prolonged unseasonable weather conditions could have a material adverse
effect on our business, financial condition and results of operations. In addition, hurricanes or other extreme weather conditions over a
prolonged period might make it difficult for our customers to travel to our stores, which could have a material adverse effect on our business,
financial condition and results of operations.
A lack of adequate sources of merchandise at acceptable prices . Our business is dependent to a significant degree upon our ability to
purchase fashion and brand name merchandise, and to do so at acceptable wholesale prices. We continuously seek out buying opportunities and
compete for these opportunities with other retailers. In the event of a further decrease in retail sales and the resulting pressure on manufacturers,
the opportunities to purchase merchandise could become limited by the consolidation or demise of merchandise vendors. Our ability to obtain
merchandise may also depend on manufacturers’ ability to obtain vendor financing through banks and factoring companies. To the extent they
are unable to secure sufficient credit, they may not be able to sell to us at acceptable terms. Although we do not depend on any single vendor or
group of vendors and believe we can successfully compete in seeking out new vendors, the loss of key vendors could make it difficult for us to
acquire sufficient quantities and an appropriate mix of merchandise, and to do so at acceptable prices which could have a material adverse
effect on our results of operations.
Increases in the price of merchandise, could increase our costs which could negatively impact our margins. We believe the underlying
costs incurred by the largely Asian-based manufacturers of our merchandise are increasing due to rising costs of raw materials, labor, energy
and transportation. We have seen some merchandise price increases from vendors in the single-digit percentage range in 2011. If such price
increases continue we may be unable to pass such increases on to our customers which could negatively impact our margins.
We are dependent on certain key personnel . Our success depends to a significant extent upon the efforts and abilities of our senior
executives. The loss of the services of one or more of these executives could have a material adverse effect upon our results of operations.
Competition for key executives in the retail industry is intense, and our operations could be adversely affected if we cannot retain our key
executives or if we fail to attract additional qualified individuals. Our continued success is also dependent upon our ability to attract and retain
qualified employees to meet our needs especially as we are currently in a search for a new Chief Executive Officer.
The seasonality of our business and fluctuations in sales and operating results could cause volatility in the price of our common stock .
Our business is seasonal with our highest sales occurring in the first and fourth quarters, which include the spring and holiday seasons. Our
annual operating results depend significantly upon sales generated during these quarters, and any factor that negatively impacts these selling
seasons could have a material adverse effect on our results of operations for the entire year. Comparable store sales and quarterly operating
results have fluctuated in the past and are expected to continue to fluctuate in the future. Our stock price is influenced by these financial
fluctuations, as well as other factors, including economic conditions, timing of promotional events, actions of competitors, inventory
management, changes in fashion trends and unseasonable weather conditions.
If the third parties that we rely on for a majority of the distribution aspects of our business experience labor strikes , increased fuel
costs, or do not adequately perform our distribution functions, our business could be disrupted and our cost of goods could increase .
We are dependent on our ability to receive merchandise in our stores throughout the United States in a timely manner. We depend on vendors
and logistics providers to source, impact, sort and pack substantially all of our merchandise and on third parties to deliver this merchandise to
our stores. These vendors and logistics providers may experience labor strikes or other disruptions in the future, the resolution of which will be
out of our control, and could result in a material disruption in our business. Any failure by these third parties to respond adequately to our
distribution needs, including labor strikes or other disruptions in the business, would disrupt our operations and negatively impact our
profitability. In addition, although fluctuations in the price of fuel have not materially affected our cost of goods in recent years, an inability to
mitigate cost increases, unless sufficiently offset by our pricing actions, could decrease our profitability.
Failure of information technology.
The operation of our business and the effective execution of our marketing strategies is dependent in large
measure on the effectiveness of our information technology systems. We are currently in the process of making material upgrades to our
merchandising and accounting information systems and a failure in the installation and operation of those systems could materially and
adversely affect our business.
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