Five Below Inc (FIVE) 2019年年度報告「NASDAQ」.pdf

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1、 2019annual reportUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 1,2020 ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANG

2、E ACT OF 1934For the transition period from to Commission file number:001-35600 Five Below,Inc.(Exact name of Registrant as specified in its charter)Pennsylvania75-3000378(State or Other Jurisdiction ofIncorporation or Organization)(I.R.S.EmployerIdentification No.)701 Market StreetSuite 300 Philade

3、lphiaPennsylvania 19106(Address of Principal Executive Offices)(Zip Code)(215)546-7909(Registrants Telephone Number,Including Area Code)Securities registered pursuant to Section 12(b)of the Exchange Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock,$0.01 par

4、value per shareFIVEThe NASDAQ Stock Market LLCSecurities registered pursuant to Section 12(g)of the Exchange Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the securities act.Yes No Indicate by check mark if the registrant is not required t

5、o file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registran

6、t was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this c

7、hapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth com

8、pany.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company in Rule 12b-2 of the Exchange Act.Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Smaller Reporting Company Emerging Growth Company If an emerging growth c

9、ompany,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined

10、 in Rule 12b-2 of the Exchange Act).Yes No As of August 2,2019,the last business day of the registrants most recently completed second fiscal quarter,the aggregate market value of common stock(based upon the last reported sales price on The NASDAQ Global Select Market)held by non-affiliates of the r

11、egistrant was approximately$5,205,255,158.The number of shares of the registrants common stock,$0.01 par value,outstanding as of March 18,2020 was 55,603,036.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants Proxy Statement for the 2020 Annual Meeting of Shareholders to be held on June

12、16,2020(hereinafter referred to as the“Proxy Statement”)are incorporated by reference into Part III of this report.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K,or Annual Report,contains forward-looking statements pursuant to the“safe harbor”provisions of the Priva

13、te Securities Litigation Reform Act of 1995.Forward-looking statements relate to expectations,beliefs,projections,future plans and strategies,anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or conditions,such as statements regard

14、ing our industry,business strategy,goals and expectations concerning our market position,future operations or results of operations,prospects and strategies for future growth,the introduction of new merchandise,the implementation of our marketing and branding strategies,margins,profitability,capital

15、 expenditures,liquidity and capital resources and other financial and operating information.Investors can identify these statements by the fact that they use words such as anticipate,assume,”believe,continue,could,estimate,expect,intend,may,plan,potential,predict,project,future and similar terms and

16、 phrases,or the negative of these terms or other comparable terminology.The forward-looking statements contained in this Annual Report reflect our views as of the date of this report about future events and are subject to risks,uncertainties,assumptions and changes in circumstances that may cause ev

17、ents or our actual activities or results to differ significantly from those expressed in any forward-looking statement.Although we believe that the expectations reflected in the forward-looking statements are reasonable,we cannot guarantee future events,results,actions,levels of activity,performance

18、 or achievements.A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements,including,but not limited to,those factors described below,in Part I,Item 1A“Risk Factors,”and in Part II,Item 7“Managements Discussion and Analysis o

19、f Financial Condition and Results of Operations.”These factors include without limitation:uncertainties associated with the Coronavirus(or COVID-19)pandemic,including closures of our stores,adverse impacts on our sales and operations,and the risk of global recession;failure to successfully implement

20、 our growth strategy;disruptions in our ability to select,obtain,distribute and market merchandise profitably;reliance on merchandise manufactured outside of the United States;the direct and indirect impact of recent and potential tariffs imposed and proposed by the United States on foreign imports,

21、including,without limitation,the tariffs themselves,any counter-measures thereto and any indirect effects on consumer discretionary spending,which could increase the cost to us of certain products,lower our margins,increase our import related expenses,and reduce consumer spending for discretionary i

22、tems,each of which could have a material adverse effect on our business,financial condition and results of future operations;the impact of price increases,such as,a reduction in our unit sales,damage to our reputation with our customers,and becoming less competitive in the marketplace;dependence on

23、the volume of traffic to our stores and website;inability to attract and retain qualified employees;inability to successfully build,operate or expand our distribution centers or network capacity;disruptions to our distribution network or the timely receipt of inventory;extreme weather conditions in

24、the areas in which our stores are located could negatively affect our business and results of operations;the risks of cyberattacks or other cyber incidents,such as the failure to secure customers confidential or credit card information,or other private data relating to our employees or our company,i

25、ncluding the costs associated with protection against or remediation of such incidents;increased operating costs or exposure to fraud or theft due to customer payment-related risks;inability to increase sales and improve the efficiencies,costs and effectiveness of our operations;dependence on our ex

26、ecutive officers,senior management and other key personnel or inability to hire additional qualified personnel;inability to successfully manage our inventory balances and inventory shrinkage;inability to meet our lease obligations;the costs and risks of constructing and owning real property;changes

27、in our competitive environment,including increased competition from other retailers and the presence of online retailers;increasing costs due to inflation,increased operating costs,wage rate increases or energy prices;the seasonality of our business;inability to successfully implement our expansion

28、into online retail;disruptions to our information technology systems in the ordinary course or as a result of system upgrades;the impact of damage or interruptions to our technology systems;failure to maintain adequate internal controls;complications with the design or implementation of the new ente

29、rprise resource system;natural disasters,adverse weather conditions,pandemic outbreaks(in addition to COVID-19),global political events,war and terrorism;the impact of changes in tax legislation;current economic conditions and other economic factors;the impact of governmental laws and regulations;th

30、e impact of changes in accounting standards;the impact to our financial performance related to insurance programs;the costs and consequences of legal proceedings;inability to protect our brand name,trademarks and other intellectual property rights;the costs and liabilities associated with infringeme

31、nt of third party intellectual property rights;the impact of product and food safety claims and effects of legislation;inability to obtain additional financing,if needed;restrictions imposed by our indebtedness on our current and future operations;and regulations related to conflict minerals.Readers

32、 are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements.All of the forward-looking statements we have included in this Annual Report are based on information available to us on the d

33、ate of this report.We undertake no obligation to publicly update or revise any forward-looking statement,whether as a result of new information,future events or otherwise,except as otherwise required by law.INDEXPART IPageITEM 1.BUSINESSITEM 1A.RISK FACTORSITEM 1B.UNRESOLVED STAFF COMMENTSITEM 2.PRO

34、PERTIESITEM 3.LEGAL PROCEEDINGSITEM 4.MINE SAFETY DISCLOSURESPART IIITEM 5.MARKET FOR REGISTRANTS COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6.SELECTED FINANCIAL DATA ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATI

35、ONSITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A.CONTROLS AND PROCEDURESITEM 9B.OTHER INFORMATIONPART IIIITEM 10.DIREC

36、TORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11.EXECUTIVE COMPENSATIONITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCEITEM 14.PRINCIPAL ACCOUNTANT FEES AND SE

37、RVICESPART IVITEM 15.EXHIBITS AND FINANCIAL STATEMENTS SCHEDULESITEM 16.FORM 10-K SUMMARYSIGNATURES 61531323232333436454771717373737373737477786PART IITEM 1.BUSINESSRecent DevelopmentsThe outbreak of the Coronavirus(or COVID-19)continues to grow both in the U.S.and globally and is expected to advers

38、ely affect our business operations.It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving.On March 13,2020,the President of the United States declared a national emergency as a result of the outbreak in the U.S.The pandemic has caused

39、 public health officials to recommend precautions to mitigate the spread of the virus,especially when congregating in heavily populated areas,such as malls and shopping centers.In recent days there have been mandates from federal,state and local authorities requiring reduction of operating hours and

40、 forced temporary closures of non-essential retailers and other businesses,which have affected our stores,further negatively impacting our business.As a result of these developments,and out of concern for our customers,crew members and community,effective at the end of business on March 19,2020,we w

41、ill be temporarily closing all of our retail stores until at least March 31,2020.All statements in this Annual Report concerning our current and planned operations,including plans concerning opening new stores and associated capital expenditures,are modified by reference to these recent developments

42、,and our ability to carry out those plans are dependent on further developments associated with the COVID-19 pandemic.For more information,see Risks Relating to Our Business and Industry-The Coronavirus(or COVID-19)outbreak has led to the temporary closure of our stores and is expected to have an ad

43、verse impact on our results of operations,financial position and liquidity later in this Annual Report.GeneralFive Below,Inc.was incorporated in Pennsylvania in January 2002.Our principal executive office is located at 701 Market Street,Suite 300,Philadelphia,PA 19106 and our telephone number is(215

44、)546-7909.Our corporate website address is .The information contained on,or accessible through,our corporate website does not constitute part of this Annual Report.As used herein,“Five Below,”the“Company,”“we,”“us,”“our”or“our business”refers to Five Below,Inc.(collectively with its wholly owned sub

45、sidiary),except as expressly indicated or unless the context otherwise requires.We purchase products in reaction to existing marketplace trends and,hence,refer to our products as“trend-right.”We use the term“dynamic”merchandise to refer to the broad range and frequently changing nature of the produc

46、ts we display in our stores.We use the term“power”shopping center to refer to an unenclosed shopping center with 250,000 to 750,000 square feet of gross leasable area that contains three or more“big box”retailers(large retailers with floor space over 50,000 square feet)and various smaller retailers

47、with a common parking area shared by the retailers.We use the term“lifestyle”shopping center to refer to a shopping center or commercial development that is often located in suburban areas and combines the traditional retail functions of a shopping mall with leisure amenities oriented towards upscal

48、e consumers.We use the term“community”shopping center to refer to a shopping area designed to serve a trade area of 40,000 to 150,000 people where the lead tenant is a variety discount,junior department store and/or supermarket.We use the term“trade area”to refer to the geographic area from which th

49、e majority of a given retailers customers come from.Trade areas vary by market based on geographic size,population density,demographics and proximity to alternative shopping opportunities.We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consistin

50、g of a 52-or 53-week period ending on the Saturday closest to January 31 of the following year.References to fiscal year 2020 or fiscal 2020 refer to the period from February 2,2020 to January 30,2021,which consists of a 52-week fiscal year.References to fiscal year 2019 or fiscal 2019 refer to the

51、period from February 3,2019 to February 1,2020,which consists of a 52-week fiscal year.References to fiscal year 2018 or fiscal 2018 refer to the period from February 4,2018 to February 2,2019,which consists of a 52-week fiscal year.References to fiscal year 2017 or fiscal 2017 refer to the period f

52、rom January 29,2017 to February 3,2018,which consists of a 53-week fiscal year.References to“fiscal year 2016”or“fiscal 2016”refer to the period from January 31,2016 to January 28,2017,which consists of a 52-week fiscal year.References to“fiscal year 2015”or“fiscal 2015”refer to the period from Febr

53、uary 1,2015 to January 30,2016,which consists of a 52-week fiscal year.References to 2020,2019,2018,2017,2016,and 2015 are to our fiscal years unless otherwise specified.Due to the 53rd week in fiscal 2017,all comparable sales related to any reporting period during the year ended February 2,2019 are

54、 reported on a restated calendar basis using the National Retail Federations restated calendar comparing similar weeks.7Our CompanyFive Below is a rapidly growing specialty value retailer offering a broad range of trend-right,high-quality merchandise targeted at the tween and teen customer.We offer

55、a dynamic,edited assortment of exciting products,most priced at$5 and below with some items up to$10,including select brands and licensed merchandise across eight worlds:Style,Room,Sports,Tech,Create,Party,Candy and Now.In the fall of 2019,we rolled out new pricing to our full chain,increasing price

56、s on certain products to be over$5.We believe we are transforming the shopping experience of our target demographic with a differentiated merchandising strategy and high-energy retail concept,which allows our customers to“Let Go and Have Fun.”Based on our managements experience and industry knowledg

57、e,we believe our customer-centric,experience-first,innovative approach to retail has led to a fiercely loyal customer base and has fostered universal appeal across a variety of age groups beyond our target demographic.We opened the first Five Below store in the greater Philadelphia area in 2002 and,

58、since then,have been expanding throughout the United States.As of February 1,2020,we operated a total of 900 locations across 36 states.Our new store model assumes a store size of approximately 8,500 square feet and is typically located within power,community and lifestyle shopping centers across a

59、variety of urban,suburban and semi-rural markets.We opened 150 new stores in fiscal 2019 and we plan to open new stores in fiscal 2020.We believe that we have the opportunity to grow our store base to more than 2,500 locations over time.In August 2016,we commenced selling merchandise on the internet

60、,through our e-commerce website.We launched our e-commerce operation as an additional channel to serve our customers.All e-commerce sales,which includes shipping and handling revenue,are included in net sales and beginning with the third fiscal quarter of 2016,are included in comparable sales.Our e-

61、commerce expenses will have components classified as both cost of goods sold and selling,general and administrative expenses.We believe that our business model has resulted in strong financial performance irrespective of the economic environment:Our comparable sales increased by 0.6%in fiscal 2019,3

62、.9%in fiscal 2018,based on the restated calendar,and 6.5%in fiscal 2017.We expanded our store base from 625 stores at the end of fiscal year 2017 to 900 stores at the end of fiscal year 2019,representing a compounded annual growth rate of 20.0%.Between fiscal 2017 and 2019,our net sales increased fr

63、om$1.3 billion to$1.8 billion,representing a compounded annual growth rate of 20.2%.Over the same period,our operating income increased from$157.4 million to$217.3 million,representing a compounded annual growth rate of 17.5%.Our Competitive StrengthsWe believe the following strengths differentiate

64、Five Below from competitors and are the key drivers of our success:Unique Focus on the Tween and Teen Customer.We target an attractive customer segment of tweens and teens with trend-right merchandise at differentiated price points.We have built our concept to appeal to this customer base,which we b

65、elieve to be economically influential and resilient based on our industry knowledge and experience,as well as their parents and others who shop for them.Our brand concept,merchandising strategy and store ambience work in concert to create an upbeat and vibrant retail experience that is designed to a

66、ppeal to our target audience,drive traffic to our stores and website,and keep our customers engaged throughout their visits.We monitor trends in the ever-changing tween and teen markets and are able to quickly identify and respond to trends that become mainstream.Our price points enable tweens and t

67、eens to shop independently,often using their own money to make frequent purchases of items geared primarily to them and to exercise self-expression through their independent retail purchases.Broad Assortment of Trend-Right,High-Quality Merchandise with Universal Appeal.We deliver an edited assortmen

68、t of trend-right as well as everyday products within each of our category worlds that changes frequently to create a sense of anticipation and freshness,which we believe provides excitement for our customers.We have a broad range of vendors,most of which are domestically-based,which enables us to sh

69、orten response lead times,maximizes our speed to market and equips us to make more informed buying decisions.Our unique approach encourages frequent customer visits and limits the cyclical fluctuations experienced by many other specialty retailers.The breadth,depth and quality of our product mix and

70、 the diversity of our category worlds attract shoppers across a broad range of age and socio-economic demographics.8 Exceptional Value Proposition for Customers.We believe we offer a clear value proposition to our customers.Our price points,with most products priced at$5 and below,resonate with our

71、target demographic and with other value-oriented customers.We are able to deliver on this value proposition through sourcing products in a manner that is designed to achieve low cost,fast response and high item velocity and sell-through.We maintain a dynamic and collaborative relationship with our v

72、endor partners that provides us with favorable access to quality merchandise at attractive prices.We also employ an opportunistic buying strategy,capitalizing on select excess inventory opportunities with our vendors.This unique and flexible sourcing strategy allows us to offer high-quality products

73、 at exceptional value across all of our category worlds.Differentiated Shopping Experience.We believe we have created a unique and engaging in-store and online atmosphere that customers find fun and exciting.While we refresh our products frequently,we maintain a floor layout,designed with an easy-to

74、-navigate flow and featuring sight-lines across the entire store enabling customers to easily identify our category worlds.All of our stores feature a sound system playing trend-right music throughout the shopping day.We employ novel and dynamic techniques to display our products,including distincti

75、ve merchandise fixtures and colorful and stimulating signage.This approach makes our stores a destination,encouraging hands-on interaction with our products and conveying our value pricing.We have developed a unique culture that emanates from our employees,many of whom frequently shop at Five Below,

76、to our customers,thereby driving a higher level of connectivity and engagement.Additionally,we believe our price points,coupled with our dynamic merchandising approach,create an element of discovery,driving repeat visits and customer engagement.Powerful and Consistent Store Economics.We have a prove

77、n store model that generates strong cash flow,consistent store-level financial results and a high level return on investment.Our stores have been successful in varying geographic regions,population densities and real estate settings and our new stores have achieved average payback periods of less th

78、an one year.We believe our robust store model,reinforced by our rigorous site selection process and in-store execution,drives the strength and consistency of our comparable sales and financial results across all geographic regions and store-year classes.Highly Experienced and Passionate Senior Manag

79、ement Team with Proven Track Record.Our senior management team,led by Joel Anderson,our President and Chief Executive Officer,has extensive retail experience across a broad range of disciplines,including merchandising,real estate,finance,store operations,supply chain management and information techn

80、ology.Our management team drives our operating philosophy,which is based on a relentless focus on providing high-quality merchandise at exceptional value and a superior shopping experience utilizing a disciplined,low-cost operating and sourcing structure.We believe our management team is integral to

81、 our success and has positioned us well for long-term growth.Growth StrategyWe believe we can grow our net sales and earnings by executing on the following strategies:Grow Our Store Base.We believe there is significant opportunity to expand our store base throughout the United States from 900 locati

82、ons as of February 1,2020 to more than 2,500 locations within the United States over time.Based upon our strategy of store densification,we expect most of our near-term growth will occur within our existing markets,as well as new markets.This strategy allows us to benefit from enhanced brand awarene

83、ss and achieve operational efficiencies.We opened 125 net new stores in fiscal 2018 and 150 new stores in fiscal 2019,and we plan to open new stores in fiscal 2020.Our new store model assumes approximately 8,500 square feet and is primarily in-line locations within power,community and lifestyle shop

84、ping centers across a variety of urban,suburban and semi-rural markets.We have a talented and disciplined real estate management team and a rigorous real estate site selection process.We analyze the demographics of the surrounding trade areas and the performance of adjacent retailers,as well as traf

85、fic and specific site characteristics and other variables.As of February 1,2020,we have executed lease agreements for the opening of 105 new stores in fiscal 2020,Drive Comparable Sales.We expect to continue generating positive comparable sales growth by continuing to hone and refine our dynamic mer

86、chandising offering and differentiated in-store shopping experience.We intend to increase our brand awareness through cost-effective marketing efforts and enthusiastic customer engagement.We believe that executing on these strategies will increase the frequency of purchases by our existing customers

87、 and attract new customers to our stores.9 Increase Brand Awareness.We have a cost-effective marketing strategy designed to promote brand awareness and drive store and website traffic.Our strategy includes the use of digital marketing,streaming video,television,print media,philanthropic and local co

88、mmunity marketing to support existing and new market entries.We leverage our growing e-mail database,mobile website and social media presence to drive brand engagement and increased store visits within existing and new markets.We believe that our digital experience is an extension of our brand and r

89、etail stores,serving as a marketing and customer engagement tool for us.Our digital experience allows us to continue to build brand awareness,grow online sales and expand our customer base.Enhance Operating Margins.We believe we have further opportunities to drive margin improvement over time.A prim

90、ary driver of our expected margin expansion will come from leveraging our cost structure as we continue to increase our store base and drive our average net sales per store.We intend to capitalize on opportunities across our supply chain as we grow our business and achieve further economies of scale

91、.Our HistoryThe Company was incorporated in Pennsylvania in January 2002 under the name of Cheap Holdings,Inc.by David Schlessinger and Thomas Vellios,who recognized a market need for a fun and affordable shopping destination aimed at our target customer.We changed our name to Five Below,Inc.in Augu

92、st 2002.In July 2014,Joel Anderson joined the Five Below senior management team and he was appointed Chief Executive Officer effective February 1,2015.Our Market OpportunityAs a result of our unique merchandise offering and value proposition,we believe we have effectively tapped the tween and teen m

93、arkets.According to the U.S.Census Bureau,there were over 63 million people in the United States between the ages of 5 and 19,which represented over 20%of the U.S.population as of April 1,2010.Based on managements experience and industry knowledge,we believe that this segment of the population has a

94、 significant amount of disposable income as the vast majority of this age groups basic needs are already met.Our MerchandiseStrategyWe offer a dynamic,edited assortment of trend-right,high-quality products,with most priced at$5 or below,including select brands and licensed merchandise,targeted at th

95、e tween and teen customer.We believe we are transforming the shopping experience of our target demographic with a unique merchandising strategy and high-energy retail concept that our customers consider fun and exciting.Based on managements experience and industry knowledge,we believe our compelling

96、 value proposition and the dynamic nature of our merchandise offering has fostered universal appeal to customers across a variety of age groups beyond our target demographic.Our typical store features in excess of 4,000 stock-keeping units,or SKUs,across a number of our category worlds including Sty

97、le,Room,Sports,Tech,Create,Party,Candy and Now.We focus our merchandising strategy on maintaining core categories within our stores,but aim to generate high item velocity and sell-through to keep our assortment fresh and drive repeat visits.We monitor trends in our target demographic market,historic

98、al sales trends of current and prior products and the success of new product launches to ensure that our merchandise is relevant for our customers.We have a highly planned merchandise strategy focused on trend-right and everyday products supplemented by selected opportunistic purchases from our vend

99、ors to drive traffic and therefore offer our customers a consistently exciting shopping experience.We believe we offer a compelling value proposition to our customers across all of our core product categories.The common element of our dynamic merchandise selection is the consistent delivery of excep

100、tional value to the consumer,with most products offered at or below the$5 price point.Our pricing enables us to provide an extensive range of exciting products,while maintaining the attraction of a value retailer.Many of the products we sell can also be found in mall specialty stores,department stor

101、es,mass merchandisers and drug stores;however,we offer all of these products in an exciting and easy to shop retail environment at exceptional price points.10Product MixWe organize the merchandise in our stores into the following category worlds:Style:Consists primarily of accessories such as novelt

102、y socks,sunglasses,jewelry,scarves,gloves,hair accessories,athletic tops and bottoms and“attitude”t-shirts.Our style offering also includes products such as nail polish,lip gloss,fragrance,and branded cosmetics.Room:Consists of items used to complete and personalize our customers living space,includ

103、ing glitter lamps,posters,frames,fleece blankets,plush items,pillows,candles,incense,lighting,novelty dcor and related items.We also offer storage options for the customers room.Sports:Consists of an assortment of sport balls,team sports merchandise and fitness accessories,including hand weights,jum

104、p ropes and gym balls.We also offer a variety of games,including name brand board games,puzzles,collectibles and toys including remote control.In the summer season,our sports offering also includes pool,beach and outdoor toys,games and accessories.Tech:Consists of a selection of accessories for cell

105、 phones,tablets,audio and computers.The offering includes cases,chargers,headphones and other related items.We also carry a range of media products including books,video games and DVDs.Create:We offer an assortment of craft activity kits,as well as arts and crafts supplies such as crayons,markers an

106、d stickers.We also offer trend-right items for school such as backpacks,fashion notebooks and journals,novelty pens and pencils,locker accessories as well as everyday name brand items.Party:Consists of party goods,decorations,gag gifts and greeting cards,as well as every day and special occasion mer

107、chandise.Candy:Consists of branded items that appeal to tweens and teens.This category includes an assortment of classic and novelty candy bars and movie-size box candy,seasonal-related candy as well as gum and snack food.We also sell chilled drinks via coolers.Now:Consists of seasonally-specific it

108、ems used to celebrate and decorate for events such as Christmas,Easter,Halloween and St.Patricks Day.These products are most often placed at the front of the store.Set forth below is data for the following groups of products leisure,fashion and home,and party and snack.The percentage of net sales re

109、presented by each product group for each of the last three fiscal years was as follows:Percentage of Net Sales201920182017Leisure49.8%50.9%50.1%Fashion and home31.3%30.9%31.6%Party and snack18.9%18.2%18.3%Total100.0%100.0%100.0%Leisure includes items such as sporting goods,games,toys,tech,books,elec

110、tronic accessories,and arts and crafts.Fashion and home includes items such as personal accessories,“attitude”t-shirts,beauty offerings,home goods and storage options.Party and snack includes items such as party and seasonal goods,greeting cards,candy and other snacks,and beverages.Our StoresAs of F

111、ebruary 1,2020,we operated 900 stores throughout the United States.Our new store model assumes a store size of approximately 8,500 square feet.Our stores are primarily located in power,community and lifestyle shopping centers;approximately 5%of our stores are located in malls.The following map shows

112、 the number of stores in each of the states in which we operated and the locations of our distribution centers as of February 1,2020.11Store Design and LayoutWe present our products in a unique and engaging in-store atmosphere.We maintain a floor layout designed with an easy-to-navigate flow and fea

113、turing sight-lines across the entire store enabling customers to easily identify our category worlds.All of our stores feature a sound system playing popular music throughout the shopping day.We employ novel and dynamic techniques to display our products,including distinctive merchandise fixtures an

114、d colorful and stimulating signage,which attract customers,encourage hands-on interaction with our products and convey our value pricing.In addition to traditional perimeter and gondola shelving,racks and tables,we utilize innovative approaches such as wheelbarrows,oil drums and bins strategically p

115、laced throughout our stores.These techniques foster customer interaction with products,supporting the strong relationship we strive to develop with our customers and enhance our upbeat and vibrant shopping environment.Each of our category worlds is strategically located within our stores in an effor

116、t to enhance the customers shopping experience.For example,our Now offerings are located in the front of the store with the goal of catching customers attention and being“top of mind,”and specially featured value items and other key items are positioned along the center aisle.Impulse items and“dolla

117、r value”items surround the checkout areas to capture add-on purchases.Expansion Opportunities and Site SelectionOur unique focus on the tween and teen customer is supported by our real estate strategy to locate stores in high-visibility locations.We seek to operate stores in high-visibility,high-tra

118、ffic retail venues,which reinforce our brand message,heighten brand awareness and drive customer traffic.Our strategy is to saturate markets with clusters of stores because of the considerable benefit that stores derive from market concentration.Our store model is profitable across a variety of urba

119、n,suburban and semi-rural markets and in multiple real estate venues including power,community and lifestyle shopping centers.Our retail concept works well with a large and varied group of national co-tenants that drive customer traffic.We select store sites for new store openings based upon certain

120、 criteria including minimum population density requirements,availability of attractive lease terms,sufficient space and strong positioning within a center.Employees on our real estate team spend considerable time evaluating prospective sites before bringing a proposal to our real estate committee.Ou

121、r real estate committee,which is composed of senior management including our executive officers,approves all of our locations before a lease is signed.We believe there is a significant opportunity to expand our store base in the United States.We opened 150 new stores in fiscal 2019 and we intend to

122、open new stores in fiscal 2020 through expansion in existing markets and by entering new markets.We maintain a pipeline of real estate sites that have been approved by our real estate committee and have executed 12105 leases as of February 1,2020 for new stores in fiscal 2020.The actual number,locat

123、ion and timing of new store openings in 2020 will depend on a number of factors,such as retail trends,competition,the general economic environment and our ability to hire and retain new store managers and employees.Our recent store growth is summarized in the following table:PeriodStores atStart ofP

124、eriodStoresOpenedStoresClosedNetStoreIncreaseStores atEnd ofPeriodFiscal 20175221041103625Fiscal 20186251261125750Fiscal 2019750150150900Opening stores within existing markets enables Five Below to benefit from enhanced brand awareness and to achieve advertising,operating and distribution efficienci

125、es.Our targeted new store openings include additional locations in existing markets as well as expansion into new markets.In existing markets,we use a store densification strategy that promotes brand awareness and leverages marketing,operating and distribution costs.When entering new markets,we empl

126、oy a store clustering strategy,opening multiple stores in a single market on the same day,enabling us to leverage marketing and pre-opening expenses and generate initial new market brand awareness.Our store growth is supported by our new store economics,which we believe to be compelling.Our new stor

127、e model assumes a store size of approximately 8,500 square feet that achieves sales of approximately$1.8 million in the first full year of operation and an average new store cash investment of approximately$0.3 million,including our store build-out(net of tenant allowances),inventory(net of payables

128、)and cash pre-opening expenses.Our new store model targets an average payback period of less than one year on our initial investment.Store OperationsEach of our stores is managed by a store manager and one or two assistant managers who oversee full-time and part-time employees within each store.Each

129、 store manager is responsible for the day-to-day operations of his or her store,including the units operating results,maintaining a clean and appealing store environment and the hiring,training and development of employees.We also employ district managers who are responsible for overseeing the opera

130、tions of 10 to 15 stores,on average,and regional directors who are responsible for overseeing the operations of our district managers.We are guided by a philosophy that recognizes strong sales performance and customer service,allowing us to identify and reward employees who meet our high performance

131、 standards.Store managers participate in a rewarding bonus incentive program.We also recognize individual performance through internal promotions and provide extensive opportunities for advancement.Our employees are critical to achieving our goals,and we strive to hire talented people with high ener

132、gy levels and motivation.We have well-established store operating policies and procedures and an in-store training program for new store managers,assistant managers and store associates.In addition,we have a dedicated group of training and new store opening managers who are focused on ensuring a con

133、sistent new store opening and remodel process and who leverage their extensive experience and knowledge of Five Below to train new store managers.Our customer service and store procedure training programs are designed to enable employees to assist customers in a friendly manner and to help create a

134、positive sales-driven environment as well as teach successful operating practices and procedures.Merchandising,Sourcing and DistributionWe have developed a disciplined approach to buying and a dynamic inventory planning and allocation process to support our merchandising strategy.MerchandisingOur me

135、rchandising team consists of a Chief Merchandising Officer,who reports directly to our Chief Executive Officer,and is supported by general merchandising managers and an extensive team of merchandising employees.Our merchandising team works directly with our product development team and our central p

136、lanning and allocation group to ensure a consistent delivery of products across our store base.Our Chief Merchandising Officer has over 30 years of experience within the retail sector.Our product development team is led by a Senior Vice President of Business and Product Development.Our product devel

137、opment team works directly with our merchandising group to identify new and improved products through international sourcing.Our Senior Vice President of Business and Product Development has over 30 years of experience within the retail sector.13SourcingWe believe we have strong sourcing capabilitie

138、s developed through a dynamic and collaborative relationship with our vendor partners that provide us with favorable access to quality merchandise at attractive prices.We regularly purchase core merchandise in accordance with our key categories.We also employ an opportunistic buying strategy,capital

139、izing on selected excess inventory opportunities,to purchase complementary merchandise based on consumer trends,product availability and favorable economic terms.We work with approximately 800 active vendors,with no single vendor representing more than 7%of our purchases in fiscal 2019.We sourced ap

140、proximately 65%of our purchases from domestic vendors in fiscal 2019.We typically have no long-term supply agreements or exclusive arrangements with our vendors.Distribution and FulfillmentWe distribute over 85%of our merchandise for our retail stores from our approximately 1,000,000 square foot dis

141、tribution center in Pedricktown,New Jersey,our approximately 700,000 square foot distribution center in Forsyth,Georgia and our approximately 600,000 square foot distribution center in Olive Branch,Mississippi,with the remaining merchandise shipped directly from the vendor to our stores.We realize c

142、ost savings by working with our vendors to streamline and reduce packaging to diminish shipping costs.For our direct-to-customer e-commerce business,we commenced fulfillment operations in Pedricktown,New Jersey in fiscal 2018 and in Cincinnati,Ohio in fiscal 2019.We generally ship merchandise from o

143、ur distribution centers to our stores between two and four times a week,depending on the season and the volume of a specific store.We use contract carriers to ship merchandise to our stores.From time to time,we augment our distribution facilities with third-party warehousing.We continuously assess w

144、ays to maximize the productivity and efficiency of our existing distribution facilities and evaluate opportunities for additional distribution centers.In March 2019,we completed the purchase of an approximately 700,000 square foot distribution center in Forsyth,Georgia.We began operating the distrib

145、ution center in April 2019.In August 2019,we acquired land in Conroe,Texas,to build an approximately 860,000 square foot distribution center.The total cost of the land and building is expected to be approximately$56 million,of which approximately$31 million has been paid through February 1,2020.We e

146、xpect to occupy the distribution center in Conroe,Texas in 2020.We are planning to lease or build new distribution centers over the next few years to support our growth objectives.Marketing and AdvertisingOur cost-effective marketing strategy is designed to promote brand awareness and drive store an

147、d website traffic with our target demographic,as well as other value-oriented customers.Our strategy includes highlighting our brand and exceptional value proposition through the use of digital advertising,commercials(on television and through streaming),print media,and local marketing,with a focus

148、on peak selling seasons.Additionally,we rely on the strong visibility and the presence of our store locations,email messaging and community fundraising to promote and further our brand image and drive traffic.Our digital experience,anchored by our mobile e-commerce website and social media presence

149、is growing rapidly as we utilize Facebook,Instagram,YouTube and Snapchat to engage our customers with compelling digital content on a daily basis.Our marketing team works with our merchandising team to develop novel and dynamic techniques to display our products,including distinctive merchandise fix

150、tures and colorful and stimulating signage,which attract customers,encourage hands-on interaction with our products and convey our value pricing.For new store openings,we seek to create community awareness and consumer excitement through a mix of print and digital advertising,public relations and co

151、mmunity outreach promoting the grand opening and by creating an engaging grand opening event that includes contests,giveaways and signature“Five Cent”hot dogs.We also aim to execute multiple store openings in a given new market on the same day in order to leverage marketing efforts to produce maximu

152、m impact.In addition to our marketing and advertising efforts described above,we also maintain an e-commerce website()and,over the last few years,our online following has grown substantially.We use both our website and social media channels to highlight our featured products,value proposition,store

153、locations,employment opportunities,and grand openings.14CompetitionWe compete with a broad range of retailers including discount,mass merchandise,grocery,drug,convenience,variety and other specialty stores with both physical locations and online stores.Many of these retail companies operate stores i

154、n many of the areas where we operate,and many of them engage in extensive advertising and marketing efforts.We also compete with online retailers who do not have traditional brick and mortar locations.The principal basis upon which we compete is by offering a dynamic,edited assortment of trend-right

155、 products,with most priced at$5 and below,and including select brands and licensed merchandise,targeted at the tween and teen customer.We believe we are transforming the shopping experience of our target demographic with a unique merchandising strategy and high-energy retail concept that our custome

156、rs consider fun and exciting.Our success also depends in substantial part on our ability to respond quickly to trends so that we can meet the changing demands of our customers.We believe that we compare favorably relative to many of our competitors based on our merchandising strategy,edited product

157、assortment targeted at tweens and teens,store environment,flexible real estate strategy and company culture.Nonetheless,certain of our competitors have greater financial,distribution,marketing and other resources than we do.Trademarks and Other Intellectual PropertyWe own several trademarks that hav

158、e been registered with the U.S.Patent and Trademark Office,including Five Below and Five Below Hot Stuff.Cool Prices.We also own domain names,including ,and unregistered copyrights in our website content.We attempt to obtain registration of our trademarks whenever practicable and pursue any infringe

159、ment of those marks.Solely for convenience,trademarks and trade names referred to in this document may appear without the or symbols,but such references are not intended to indicate,in any way,that we will not assert,to the fullest extent under applicable law,our rights or the rights of the applicab

160、le licensor to these trademarks and trade names.We also refer to product names,trademarks,trade names and service marks that are the property of other companies.Management Information SystemsOur management information systems provide a full range of business process assistance and timely information

161、 to support our merchandising strategy,warehouse management,stores and operating and financial teams.We believe our current systems provide us with operational efficiencies,scalability,management control and timely reporting that allow us to identify and respond to merchandising and operating trends

162、 in our business.We use a combination of internal and external resources to support store point-of-sale,merchandise planning and buying,inventory management,financial reporting,real estate,human resource and administrative functions.We continuously assess ways to maximize productivity and efficiency

163、,and evaluate opportunities to further enhance our existing systems.Government RegulationWe are subject to labor and employment laws,laws governing advertising,privacy laws,safety regulations and other laws,including consumer protection regulations that regulate retailers and/or govern the promotion

164、 and sale of merchandise and the operation of stores and warehouse facilities.We monitor changes in these laws and believe that we are in material compliance with applicable laws.InsuranceWe maintain third-party insurance for a number of risk management activities including but not limited to worker

165、s compensation,cyber,directors&officers,general liability,property and employee-related health care benefits.We evaluate our insurance requirements on an ongoing basis to ensure we maintain adequate levels of coverage.EmployeesAs of February 1,2020,we employed approximately 4,400 full-time and 12,20

166、0 part-time employees.Of our total employees,approximately 500 were based at our corporate headquarters in Philadelphia,Pennsylvania,approximately 700 were based at our distribution centers in Pedricktown,New Jersey,Olive Branch,Mississippi,Forsyth,Georgia and Cincinnati,Ohio and approximately 15,40

167、0 were store employees.The number of part-time employees fluctuates depending on seasonal needs.None of our employees belong to a union or are party to any collective bargaining or similar agreement.SeasonalityOur business is seasonal in nature with the highest level of net sales and net income gene

168、rated in the fourth fiscal quarter due to the year-end holiday season and,therefore,operating results for any fiscal quarter are not necessarily indicative of 15results for the full fiscal year.To prepare for the holiday season,we must order and keep in stock more merchandise than we carry during ot

169、her parts of the year.We expect inventory levels,along with an increase in accounts payable and accrued expenses,generally to reach their highest levels in the third and fourth fiscal quarters in anticipation of the increased net sales during the year-end holiday season.As a result of this seasonali

170、ty,and generally because of variation in consumer spending habits,we experience fluctuations in net sales,net income and working capital requirements during the year.Available InformationFor more information about us,visit our website at .The contents of our website are not part of this Annual Repor

171、t on Form 10-K.Our electronic filings with the Securities and Exchange Commission(including all annual reports on Form 10-K,quarterly reports on Form 10-Q,and current reports on Form 8-K,and any amendments to these reports),including the exhibits,are available,free of charge,through our website as s

172、oon as reasonably practicable after we electronically file them with,or furnish them to,the Securities and Exchange Commission.ITEM 1A.RISK FACTORSYou should consider carefully the following risks and uncertainties when reading this Annual Report.If any of the following risks actually occurs,our bus

173、iness,financial condition and results of operations could be materially and adversely affected.In that event,the trading price of our common stock could decline.Although we believe that we have identified and discussed below the key risk factors affecting our business,there may be additional risks a

174、nd uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our performance or financial condition.Risks Relating to Our Business and IndustryThe Coronavirus(or COVID-19)outbreak has led to the temporary closure of our stores and is ex

175、pected to have an adverse impact on our results of operations,financial position and liquidity.The outbreak of the Coronavirus(or COVID-19)continues to grow both in the U.S.and globally,and related government and private sector responsive actions are expected to adversely affect our business operati

176、ons.It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving.Store traffic has decreased based on changes in consumer sentiment,fear of a recession and health concerns.On March 13,2020,the President of the United States declared a natio

177、nal emergency as a result of the COVID-19 outbreak in the U.S.The pandemic has caused public health officials to recommend precautions to mitigate the spread of the virus,especially when congregating in heavily populated areas,such as malls and shopping centers.In recent days there have been mandate

178、s from federal,state and local authorities requiring reduction of operating hours and forced temporary closures of non-essential retailers and other businesses,which have affected our stores,further negatively impacting the Companys business.As a result of these developments,out of concern for our c

179、ustomers,crew members and community,effective at the close of business on March 19,2020,we will be temporarily closing all of our retail stores until at least March 31,2020.Although we continue to sell products through our e-commerce site and our distribution centers remain open and operational thro

180、ugh the date of filing of this Annual Report,governmental mandates or illness or absence of a substantial number of distribution center employees could require that we temporarily close one or more of our distribution centers,which would complicate or prevent our fulfilling on-line orders,and once s

181、ome or all of our stores reopen,would complicate or prevent our supplying merchandise to our stores.Although it is not possible to reliably estimate the duration or severity of the pandemic and hence its financial impact on the Company,the temporary closure of our stores is expected to have an adver

182、se impact on our results of operations,financial position and liquidity.After some or all of our stores reopen,any significant reduction in consumer willingness to visit malls and shopping centers,levels of consumer spending at our stores,or employee willingness to staff our stores,or the temporary

183、closure of our stores or distribution centers,relating to the pandemic or its impact on the economy,consumer sentiment or health concerns,would result in a further loss of sales and profits and other material adverse effects.The extent to which COVID-19 impacts our results,financial position and liq

184、uidity will depend on future developments,which are highly uncertain and cannot be predicted,including new information which may emerge concerning the severity of the pandemic and the actions to contain COVID-19 or treat its impact,among others.We may not be able to successfully implement our growth

185、 strategy on a timely basis or at all,which could harm our growth and results of operations.Our growth is dependent on our ability to open profitable new stores.We believe we have an opportunity to continue to grow our store base from 900 stores in 36 states as of February 1,2020 to more than 2,500

186、locations over time.Our ability to open profitable new stores depends on many factors,including our ability to:16 identify suitable markets and sites for new stores;negotiate leases with acceptable terms;achieve brand awareness in the new markets;efficiently source and distribute additional merchand

187、ise;expand our distribution capacity by successfully opening and operating new distribution centers;maintain adequate distribution capacity,information systems and other operational system capabilities;hire,train and retain store management and other qualified employees;and achieve sufficient levels

188、 of cash flow and financing to support our expansion.Unavailability of attractive store locations,delays in the acquisition or opening of new stores,delays or costs resulting from a decrease in commercial development due to capital constraints,difficulties in staffing and operating new store locatio

189、ns or lack of customer acceptance of stores in new market areas may negatively impact our new store growth and the costs or the profitability associated with new stores.Additionally,some of our new stores may be located in areas where we have little experience or a lack of brand recognition.Those ma

190、rkets may have different competitive conditions,market conditions,consumer tastes and discretionary spending patterns than our existing markets,which may cause these new stores to be less successful than stores in our existing markets.Other new stores may be located in areas where we have existing s

191、tores.Although we have experience in these markets,increasing the number of locations in these markets may result in inadvertent over-saturation of markets and temporarily or permanently divert customers and sales from our existing stores,thereby adversely affecting our overall financial performance

192、.Accordingly,we cannot assure you that we will achieve our planned growth or,even if we are able to grow our store base as planned,that any new stores will perform as planned.If we fail to successfully implement our growth strategy,we will not be able to sustain the rapid growth in sales and profits

193、 that we expect,which would likely have an adverse impact on the price of our common stock.Any disruption in our ability to select,obtain,distribute and market merchandise attractive to customers at prices that allow us to profitably sell such merchandise could impact our business negatively.We gene

194、rally have been able to select and obtain sufficient quantities of attractive merchandise at prices that allow us to be profitable.If we are unable to continue to select products that are attractive to our customers,to obtain such products at costs that allow us to sell such products at a profit,or

195、to market such products effectively to consumers,our sales or profitability could be affected adversely.In addition,the success of our business depends in part on our ability to anticipate,identify and respond promptly to evolving trends in demographics and consumer preferences,expectations and need

196、s.If we are unable to quickly respond to developing trends or if the spending patterns or demographics of these markets change,and we do not timely and appropriately respond to such changes,then the demand for our products,which are discretionary,and our market share could be adversely affected.Fail

197、ure to maintain attractive stores and to timely identify or effectively respond to changing consumer needs,preferences and spending patterns could adversely affect our relationship with customers,the demand for our products and our market share.Any disruption in the supply or increase in pricing of

198、our merchandise could negatively impact our ability to achieve anticipated operating results.The products we sell are sourced from a wide variety of domestic and international vendors.We have not experienced any difficulty in obtaining sufficient quantities of core merchandise and believe that,if on

199、e or more of our current sources of supply become unavailable,we would generally be able to obtain alternative sources without experiencing a substantial disruption of our business.However,such alternative sources could increase our merchandise costs and reduce the quality of our merchandise,and an

200、inability to obtain alternative sources could affect our sales.Our reliance on merchandise manufactured outside of the United States subjects us to legal,regulatory,political and economic risks.In particular,tariffs imposed and proposed by the U.S.government could increase the cost to us of certain

201、products,lower our margins,increase our import related expenses,cause us to increase our prices to consumers,and reduce consumer spending on discretionary items,each of which could have a material adverse effect on our business,financial condition and results of future operations.A significant major

202、ity of our merchandise is manufactured outside of the United States,and changes in the prices and flow of these goods for any reason could have an adverse impact on our operations.The United States and other countries have occasionally proposed and enacted protectionist trade policies,which may resu

203、lt in changes in tariff structures and trade policies and restrictions that could increase the cost or reduce the availability of certain merchandise.In particular,in 2018 and 172019 the United States imposed increased tariffs on certain imports from China(up to 30%),and the President of the United

204、States,at one point,directed United States companies to immediately begin to look for alternatives to China and suggested he had the authority to order United States companies to cease production in,and importation from,China.Although a partial trade deal has been reached between the United States a

205、nd China,the trade issues between these countries are not fully resolved.The trade issues between the United States and China may continue to be volatile and difficult to predict or forecast.Increased tariffs as well as any newly imposed tariffs on items imported from China or elsewhere would likely

206、 result in lower gross margins on impacted products,unless we are able to successfully take any one or more of the following mitigating actions:negotiate lower product costs with our vendors,purchase products produced in countries with no or lower tariffs or transition away from domestic vendors who

207、 source from China or other tariff impacted countries,increase our prices,or alter or cease offering certain products.Any increase in pricing,alteration of products or reduced product offering could reduce the competitiveness of our products.Furthermore,any retaliatory counter-measures imposed by co

208、untries subject to such tariffs,such as China,could increase our,or our vendors,import expenses.Additionally,even if the products we import are not directly impacted by additional tariffs,the imposition of such additional tariffs on goods imported into the United States could cause increased prices

209、for consumer goods in general,which could have a negative impact on consumer spending for discretionary items reducing demand for our products.These direct and indirect impacts of increased tariffs or trade restrictions implemented by the United States,both individually and cumulatively,could have a

210、 material adverse effect on our business,financial condition and results of future operations.It has also been suggested that the United States may materially modify or withdraw from some of its existing trade agreements.Any of these or other measures,if ultimately enacted,or events relating to the

211、manufacturers of our merchandise and the countries in which they are located,some or all of which are beyond our control,could adversely affect our ability to access suitable merchandise on acceptable terms,negatively impact our operations,increase costs and lower our margins.Such events or circumst

212、ances include,but are not limited to:political and economic instability;the financial instability and labor problems of the manufacturers of our merchandise;the availability and cost of raw materials;merchandise quality or safety issues;changes in currency exchange rates;the regulatory environment i

213、n the countries in which the manufacturers of our merchandise are located;work stoppages or other employee rights issues;inflation or deflation;and transportation availability,costs and disruptions.Moreover,negative press or reports about products manufactured outside the United States may sway publ

214、ic opinion,and thus customer confidence,away from the products sold in our stores.These and other factors affecting the manufacturers of our merchandise who are located outside of the United States and our access to our products could adversely affect our financial performance.We have implemented pr

215、ice increases in an effort to mitigate current and future cost increases.These or future price increases could reduce our unit sales,damage our reputation with our customers as an extreme value retailer,or cause us to become less competitive in the marketplace,each of which could have a material adv

216、erse effect on our business,financial condition and results of future operations.We,like many retailers,are and may in the future be subject to increasing operational costs,including escalating product costs,the imposition of tariffs on imported goods,and higher wage and benefits costs in response t

217、o legislative requirements and competitive pressures.In fiscal 2019 we implemented price increases(including beyond$5 per item)in an effort to mitigate some or all of the risks of such operational cost increases.We can offer no assurances that price increases will be accepted by our customers,or tha

218、t price increases will be sufficient to offset the impact of future cost increases.In addition,any increase in our prices may cause our unit sales to decline,and could undermine our positioning as an extreme value retailer making us less attractive to our customers and less competitive in the market

219、place.Accordingly,such factors could have a material adverse effect on our business,financial condition and results of future operations.18Our sales depend on a volume of traffic to our stores,and a reduction in traffic to,or the closing of,anchor tenants and other destination retailers in the shopp

220、ing centers in which our stores are located could significantly reduce our sales and leave us with excess inventory.Most of our stores are located in power,community and lifestyle shopping centers that benefit from the ability of“anchor”retail tenants,generally big box stores,and other destination r

221、etailers and attractions to generate sufficient levels of consumer traffic in the vicinity of our stores.Any decline in the volume of consumer traffic at shopping centers,whether because of consumer preferences to shop on the internet or at large warehouse stores,an economic slowdown,a decline in th

222、e popularity of shopping centers,the closing of anchor stores or other destination retailers or otherwise,could result in reduced sales at our stores and leave us with excess inventory,which could have a material adverse effect on our financial results or business.An inability to attract and retain

223、qualified employees and to control labor costs,as well as other labor issues,could adversely affect our business.Our growth could be adversely impacted by an inability to attract,retain and motivate qualified employees at the store operations level,in distribution facilities,and at the corporate lev

224、el,at costs which allow us to profitably conduct our operations.Our ability to meet our labor needs,while controlling our labor costs,is subject to many external factors,including competition for and availability of qualified employees in a given market,unemployment levels within those markets,preva

225、iling wage rates,minimum wage laws,health and other insurance costs,and changes in employment and labor laws(including changes in the process for our employees to join a union)or other workplace regulation.For example,some jurisdictions in which we operate have historically enacted minimum wages tha

226、t exceed the federal standards.To the extent our competitors increase wage rates for their employees,we will likely have to increase wage rates to stay competitive and attract and retain our employees,which would increase our labor costs.If we do not maintain competitive wages,our customer service c

227、ould suffer due to declining quality of our workforce or,alternatively,our earnings could decrease if we increase our wage rates.In addition,if a significant portion of our employee base unionizes,or attempts to unionize,our labor costs could increase.Further,we believe the current pricing of our he

228、althcare costs includes the potential future impact of the Patient Protection and Affordable Care Act,but such legislation may further cause our healthcare costs to increase.Significant costs of the Patient Protection and Affordable Care Act may occur due to provisions of the legislation being phase

229、d in over time and changes to our healthcare costs structure could have a significant negative effect on our business.In addition,our ability to pass along any increase in labor costs to our customers is constrained by our low price model.19Our new store growth is dependent upon our ability to succe

230、ssfully expand our distribution network capacity,and failure to achieve or sustain these plans could affect our performance adversely.We maintain distribution centers in Pedricktown,New Jersey,Olive Branch,Mississippi,Forsyth,Georgia and Cincinnati,Ohio.We continuously assess ways to maximize the pr

231、oductivity and efficiency of our existing distribution facilities and evaluate opportunities for additional distribution centers.During fiscal 2015,we opened a distribution center in Pedricktown,New Jersey.We currently occupy approximately 1,000,000 square feet,having expanded from 800,000 square fe

232、et in September 2018.In March 2019,we completed the purchase of an approximately 700,000 square foot distribution center in Forsyth,Georgia.We began operating the distribution center in April 2019.In August 2019,we acquired land in Conroe,Texas,to build an approximately 860,000 square foot distribut

233、ion center,which we expect to occupy in 2020.In addition,we are planning to lease or build new distribution centers over the next few years to support our growth objectives.Delays in opening the planned new distribution centers could adversely affect our future operations by slowing store growth,whi

234、ch could in turn reduce sales growth.In addition,any distribution-related construction or expansion projects entail risks which could cause delays and cost overruns,such as:shortages of materials;shortages of skilled labor or work stoppages;unforeseen construction,scheduling,engineering,environmenta

235、l or geological problems;weather interference;fires or other casualty losses;and unanticipated cost increases.The completion date and ultimate cost of future projects,including opening the planned new distribution centers could differ significantly from initial expectations due to construction-relat

236、ed or other reasons.We cannot guarantee that any project will be completed on time or within established budgets.In addition,the fixed costs associated with owning,operating and maintaining our distribution centers during a period of economic weakness or declining sales can result in lower operating

237、 efficiencies,financial deleverage and potential impairment in the recorded value of distribution assets.This fixed cost structure may adversely affect profitability if sales volumes decline for an extended period of time and could have material adverse effects on our financial condition,results of

238、operations or cash flow.Furthermore,our distribution centers in Forsyth,Georgia and Conroe,Texas subject us to the risks of owning real property,which include,but are not limited to:the possibility of environmental contamination and the costs associated with remediating any environmental problems;ad

239、verse changes in the value of this property,and any future properties we may own,due to interest rate changes,changes in the neighborhood in which the property is located,or other factors;the possible need for structural improvements in order to comply with zoning,seismic and other legal or regulato

240、ry requirements;the potential disruption of our business and operations arising from or connected with a relocation due to moving to or renovating the facility;increased cash commitments for improvements to the building or the property,or both;increased operating expenses for the buildings or the pr

241、operty,or both;and the risk of financial loss in excess of amounts covered by insurance,or uninsured risks,such as the loss caused by damage to the buildings as a result of earthquakes,floods and/or other natural disasters.20A significant disruption to our distribution network or to the timely recei

242、pt of inventory could adversely impact sales or increase our transportation costs,which would decrease our profits.Because most of our products are distributed from our distribution centers,the unexpected loss of any one of our distribution centers,due to natural disaster or otherwise,would material

243、ly affect our operations.We also rely upon independent third-party transportation to provide goods to our stores in a timely and cost-effective manner,through deliveries to our distribution centers from vendors and then from the distribution centers or direct ship vendors to our stores.Our use of ou

244、tside delivery services for shipments is subject to risks outside of our control and any disruption,unanticipated expense or operational failure related to this process could affect store operations negatively.For example,unexpected delivery delays or increases in transportation costs(including thro

245、ugh increased fuel costs or a decrease in transportation capacity for overseas shipments or resulting from labor shortages or work stoppages)could significantly decrease our ability to generate sales and earn profits.If we change shipping companies,we could face logistical difficulties that could ad

246、versely impact deliveries and we would incur costs and expend resources in connection with such change.Moreover,we may not be able to obtain terms as favorable as those received from the independent third-party transportation providers we currently use,which would increase our costs.Additionally,lon

247、g-term disruptions to the United States and international transportation infrastructure from wars,political unrest,terrorism,natural disasters,governmental budget constraints and other significant events that could lead to delays or interruptions of service could adversely affect our business.As we

248、seek to expand our operation through the implementation of our online retail capabilities,we may face increased or unexpected demands on distribution center operations,as well as new demands on our distribution network.Extreme weather conditions in the areas in which our stores are located could neg

249、atively affect our business and results of operations.Extreme weather conditions in the areas in which our stores are located could negatively affect our business and results of operations.We have a significant number of stores in the Northeastern and Midwestern regions of the United States,which ar

250、e prone to inclement weather conditions,as well as severe storms.Such inclement weather could have a significant impact on consumer behavior,travel and store traffic patterns,as well as our ability to operate our stores.For example,frequent or unusually heavy snowfall,ice storms,rainstorms or other

251、extreme weather conditions over a prolonged period could make it difficult for our customers to travel to our stores and thereby reduce our sales and profitability.In addition,we typically generate higher revenues and gross margins during our fourth fiscal quarter,which includes the year-end holiday

252、 season.If weather conditions are not favorable during these periods,our operating results and cash flow from operations could be adversely affected.If we are unable to secure our customers confidential or credit card information,or other private data relating to our employees or our Company,we coul

253、d be subject to negative publicity,costly government enforcement actions or private litigation,which could damage our business reputation and adversely affect our financial results.As with other companies,we are periodically subject to cyberattacks.Cyberattacks and other cyber incidents are occurrin

254、g more frequently,are constantly evolving in nature,are becoming more sophisticated and are being made by groups and individuals(including criminal hackers,hacktivists,state-sponsored institutions,terrorist organizations and individuals or groups participating in organized crime)with a wide range of

255、 expertise and motives(including monetization of corporate,payment or other internal or personal data,theft of trade secrets and intellectual property for competitive advantage and leverage for political,social,economic and environmental reasons).Such cyberattacks and cyber incidents can take many f

256、orms including cyber extortion,denial of service,social engineering,such as impersonation attempts to fraudulently induce employees or others to disclose information or unwittingly provide access to systems or data,introduction of viruses or malware,such as ransomware through phishing emails,website

257、 defacement or theft of passwords and other credentials.Although we may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents,no cyberattack or other cyber incident has,to our knowledge,had a material adverse effect on our business,financial condition or

258、results of operations to date.The protection of our customer,employee and company data is critical to us.The regulatory environment surrounding information security and privacy is increasingly demanding,with the frequent imposition of new and constantly changing requirements that affect our business

259、.In addition,customers have a high expectation that we will adequately protect their personal information from cyberattack or other security breaches.We have procedures and technology in place designed to safeguard our customers debit and credit card and other personal information,our employees priv

260、ate data and company records,intellectual property and other confidential information,and we continue to devote significant resources to network security,backup and disaster recovery,and other security measures,including training,to protect our systems and data.Nevertheless,these security measures c

261、annot provide absolute security or guarantee that we will be successful in preventing or responding to every such breach or disruption,including through the intentional or negligent actions of our employees,business associates or third parties.As a result,unauthorized parties may obtain access to ou

262、r data systems and misappropriate customer data and company confidential information.21There can be no assurance that advances in computer capabilities,new discoveries in the field of cryptography or other developments will prevent the compromise of our customer transaction processing capabilities a

263、nd personal data.Furthermore,because the techniques used to obtain unauthorized access,disable or degrade service,or sabotage systems change frequently and often are not recognized until launched against a target,we may be unable to anticipate these techniques or to implement adequate preventative m

264、easures.If any such compromise of our security or the security of information residing with our business associates or third parties were to occur,we could be exposed to negative publicity,government enforcement actions,card issuer fines and/or penalties,private litigation or costly response measure

265、s.In addition,our reputation within the business community and with our customers may be affected,which could result in our customers discontinuing the use of debit or credit cards in our stores,or not shopping in our stores altogether.This could cause us to lose market share to our competitors and

266、could have an adverse effect on our financial results.We are subject to customer payment-related risks that could increase operating costs or exposure to fraud or theft,subject us to potential liability and potentially disrupt our business.We accept payments using a variety of methods,including cash

267、,credit and debit cards and gift cards.Acceptance of these payment options subjects us to rules,regulations,contractual obligations and compliance requirements,including payment network rules and operating guidelines,data security standards and certification requirements,and rules governing electron

268、ic funds transfers.Any inability to comply with such requirements may subject us to increased risk of liability for fraudulent transactions and may adversely affect our business and operating results.For certain payment methods,including credit and debit cards,we pay interchange and other fees,which

269、 may increase over time and raise our operating costs.We rely on third parties to provide payment processing services,including the processing of credit cards,debit cards,and other forms of electronic payment.If these companies become unable to provide these services to us,or if their systems are co

270、mpromised,it could potentially disrupt our business.The payment methods that we offer also subject us to potential fraud and theft by criminals,who are becoming increasingly more sophisticated,seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems.If we

271、fail to comply with applicable rules or requirements for the payment methods we accept,or if payment-related data is compromised due to a breach or misuse of data,we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees

272、,or our ability to accept or facilitate certain types of payments may be impaired.In addition,our customers could lose confidence in certain payment types,which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs.As a result,our bu

273、siness and operating results could be adversely affected.Our growth from existing stores is dependent upon our ability to increase sales and improve the efficiencies,costs and effectiveness of our operations,and failure to achieve or sustain these plans could affect our performance adversely.Increas

274、es in sales in existing stores are dependent on factors such as competition,including from online retailers,merchandise selection,store operations and customer satisfaction.If we fail to realize our goals of successfully managing our store operations and increasing our customer retention and recruit

275、ment levels,our sales may not increase and our growth may be impacted adversely.Our success depends on our executive officers,senior management,district,store,and distribution center managers,and other key personnel.If we lose our executive officers,senior management,district,store,and distribution

276、center managers,or any other key personnel,or are unable to hire additional qualified personnel,our business could be harmed.Our future success depends to a significant degree on the skills,experience and efforts of our executive officers,senior management,district,store,and distribution center mana

277、gers,and other key personnel,including Joel Anderson,our President and Chief Executive Officer.The loss of the services of any of our executive officers,senior management,district,store,and distribution center managers,or other key personnel could have an adverse effect on our operations.Competition

278、 for skilled and experienced management in the retail industry is intense,and our future success will also depend on our ability to attract,retain and motivate qualified personnel,as a failure to attract these key personnel could have an adverse effect on our operations.We do not currently maintain

279、key person life insurance policies with respect to our executive officers or key personnel.Our profitability and cash flows from operations may be negatively affected if we are not successful in managing our inventory balances and inventory shrinkage.Our inventory balance represented approximately 1

280、7%of our total assets as of February 1,2020.Efficient inventory management is a key component of our business success and profitability.To be successful,we must maintain sufficient inventory levels and an appropriate product mix to meet our customers demands without allowing those levels to increase

281、 to such an extent that the costs to store and hold the goods unduly impacts our financial results.If our buying decisions do not accurately predict customer trends or purchasing actions,or if our expectations about customer spending levels are inaccurate,we may have to take unanticipated markdowns

282、to dispose of excess inventory,which also can adversely impact our financial 22results.We also experience inventory shrinkage,and we cannot assure you that incidences of inventory loss and theft will stay at acceptable levels or decrease in the future,or that the measures we are taking will effectiv

283、ely address the problem of inventory shrinkage.We continue to focus on ways to reduce these risks,but we cannot assure you that we will be successful in our inventory management.If we are not successful in managing our inventory balances,our profitability and cash flows from operations may be negati

284、vely affected.Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the leases negotiated in the past.Currently,we lease all of our store locations,as well as our corporate headquarters

285、and distribution facilities in Pedricktown,New Jersey,Olive Branch,Mississippi and Cincinnati,Ohio(and own our distribution center in Forsyth,Georgia and land in Conroe,Texas,where we expect to build a distribution center).Our stores are leased from third parties,with typical initial lease terms of

286、ten years.Many of our lease agreements also have additional five-year renewal options.Historically,we have been able to negotiate terms that fit within our economic model and that we believe are favorable;however,there is no guarantee that we will be able to continue to negotiate such terms.Consolid

287、ation in the commercial retail real estate market could affect our ability to successfully negotiate favorable rental terms for our stores in the future.Should significant consolidation occur,a large proportion of our store base could be concentrated with one or a few landlords that would then be in

288、 a position to dictate unfavorable terms to us due to their significant negotiating leverage.Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions.Increases in our occupancy costs and difficulty in identifying economically suitable new store lo

289、cations could have significant negative consequences,which include:requiring that a greater portion of our available cash be applied to pay our rental obligations,thus reducing cash available for other purposes and reducing our profitability;increasing our vulnerability to general adverse economic a

290、nd industry conditions;and limiting our flexibility in planning for,or reacting to changes in,our business or in the industry in which we compete.We depend on cash flow from operations to pay our lease expenses and to fulfill our other cash needs.If our business does not generate sufficient cash flo

291、w from operating activities to fund these expenses and needs and sufficient funds are not otherwise available to us,we may not be able to service our lease expenses,grow our business,respond to competitive challenges or fund our other liquidity and capital needs,which could harm our business.If an e

292、xisting or future store is not profitable,and we decide to close it,we may nonetheless be committed to perform our obligations under the applicable lease including,among other things,paying the base rent for the balance of the lease term.Moreover,even if a lease has an early cancellation clause,we m

293、ay not satisfy the contractual requirements for early cancellation under that lease.In addition,if we are not able to enter into new leases or renew existing leases on terms acceptable to us,this could have an adverse effect on our results of operations.Operational difficulties,including those assoc

294、iated with our ability to either lease or build and operate our distribution centers,could adversely impact our business.We maintain a network of distribution centers and are planning to lease or build new distribution centers over the next few years to support our growth objectives.Delays in openin

295、g these new distribution centers could adversely affect our future financial performance by slowing store growth,which may in turn reduce revenue growth,or by increasing transportation costs.In addition,distribution center-related construction entails risks that could cause delays and cost overruns,

296、such as:shortages of materials or skilled labor;work stoppages;unforeseen construction,scheduling,engineering,environmental or geological problems;weather interference;fires or other casualty losses;and unanticipated cost increases.The completion date and ultimate cost of these projects could differ

297、 significantly from initial expectations due to construction-related or other reasons.We cannot guarantee that these distribution centers or any future operational projects will be completed on time or within established budgets.Additionally,potential ownership of these facilities and of additional

298、facilities which we may lease,acquire,build and own in the future,entails risks of our ability to comply with regulations restricting the construction and operation of these facilities,as well as local community actions opposed to the location of our facilities at specific sites and the adoption of

299、local laws restricting our operations and environmental regulations,which may impact our ability to find suitable locations,and increase the cost of sites and of constructing,leasing and operating our facilities.We also may have difficulty negotiating real estate purchase agreements or leases on acc

300、eptable terms.Failure to manage these and other similar factors effectively may affect our ability to timely build or lease new facilities,which could have a material adverse effect on our future growth and profitability.23We operate in a competitive environment and,as a result,we may not be able to

301、 compete effectively or maintain or increase our sales,market shares or margins.We operate in a highly competitive retail environment with numerous competitors,including online retailers,some of which have greater resources or better brand recognition than we do.We compete with respect to customers,

302、price,store location,merchandise quality and supply,assortment and presentation,in-stock consistency,customer service and employees.This competitive environment subjects us to various risks,including the ability to provide quality,trend-right merchandise to our customers at competitive prices that a

303、llow us to maintain our profitability.Because of our low price model,we may have limited ability to increase prices in response to increased costs without losing competitive position which may adversely affect our margins and financial performance.In addition,price reductions by our competitors may

304、result in the reduction of our prices and a corresponding reduction in our profitability.Accordingly,we may face periods of intense competition in the future,which could have a material adverse effect on our profitability and results of operations.Consolidation among retailers,changes in pricing of

305、merchandise or offerings of other services by competitors could have a negative impact on the relative attractiveness of our stores to consumers.We do not possess exclusive rights to many of the elements that comprise our in-store experience and product offerings.Our competitors may seek to copy our

306、 business strategy and in-store experience,which could result in a reduction of any competitive advantage or special appeal that we might possess.In addition,most of our products are sold to us on a non-exclusive basis.As a result,our current and future competitors may be able to duplicate or improv

307、e on some or all of our in-store experience or product offerings that we believe are important in differentiating our stores and our customers shopping experience.If our competitors were to duplicate or improve on some or all of our in-store experience or product offerings,our competitive position a

308、nd our business could suffer.Our ability to provide quality,trend-right products at attractive,competitive prices could be impacted by various actions of our competitors that are beyond our control.Our profitability is vulnerable to inflation,cost increases,wage rate increases and energy prices.Futu

309、re increases in costs such as the cost of merchandise,wage rates,shipping rates,freight costs,fuel costs and store occupancy costs may reduce our profitability.These cost increases may be the result of inflationary pressures that could further reduce our sales or profitability.Increases in other ope

310、rating costs,including changes in energy prices,transportation costs,wage rates and lease and utility costs,may increase our cost of goods sold or operating expenses.In addition,because our expenses relating to wages are significant,any unfavorable changes in labor costs could negatively affect our

311、operational results,financial position,and cash flows.Our low price model and competitive pressures in our industry may have the effect of inhibiting our ability to reflect these increased costs in the prices of our products and therefore reduce our profitability.Our business is seasonal,and adverse

312、 events during the holiday season could impact our operating results negatively.Our business is seasonal,with the highest percentage of sales(approximately 40%of total annual sales over the last two fiscal years)occurring during the fourth fiscal quarter(November,December and January),which includes

313、 the year-end holiday season.This increased percentage of net sales has historically resulted in the highest percentages of net income during the fourth fiscal quarter.We purchase substantial amounts of inventory in the end of the third fiscal quarter(October)and beginning of the fourth fiscal quart

314、er(November and December)and incur higher shipping costs and higher payroll costs in anticipation of the increased sales activity during these time periods.Adverse events,such as inclement or unusual weather,deteriorating economic conditions,higher unemployment,increased wage rates,higher gas prices

315、 or public transportation disruptions could result in lower-than-planned sales during the holiday season which may lead to unanticipated markdowns.Since we rely on third parties for transportation and use third-party warehouses when we build up inventory,a number of these factors are outside of our

316、control.An unsuccessful fourth quarter,or holiday season,will have a substantial negative impact on our financial condition and results of operations for the entire fiscal year.We may not be successful in implementing our expansion into online retail and if we are successful,we will face new risks a

317、nd challenges,which could adversely affect our results of operations.In August 2016,we commenced selling merchandise on the internet,through our e-commerce website.Our ability to successfully execute our e-commerce strategy may suffer if we are unable to establish an effective online presence and se

318、ll our products in a cost-efficient manner.Because we are in the process of developing our online sales platform,we may not be able to compete as effectively with seasoned online retailers who have a known online presence,well established e-commerce distribution networks and online sales platforms,a

319、nd more resources than we do.24In addition,if we are successful,we will encounter risks and difficulties frequently experienced by internet-based businesses,including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate,support,expand and

320、develop our internet operations,website and software and other related operational systems.Although we believe that our participation in both e-commerce and physical store sales will be a distinct advantage for us due to synergies,the potential for new customers and increased brand recognition natio

321、nwide in markets where we do not yet have stores,supporting product offerings through both of these channels could create issues that have the potential to adversely affect our results of operations.For example,if our e-commerce business successfully grows,it may do so in part by attracting existing

322、 customers,rather than new customers,who choose to purchase products from us online rather than from our physical stores,thereby reducing the financial performance of our stores.In addition,selling products through the internet exposes us to the potential for fraud associated with“card-not-present”c

323、redit card transactions that does not exist for physical store sales.Criminals are using increasingly sophisticated methods to engage in illegal activities such as unauthorized use of credit or debit cards and bank account information.Requirements relating to consumer authentication and fraud detect

324、ion are more complex for online sales than for physical store sales.We may be denied the revenues associated with orders resulting from the unauthorized use of a cardholders card number in an illegal activity even if the associated financial institution approved payment of the orders.As we develop o

325、ur e-commerce business,the impact of attracting existing rather than new customers,of the increased costs associated with the technology infrastructure and distribution networks,and of opening up our channels to increased internet competition could have a material adverse impact on our business,fina

326、ncial condition,profitability and cash flows,including future growth.Material damage to,or interruptions to,or the inability to upgrade or expand,our technology systems as a result of external factors,staffing shortages or difficulties in updating our existing technology or developing or implementin

327、g new technology could have a material adverse effect on our business or results of operations.We depend on a variety of information technology systems for the efficient functioning of our business.Such systems are subject to damage or interruption from power outages,computer and telecommunications

328、failures,computer viruses,security breaches and natural disasters.Damage or interruption to these systems may require a significant investment to fix or replace them,and we may suffer interruptions in our operations in the interim.Any material interruptions may have a material adverse effect on our

329、business or results of operations.We are continuing to expand,upgrade and develop our information technology capabilities,including our point-of-sale system.If we are unable to successfully upgrade or expand our technological capabilities,including our point-of-sale system,we may not be able to take

330、 advantage of market opportunities,manage our costs and transactional data effectively,satisfy customer requirements,execute our business plan or respond to competitive pressures.In addition,costs and potential problems and interruptions associated with the implementation of new or upgraded systems

331、and technology,or with maintenance or adequate support of existing systems,could also disrupt or reduce the efficiency of our operations.Some of our information technology systems are currently outsourced to third parties.If these third parties are unable,unwilling,or otherwise experience interrupti

332、ons in their ability to provide services to us or to provide us access to the systems on which we rely,this would disrupt or reduce the efficiency of our operations if we are unable to convert to alternate systems in an efficient and timely manner.Furthermore,if these third parties are unable to sec

333、ure our private data from cyberattacks and other cyber incidents,it may disrupt or reduce the efficiency of our operations or otherwise have a material adverse effect on our business,financial condition or reputation.We also rely heavily on our information technology staff.Failure to meet these staffing needs may negatively affect our ability to fulfill our technology initiatives while continuing