What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-03-29 compared with 2020-03-31 · 179 added, 68 removed, 244 unchanged (50% of the section changed)

7 unchanged sentences

Further, the Company has seen, and expects to continue to see a direct, material adverse impact to sales and operations as a result of COVID-19.

The rapidly evolving COVID-19 situation also poses various risks to the Company, certain of which are detailed throughout this Item 1A.

COVID-19 poses various risks to the Company, certain of which are detailed throughout this “ITEM 1A.

RISK FACTORS”.

2 unchanged sentences

Macroeconomic and industry risks include:

• COVID‐19 has and may continue to materially adversely impact and cause disruption to our business;

• Changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits could have a material adverse impact on our business;

• Failure to engage our customers, anticipate customer demand and changing fashion trends, and manage our inventory commensurately could have a material adverse impact on our business;

Our failure to operate in a highly competitive and constantly evolving industry could have a material adverse impact on our business ;

• Our failure to operate effectively in a highly competitive and constantly evolving industry could have a material adverse impact on our business;

• Fluctuations in foreign currency exchange rates could have a material adverse impact on our business;

• Our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions that our stores are located in or around;

The impact of war, acts of terrorism, mass casualty events or civil unrest could have a material adverse impact on our business ;

• The impact of war, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience could have a material adverse impact on our business;

• The impact of extreme weather, infectious disease outbreaks, including COVID-19, and other unexpected events could result in an interruption to our business, as well as to the operations of our third-party partners, and have a material adverse impact on our business.

3 unchanged sentences

• Our failure to execute our international growth strategy successfully and inability to conduct business in international markets as a result of legal, tax, regulatory, political and economic risks could have a material adverse impact on our business;

• Our failure to appropriately address emerging environmental, social and governance matters could have a material adverse impact on our reputation and, as a result, our business.

Operational risks include:

5 unchanged sentences

• We depend upon independent third parties for the manufacture and delivery of all our merchandise, and a disruption of the manufacture or delivery of our merchandise could have a material adverse impact on our business;

We rely on the experience and skills of our executive officers and associates, and the failure to attract or retain this talent, or effectively manage succession could have a material adverse impact on our business .

• We rely on the experience and skills of our executive officers and associates, and the failure to attract or retain this talent, effectively manage succession, and establish a diverse workforce could have a material adverse impact on our business;

• We identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future.

If we fail to remediate our material weaknesses, or if we fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.

Legal, tax, regulatory and compliance risks include:

3 unchanged sentences

• Changes in the regulatory or compliance landscape could have a material adverse impact on our business;

Our credit facilities include restrictive covenants that limit our flexibility in operating our business and our inability to obtain credit on reasonable terms in the future could have an adverse impact on our business .

• The agreements related to our senior secured asset-based revolving credit facility and our senior secured notes include restrictive covenants that limit our flexibility in operating our business and our inability to obtain credit on reasonable terms in the future could have an adverse impact on our business.

The factors listed above are not our only risks.

3 unchanged sentences

MACROECONOMIC AND INDUSTRY RISKS.

COVID‐19 has and may continue to materially adversely impact and cause disruption to our business .

COVID-19 has had a material adverse effect on our business, including our financial performance and condition, operating results and cash flows, and may continue to materially adversely impact and cause disruption to our business in the future.

As a result of COVID-19, numerous state and local jurisdictions have imposed, and others in the future may impose, shelter-in-place orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19.

Such orders or restrictions have resulted in temporary store closures, modified store operating hours, a decrease in customer traffic, work stoppages, slowdowns and delays, travel restrictions and cancellation of events, among other effects, thereby negatively impacting our operations.

The impact of regulations imposed in the future in response to the pandemic, could, among other things, require that we close our stores or distribution centers or otherwise make it difficult or impossible to operate our business.

Other factors that would negatively impact our ability to successfully operate during the current COVID-19 pandemic include, but are not limited to:

• Our ability to reopen our stores in a timely manner if and when they reopen;

• Our ability to keep our stores open if there is a re-emergence or increase in infection rate;

• Our ability to attract customers to our reopened stores, given the risks, or perceived risks, of gathering in public places;

• Our ability to incentivize and retain associates and to reinstate any furloughed store associates;

• Our ability to obtain rent abatements or enter into rent deferral arrangements with our landlords;

• Our ability to react to changes in anticipated customer demand and manage inventories, which may result in excess inventories;

• Our ability to rely on our distribution centers to manage the receipt, storage, sorting, packing and distribution of our merchandise as the distribution centers are susceptible to local and regional factors, such as system failures, accidents, labor disputes, economic and weather conditions, natural disasters, demographic and population changes;

• Supply chain delays due to closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, as well as carrier constraints due to an increase in digital sales;

• Fluctuations in the cost, availability and quality of raw materials, as well as costs of labor and transportation;

• A more promotional retail environment or our ability to move existing inventory, may cause us to lower our prices, sell existing inventory at larger discounts than in the past, or write down the value of inventory, and increase the costs and expenses of updating and replacing inventory, negatively impacting our margins;

• Delays in, or our ability to complete, planned store openings on the expected terms or timing, or at all;

• The deterioration or fluctuations in the economic conditions in the U.S.

or international markets, which could have an impact on consumer confidence and discretionary consumer spending;

• Our ability to attract, retain and manage our associates during periods of extended work from home arrangements;

• Associates, whether our own or those of our third-party vendors, working offsite through work from home arrangements may rely on residential communication networks and internet providers and may be more susceptible to service

interruptions and cyberattacks, and, this period of uncertainty could result in an increase in phishing and other scams, fraud, money laundering, theft and other criminal activity;

• Fluctuations in foreign currency exchange rates and changes in the effectiveness of our hedging instruments;

• Our ability to successfully execute against our international expansion plans;

• Our ability to preserve liquidity to be able to take advantage of market conditions during periods of temporary store closures;

• Difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deterioration in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities.

Factors and uncertainties related to future impacts of COVID-19 on our business, include, but are not limited to:

• The severity and duration of the pandemic, including additional periods of increases or spikes in the number of COVID-19 cases, future mutations or variants of the virus in areas in which we operate;

• The availability and acceptance of effective vaccines or medical treatments;

• The nature and size of federal economic stimulus and other governmental efforts;

• The impact of the pandemic on overall customer demand and consumer behaviors as well as its impact on macroeconomic factors such as general economic uncertainty, unemployment rates, and recessionary pressures;

• Any unknown consequences on our business performance and initiatives stemming from the substantial investment of time and other resources to the pandemic response.

It is uncertain as to when or if we will be able to resume all store operations and if we will see traffic return to pre-COVID-19 levels in the future.

In addition, customers have increasingly relied on technology to shop and to interact with our brands during this unprecedented period and our inability to continue to connect with our customers in this manner going forward could affect our ability to compete and adversely affect our results of operations.

The factors described above may exacerbate other risks within this section of “ITEM 1A.

RISK FACTORS”.

Any future outbreak of any other highly infectious or contagious disease could also have a material adverse impact on our business.

Changes in global economic and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits could have a material adverse impact on our business.

3 unchanged sentences

Dollar versus foreign currencies and other macroeconomic factors.

Global uncertainty, such as the terms surrounding the United Kingdom’s recent exit from the European Union, uncertainty with respect to trade policies and COVID-19, has in the past, and could in the future, cause changes in consumer confidence and in consumers’ discretionary spending habits globally, resulting in a material adverse effect on our results of operations, liquidity and capital resources.

The economic conditions and factors described above could adversely impact our results of operations, liquidity and capital resources, and may exacerbate other risks within this section of Item 1A “Risk Factors.” Changes in economic conditions could also impact our ability to fund growth and/or result in our becoming reliant on external financing, the availability and cost of which may be uncertain.

Global uncertainty, such as the ultimate impact of the United Kingdom’s recent exit from the European Union, uncertainty with respect to trade policies and COVID-19, has in the past, and could in the future, cause changes in consumer confidence and in consumers’ discretionary spending habits globally, resulting in a material adverse effect on our results of operations, liquidity and capital resources.

RISK FACTORS”.

Changes in economic conditions could also impact our ability to fund growth and/or result in our becoming reliant on external financing, the availability and cost of which may be uncertain.

Failure to engage our customers, anticipate customer demand and changing fashion trends, and manage our inventory commensurately could have a material adverse impact on our business.

9 unchanged sentences

If we are not able to adjust appropriately to such factors, our inventory management may be affected, which could adversely impact our performance and our reputation.

Our failure to operate in a highly competitive and constantly evolving industry could have a material adverse impact on our business .

Our failure to operate effectively in a highly competitive and constantly evolving industry could have a material adverse impact on our business.

The sale of apparel, personal care products and accessories for men, women and kids is a highly competitive business with numerous participants, including individual and chain specialty apparel retailers, local, regional, national and international department stores, discount stores and online-exclusive businesses.

3 unchanged sentences

• anticipating and quickly responding to changing consumer shopping preferences better than our competitors;

maintaining favorable brand recognition and effective marketing of our products to consumers in several diverse demographic markets;

• maintaining favorable brand recognition;

• marketing our products to consumers in several diverse demographic markets effectively, including through social media platforms which have become increasingly more important during the COVID-19 pandemic in order to stay connected to our customers;

• retaining customers, including our loyalty club members, as if we were to fail, it could result in increased marketing costs to acquire new customers;

5 unchanged sentences

and enhancing management decision-making through use of data analytics to develop new, consumer insights.

In addition, in order to compete in this highly competitive and constantly evolving industry, at times, we may launch and/or acquire new brands to expand our portfolio.

This could result in significant financial and operational investments that do not provide the anticipated benefits or desired rates of return and there can be no guarantee that pursuing these investments will result in improved operating results.

In light of the competitive challenges we face, we may not be able to compete successfully in the future.

5 unchanged sentences

dollar relative to the functional currencies of our foreign subsidiaries, as was the case in Fiscal 2019.

Fluctuations in foreign currency exchange rates could adversely impact consumer spending, delay or prevent successful penetration into new markets or could adversely affect the profitability of our international operations.

Certain events, such as the uncertainty as to the ultimate scope and duration of COVID-19, the uncertainty surrounding the terms of United Kingdom’s recent exit from the European Union and uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S.

Fluctuations in foreign currency exchange rates could adversely impact consumer spending, delay or prevent successful penetration into new markets or adversely affect the profitability of our international operations.

Certain events, such as the uncertainty as to the ultimate scope and duration of COVID-19, the ultimate impact of the United Kingdom’s recent exit from the European Union and uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S.

and other countries, have increased global economic and political uncertainty in recent years and could result in volatility of foreign currency exchange rates as these events develop.

For example, volatility of foreign currency exchange rates and changes in sales assumptions in response to COVID-19 has resulted in changes in the effectiveness of our hedging instruments, and we could see similar impacts in future periods.

For example, changes in sales assumptions in response to COVID-19 have resulted in changes in the effectiveness to certain of our hedging instruments, and we could see similar impacts in future periods.

Our ability to attract customers to our stores depends, in part, on the success of the shopping malls or area attractions that our stores are located in or around.

Our stores are primarily located in shopping malls and other shopping centers, certain of which have been experiencing declines in customer traffic.

Our stores are primarily located in shopping malls and other shopping centers, certain of which had been experiencing declines in customer traffic prior to COVID-19.

Our sales at these stores, as well as sales at our flagship locations, are partially dependent upon the volume of traffic in those shopping centers and the surrounding area.

3 unchanged sentences

If the popularity of shopping malls declines among our customers, our sales may decline, and it may be appropriate to exit leases earlier than originally anticipated.

In addition, COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as shopping malls, and has caused us to recently enact widespread temporary store closures and our landlords to temporarily close certain of the malls in which our stores operate.

There is significant uncertainty surrounding the ultimate duration of these closures and consumer willingness to visit shopping malls once they reopen.

The impact of these temporary store and shopping mall closures on our current rent obligations remains uncertain and we may be limited in our ability to obtain rent abatements or landlord concessions of rent otherwise payable during this period of temporary store closures.

In addition, COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as shopping malls, and caused us to enact widespread temporary store closures and our landlords to temporarily close certain of the malls in which our stores operate.

While the majority of stores have reopened since their initial closure in March 2020, we continue to see reclosures in certain geographic areas, primarily within Europe, and there is significant uncertainty surrounding the ultimate duration of these closures as well as temporary store closures that may take place in the future.

In Fiscal 2020, we experienced store traffic below Fiscal 2019 levels and there remains uncertainty as to the long-term effects of COVID-19 on consumer willingness to visit shopping malls in the future, and whether store traffic will return to pre-COVID-19 levels.

Furthermore, declines in traffic beyond our current expectations could result in additional impairment charges.

While we have been successful in obtaining certain rent abatements and landlord concessions of rent payable during Fiscal 2020 as a result of COVID-19 store closures, we may be limited in our ability to obtain rent abatements or landlord concessions of rent otherwise payable going forward.

All of these factors may impact our ability to meet our productivity or our growth objectives for our stores and could have a material adverse impact on our financial condition or results of operations.

Part of our future growth is dependent on our ability to operate

stores in desirable locations, with capital investment and lease costs providing the opportunity to earn a reasonable return.

Part of our future growth is dependent on our ability to operate stores in desirable locations, with capital investment and lease costs providing the opportunity to earn a reasonable return.

We cannot be sure when or whether such desirable locations will become available at reasonable costs.

The impact of war, acts of terrorism, mass casualty events or civil unrest could have a material adverse impact on our business .

In the past, the impact of war, acts of terrorism, mass casualty events or civil unrest and the associated heightened security measures in response to these events have disrupted commerce.

Further events of this nature, domestic or abroad, including the ongoing protests in China’s Hong Kong SAR, may disrupt commerce and undermine consumer confidence and consumer spending by causing a decline in traffic, store closures and a decrease in digital demand adversely affecting our operating results.

The impact of war, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience could have a material adverse impact on our business.

In the past, the impact of war, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience and the associated heightened security measures in response to these events have disrupted commerce.

Further events of this nature, domestic or abroad, including recent unrest in the U.S., Europe and in China’s Hong Kong SAR, may disrupt commerce and undermine consumer confidence and consumer spending by causing a decline in traffic, store closures and a decrease in digital demand adversely affecting our operating results.

Furthermore, the existence or threat of any other unforeseen interruption of commerce, could negatively impact our business by interfering with the availability of raw materials or our ability to obtain merchandise from foreign manufacturers.

1 unchanged sentence

The impact of extreme weather, infectious disease outbreaks, including COVID-19, and other unexpected events could result in an interruption to our business, as well as to the operations of our third-party partners, and have a material adverse impact on our business.

Our retail stores, corporate offices, distribution centers, infrastructure projects and digital operations, as well as the operations of our vendors and manufacturers, are vulnerable to disruption from natural disasters, infectious disease outbreaks and other unexpected events.

These events could disrupt the operations of our corporate offices, global stores and supply chain and those of our third-party partners, including our vendors and manufacturers.

1 unchanged sentence

These events could reduce the availability and quality of the fabrics or other raw materials used to manufacture our merchandise, which could result in delays in responding to consumer demand resulting in the potential loss of customers and revenues or we may incur increased costs to meet demand and may not be able to pass all or a portion of higher costs on to our customers, which could adversely affect our gross margin and results of our operations.

We could also be adversely affected if government authorities impose mandatory store closures, or restrict the import or export of products, in response to an unexpected event such as an infectious disease outbreak.

Even if such measures are not implemented or infectious disease does not spread significantly, the perceived risk of infection or health risk may adversely affect our business and operating results.

We could also be adversely affected if government authorities impose mandatory store closures as we experienced in Fiscal 2020 as a result of COVID-19, or restrict the import or export of products, in response to an unexpected event such as an infectious disease outbreak.

Even if such measures are not implemented or infectious disease does not spread significantly, the

perceived risk of infection or health risk may adversely affect our business and operating results.

The extent of impacts of COVID-19 or future infectious disease outbreaks may be exacerbated depending on the emergence of new variants or strains as well as the availability and acceptance of effective vaccines or medical treatments.

Our business has been materially, adversely impacted by COVID-19.

At this point in time, there is significant uncertainty relating to the ultimate impact COVID-19 will have on the Company’s business and the Company could experience further adverse impacts as the scope of COVID-19 evolves or if the duration of business disruptions from COVID-19 continues longer than initially anticipated, either of which could further adversely impact our results of operations, liquidity and capital resources.

Refer to “ ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

,” for further discussion.

Refer to risk factor “ COVID‐19 has and may continue to materially adversely impact and cause disruption to our business ,” included within this section for further discussion of the ongoing impacts and risks related to COVID-19.

In addition, historically, our operations have been seasonal, and extreme weather conditions, including natural disasters, unseasonable weather or changes in weather patterns, may diminish demand for our seasonal merchandise and could also influence consumer preferences and fashion trends, consumer traffic and shopping habits.

In addition, we may incur costs that exceed our applicable insurance coverage for any necessary repairs to damages or business disruption.

Any of the factors listed above could reduce sales and profitability and could have a material adverse effect on our financial condition and results of operations.

STRATEGIC RISKS.

2 unchanged sentences

As our success depends on our ability to respond to shifting consumer traffic patterns and ability to engage our customers, we have made significant investments and significant operational changes to develop our digital and omnichannel capabilities globally, including the development of localized fulfillment, shipping and customer service operations, investments in digital media to attract new customers and the rollout of omnichannel capabilities listed in “ ITEM 1.

driving sales or attracting customers and could result in significant investments that do not provide the anticipated benefits or desired rates of return.

While we must keep up to date with emerging technology trends in the retail environment in order to develop a successful omnichannel shopping experience, it is possible these initiatives may not prove to be successful, may increase our costs, may not succeed in driving sales or attracting customers and could result in significant investments that do not provide the anticipated benefits or desired rates of return.

For example, we could be at a competitive disadvantage if we are unable to leverage data analytics to retrieve timely, customer insights to appropriately respond to customer demands and improve customer engagement across channels.

In addition, digital operations are subject to numerous risks, including reliance on third-party computer hardware/software and service providers, data breaches, violations of state, federal or international laws, including those relating to online privacy, credit card fraud, telecommunication failures and electronic break-ins and similar disruptions, and disruption of internet service.

2 unchanged sentences

Our failure to optimize our global store network could have a material adverse impact on our business.

While the majority of sales occur within the stores channel, with the evolution of digital and omnichannel capabilities, customer expectations have shifted and there has been greater pressure for a seamless omnichannel experience across all channels.

With the evolution of digital and omnichannel capabilities, customer expectations have shifted and there has been greater pressure for a seamless omnichannel experience across all channels.

In addition, the majority of the Company’s sales in Fiscal 2020 occurred within the digital channel as a result of COVID-19’s influence on consumer shopping behaviors which may have a lasting impact on consumer shopping behaviors in the future.

As a result, global store network optimization is an important part of our business and failure to optimize our global store network could have an adverse impact on our results of operations.

Opportunities to open new stores experiences and modify existing leases requires partnership with our landlords.

If our partnerships with our landlords were to deteriorate, this could adversely affect the pace of opening new store experiences.

If our partnerships with our landlords were to deteriorate, this could adversely affect the pace of opening new store experiences and/or lead to an increase in store closures.

In addition, if there is an increase in events such as landlord bankruptcies, or mall foreclosures, competition between retailers could increase for remaining suitable store locations.

Pursuing the wrong opportunities and any delays, cost increases, disruptions or other uncertainties related to those opportunities could adversely affect our results of operations.

17 unchanged sentences

If any of our overseas operations, or our associates or agents, violate such laws, we could become subject to sanctions or other penalties that could negatively affect our reputation, business and operating results.

In addition, there continues to be global uncertainty, such as the uncertainty as to the ultimate scope and duration of COVID-19, the uncertainty surrounding the terms of United Kingdom’s recent exit from the European Union and uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S.

In addition, there continues to be global uncertainty, such as the uncertainty as to the ultimate scope and duration of COVID-19, the ultimate impact of the United Kingdom’s recent exit from the European Union and uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S.

and other countries, and similar events of global unrest.

These events have increased global economic and political uncertainty in recent years and could affect our international expansion plans.

Our failure to appropriately address emerging environmental, social and governance matters could have a material adverse impact on our reputation and, as a result, our business.

There is an increased focus from certain investors, customers, associates, business partners and other stakeholders concerning environmental, social and governance matters.

The expectations related to environmental, social and governance matters are rapidly evolving, and from time to time, we announce certain initiatives and goals, related to environmental, social or governmental matters, such as those announced in Fiscal 2019 through our participation in the United Nations Global Compact.

We could fail, or be perceived to fail to act responsibly, in our environmental, social and governance efforts, or we could fail in accurately reporting our progress on such initiatives and goals.

In addition, we could be criticized for the scope of such initiatives or goals.

As a result, we could suffer negative publicity and our reputation could be adversely impacted, which in turn could have a negative impact on investor perception and our products' acceptance by consumers.

This may also impact our ability to attract and retain talent to compete in the marketplace.

There is also greater uncertainty following the recent November 2020 U.S.

elections regarding potential policies related to issues surrounding global environmental sustainability.

Changes in the legal or regulatory environment affecting responsible sourcing, supply chain transparency, or environmental protection, among others, including regulations to limit carbon dioxide and other greenhouse gas emissions, to discourage the use of plastic or to limit or to impose additional costs on commercial water use may result in increased compliance costs for us and our business partners.

OPERATIONAL RISKS.

1 unchanged sentence

Our ability to maintain our reputation is critical and public perception about our products or operations, whether justified or not, could impair our reputation, involve us in litigation, damage our brands and have a material adverse impact on our business.

In addition, the broad use of social media allows for anyone to provide public feedback that could influence perceptions of our brands and reduce demand for our merchandise.

Events that could jeopardize our reputation, include, but are not limited to, the following:

• We fail to maintain high standards for merchandise quality and integrity;

We fall victim to a cyber-attack, which resulted in customer data being compromised;

• We fall victim to a cyber-attack, resulting in customer data being compromised;

• We fail to comply with ethical, social, product, labor, health and safety, accounting or environmental standards, or related political considerations;

• Our associates’ actions don’t align with our values and fail to comply with our Associate Code of Conduct;

Our third parties with which we have a business relationship, including our brand representatives, fail to represent our brands in a manner consistent with our brand image or act in a way that harms their reputation;

Our third party vendors fail to comply with our Vendor Code of Conduct or if any third parties with which we have a business relationship with fail to represent our brands in a manner consistent with our brand image.

• Third parties with which we have a business relationship, including our brand representatives and influencer network, fail to represent our brands in a manner consistent with our brand image or act in a way that harms their reputation;

• Third-party vendors fail to comply with our Vendor Code of Conduct or any third parties with which we have a business relationship with fail to represent our brands in a manner consistent with our brand image.

Our position or perceived lack of position on environmental, social, governance, public policy or other similar issues, including any actions we have taken in response to COVID-19, and any perceived lack of transparency about those matters could also harm our reputation with consumers or investors.

Damage to our reputation and loss of consumer confidence for these or any other reasons could lead to adverse consumer actions, including boycotts, which could have a material adverse effect on our results of operations and financial condition, as well as require additional resources to rebuild our reputation.

In addition, in recent years there has been increase in social media platforms and our use of social media platforms is an important element of our omnichannel marketing efforts, which became increasingly more important during the COVID-19 pandemic in order to stay connected to our customers.

For example, we maintain various social media accounts for our brands, including Instagram, TikTok, Facebook, Twitter and Pinterest accounts.

Actions taken by individuals that we partner with, such as brand representatives, influencers or our associates, that fail to represent our brands in a manner consistent with our brand image or act in a way that harms their reputation, whether through our social media platforms or their own, could harm our brand reputation and materially impact our business.

Social media also allows for anyone to provide public feedback that could influence perceptions of our brands and reduce demand for our merchandise.

Damage to our reputation and loss of consumer confidence for these or any other reasons could lead to adverse consumer actions, including boycotts, negative impacts on investor perception and could impact our ability to attract and retain the talent necessary to compete in the marketplace, all of which could have a material adverse impact on our business, as well as require additional resources to rebuild our reputation.

If our information technology systems are disrupted or cease to operate effectively, it could have a material adverse impact on our business.

3 unchanged sentences

respond to customer inquiries;

manage inventory, including our recently implemented markdown and size optimization tools;

manage inventory;

purchase, sell and ship merchandise, on a timely basis;

14 unchanged sentences

The retail industry in particular has been the target of many recent cyber-attacks and it is possible that an individual or group could defeat our security measures, or those of a third-party service provider, and access confidential information.

Further, like other companies in the retail industry, during the ordinary course of business, we and our vendors have in the past experienced, and we expect to continue to experience, cyber-attacks of varying degrees and types, including phishing, and other attempts to breach, or gain unauthorized access to, our systems.

To date, these attacks have not had a material impact on our operations, but we cannot provide assurance that cyber attacks will not have a material impact in the future.

We could experience increased costs associated with protecting confidential information through the implementation of security technologies, processes and procedures, including training programs for associates to raise awareness about phishing, malware and other cyber risks, especially as we implement new technologies, such as new payment capabilities or updates to our mobile apps and websites.

Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems change frequently and increase in complexity and are often not recognized until such attacks are launched or

have been in place for a period of time.

or have been in place for a period of time.

We may not have the resources or technical sophistication to anticipate, prevent, or immediately identifying cyber-attacks.

1 unchanged sentence

We may incur significant costs related to compliance with these laws and failure to comply with these regulatory standards, and others, could have a material adverse impact on our business.

In addition, our business has been adversely impacted by COVID-19, and as a result, we have seen an increase in the number of corporate associates working offsite.

In addition, our business has been adversely impacted by COVID-19, and as a result, we have implemented a work-from-home policy that applies to a significant majority of our corporate associates, as have certain of our third-party vendors.

Offsite working by associates, increased use of public Wi-Fi, and use of office equipment off premises may be necessary, and may make our business more vulnerable to cybersecurity breach attempts.

1 unchanged sentence

If we, or a third-party partner, were to fall victim to a successful cyber-attack, suffer intentional or unintentional data and security breaches by associates or third-parties, it could have a material adverse impact on our business, especially an event that compromises customer data or results in the unauthorized release of confidential business or customer information.

These and similar events could result in negative consequences, which may include but are not limited to:

In addition, if we are unable to avert a denial of service attack that renders our site inoperable, it could result in negative consequences, such as lost sales and customer dissatisfaction.

Additional negative consequences that could result from these and similar events may include, but are not limited to:

• remediation costs, such as liability for stolen assets or information, potential legal settlements to affected parties, repairs of system damage, and incentives to customers or business partners in an effort to maintain relationships after an attack;

7 unchanged sentences

Our reliance on our distribution centers makes us susceptible to disruptions or adverse conditions affecting our supply chain.

Our distribution center operations are susceptible to local and regional factors, such as system failures, accidents, labor disputes, economic and weather conditions, natural disasters, demographic and population changes, as well as other unforeseen events and circumstances, including COVID-19.

We rely on our distribution centers to manage the receipt, storage, sorting, packing and distribution of our merchandise.

If our distribution operations were disrupted, and we were unable to relocate operations or find other property adequate for conducting business, our ability to replace inventory in our stores and process digital and third-party orders could be interrupted, potentially resulting in adverse impacts to sales or increased costs.

If our distribution centers are not adequate to support our operations, including as a result of capacity constraints in response to an increase in digital sales, we could experience adverse impacts such as shipping delays and customer dissatisfaction.

In addition, if our distribution operations were disrupted, and we were unable to relocate operations or find other property adequate for conducting business, our ability to replace inventory in our stores and process digital and third-party orders could be interrupted, potentially resulting in adverse impacts to sales or increased costs.

Refer to “ ITEM 1.

4 unchanged sentences

The price and availability of such raw materials may fluctuate significantly, depending on many factors, including crop yields, weather patterns and other unforeseen events.

In addition, we have experienced increasing wage pressures in recent years, specifically with the cost of labor at our third-party manufacturers, at our distribution centers and at our stores.

In addition, we have experienced increasing wage pressures in recent years related to the cost of labor at our third-party manufacturers, at our distribution centers and at our stores.

For example, recent government initiatives in the U.S.

or changes to existing laws, such as the adoption and implementation of national, state, or local government proposals relating to increases in minimum wage rates, may increase our costs of doing business and adversely affect our results of operations.

We may not be able to pass all or a portion of higher labor costs on to our customers, which could adversely affect our gross margin and results of operations.

We primarily use one contract carrier to ship merchandise and related materials to our North American stores and digital customers.

If the shipping operations of this third-party were disrupted, and we are unable to respond in a quick and efficient manner, our ability to replace inventory in our stores and process digital and third-party orders could be interrupted, potentially resulting in adverse impacts to sales or increased costs.

In addition, there continues to be global uncertainty, such as to the ultimate scope and duration of COVID-19, the uncertainty surrounding the terms of United Kingdom’s recent exit from the European Union and uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S.

We primarily used four contract carriers to ship merchandise and related materials to our North American customers, and several contract carriers for our international customers.

If the shipping operations of these third-parties were disrupted, and we are unable to respond in a quick and efficient manner, our ability to replace inventory in our stores and process digital and third-party orders could be interrupted, potentially resulting in adverse impacts to sales or increased costs.

In addition, there continues to be global uncertainty, such as to the ultimate scope and duration of COVID-19, the ultimate impact of the United Kingdom’s recent exit from the European Union and uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S.

and other countries, and similar events of global, political unrest.

These events have increased global uncertainty in recent years and could impact the cost, availability and quality of merchandise, and could impact the cost, availability and quality of the fabrics or other raw materials used to manufacture our merchandise.

These events have increased global uncertainty and have impacted and may in the future impact the cost, availability and quality of merchandise, as well as the cost, availability and quality of the fabrics or other raw materials used to manufacture our merchandise.

For example, factors that may negatively impact our ability to successfully operate during the current COVID-19 pandemic include, but are not limited to supply chain delays due to closed factories, continued shipping container shortages, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas.

In addition, compliance with the recent sanctions and customs trade orders issued by the U.S.

government related to entities and individuals who are connected to the China’s Xinjiang Uyghur Autonomous Region, could affect the global supply chain and the price of cotton in the marketplace.

We may face regulatory challenges in complying with applicable sanctions and trade regulations and reputational challenges with our consumers and other stakeholders if we are unable to sufficiently verify the origins for the material sourced.

We may not be able to pass all or a portion of higher raw materials prices or labor or transportation costs on to our customers, which could adversely affect our gross margin and results of operations.

9 unchanged sentences

All factories that we partner with are contractually required to adhere to the Company’s Vendor Code of Conduct, go through social audits which include on-site walk-throughs to appraise the physical working conditions and health and safety practices, and review payroll and age documentation.

If our factories are unwilling or not able to meet the standards set forth within the Vendor Code of Conduct it could limit the options available to us and could result in an increase of costs of manufacturing, which we may not able to pass on to our customers.

Other events that could disrupt the timely delivery of our merchandise include new trade law provisions or regulations, reliance on a limited number of shipping carriers, significant labor disputes, significant delays in the delivery of cargo due to port security considerations or capacity limitations and other unexpected events, such as COVID-19.

If our factories are unwilling or not able to meet the standards set forth within the Company’s Vendor Code of Conduct, it could limit the options available to us and could result in an increase of costs of manufacturing, which we may not able to pass on to our customers.

Other events that could disrupt the timely delivery of our merchandise include new trade law provisions or regulations, reliance on a limited number of shipping carriers and associated alliances, weather events, significant labor disputes, port congestion and other unexpected events, such as COVID-19.

Furthermore, we are susceptible to increases in fuel costs which may increase the cost of distribution.

If we are not able to pass this cost on to our customers, our financial condition and results of operations could be adversely affected.

We rely on the experience and skills of our executive officers and associates, and the failure to attract or retain this talent, effectively manage succession, and establish a diverse workforce could have a material adverse impact on our business.

Our ability to succeed may be adversely impacted if we are not able to attract, retain and develop talent and future leaders, including our executive officers.

We believe that the attraction, retention, and management of qualified talent is integral to our success in advancing our strategies and key business priorities and avoiding disruptions in our business.

We rely on our associates across the organization, including those at our corporate offices, stores, and distribution centers, as well as their experience and expertise in the retail business.

Our executive officers closely supervise all aspects of our operations, including the design of our merchandise, have substantial experience and expertise in the retail business and have an integral role in the growth and success of our brands.

If we were to lose the benefit of the involvement of executives or other personnel, without adequate succession plans, our business could be adversely affected.

If we are unable to attract and retain talent at the associate level without adequate succession plans, our business could adversely be impacted as competition for such qualified talent is intense, and we cannot be sure we will be able to attract, retain and develop a sufficient number of qualified individuals in future periods.

In addition, COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as shopping malls.

Our business could be adversely affected if store associates are either unwilling or unable to staff our stores as a result of COVID-19 concerns.

In addition, if we are unable to attract and retain talent at the associate level without adequate succession plans, our business could also adversely be impacted as competition for such qualified talent is intense, and we cannot be sure we will be able to attract, retain and develop a sufficient number of qualified individuals in future periods.

For example, as automation, artificial

intelligence and similar technological advancements continue to evolve, we may need to compete for talent that is familiar with these advancements in technologies in order to compete effectively with our industry peers.

If we are not successful in these efforts, our business may be adversely affected.

COVID-19 has also caused public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as shopping malls.

Our business could be adversely affected if we experienced a large capacity of store associates that are either unwilling or unable to staff our stores as a result of concerns over COVID-19, similar infectious disease in the future or other safety concerns.

If we are not successful in these efforts or fail to successfully execute against the key initiatives that are focused on attracting, retaining and managing our human capital resources listed in “ ITEM 1.

BUSINESS ,” our business could be adversely impacted.

We identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future.

The effectiveness of any controls or procedures is subject to certain inherent limitations, and as a result, there can be no assurance that our controls and procedures will prevent or detect misstatements.

Even an effective system of internal control over financial reporting will provide only reasonable, not absolute, assurance with respect to financial statement preparation.

Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

With the participation of the Chief Executive Officer of A&F and the Senior Vice President and Chief Financial Officer of A&F, management evaluated the effectiveness of A&F’s internal control over financial reporting as of January 30, 2021 using criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on management’s assessment of A&F’s internal control over financial reporting, under the criteria described in the preceding sentence, management has identified a control deficiency during the fiscal year ended January 30, 2021, that constituted a material weakness as described within “ ITEM 9A.

CONTROLS & PROCEDURES .”

If we fail to remediate the material weakness, or are otherwise unable to maintain effective internal control over financial reporting, management could be required to expend significant resources and we could fail to meet our public reporting requirements on a timely basis, and be subject to fines, penalties, investigations or judgements, all of which could negatively affect investor confidence and adversely impact our stock price.

LEGAL, TAX, REGULATORY AND COMPLIANCE RISKS.

11 unchanged sentences

Failure to correctly calculate or submit the appropriate amounts could subject us to substantial fines and penalties that could have an adverse effect on our financial condition, results of operations or cash flows.

Tax law may be enacted in the future, domestically or abroad, that impacts our current or future tax structure and effective tax rate, such as the Tax Cuts and Jobs Act of 2017 and Swiss Tax Reform discussed further in Note 11 , “ INCOME TAXES .”

There is also heightened scrutiny on the potential taxation of digital businesses.

For example, the Organization for Economic Co-Operation and Development (the “OECD”) has had a specific focus on the taxation implications of e-commerce business, generally referred by the OECD as the “digital economy,” proposed an approach which would, among other changes, create a new right to tax certain “digital economy” income not necessarily based on traditional nexus concepts nor on the “arm’s length principle.” At this point, there is a lack of consensus agreement among members with the latest OECD proposal.

A failure to reach full consensus on an executable plan within the tight timeframe under which the OECD is operating could result in individual jurisdictions legislating digital tax provisions in an uncoordinated and unilateral manner, and further result in greater or even double taxation that companies may not have sufficient means to remedy.

Efforts to alleviate any increased tax burden may increase the cost of structuring and compliance, adversely impacting our business.

In the past, tax law has been enacted, domestically and abroad, impacting our current or future tax structure and effective tax rate, such as the Tax Cuts and Jobs Act of 2017 and Swiss Tax Reform discussed further in Note 12, “ INCOME TAXES .” Tax law may be enacted in the future, domestically or abroad, that impacts our current or future tax structure and effective tax rate,

including tax law that may be enacted following the recent November 2020 U.S.

elections or in response to the COVID-19 crisis, both of which have introduced greater uncertainty with respect to tax policies, laws and regulations.

For example, certain jurisdictions may introduce new tax law or reconsider existing laws to assist with covering the costs of the COVID-19 crisis in efforts to restore public finances, which could have a material impact on our business.

Our litigation exposure, or any securities litigation and shareholder activism, could have a material adverse impact on our business.

We, along with third parties we do business with, are involved, from time to time, in litigation arising in the ordinary course of business.

Litigation matters may include, but are not limited to, contract disputes, employment-related actions, labor relations, commercial litigation, intellectual property rights, product safety and shareholder actions.

Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing in publicly traded companies recently.

Due to the potential volatility of our stock price and for a variety of other reasons, we may become the target of securities litigation or shareholder activism.

Additionally, while we have continued to prioritize the health and safety of our associates and customers as we continue to operate during COVID-19, we face an increased risk of litigation related to our operating environments, including litigation risk related to potential workplace lawsuits and may incur significant increased operating costs associated with potential increases in insurance premiums, medical claims costs, and/or workers’ compensation claim costs, which could negatively affect our results of operations both during and after the pandemic.

In addition, while the Company has been successful in obtaining certain rent abatements and landlord concessions of rent payable during Fiscal 2020 as a result of COVID-19 store closures, the Company continues to engage with our landlords to find a mutually beneficial and agreeable path forward for certain of our other leases.

Any litigation that we become a party to could be costly and time consuming and could divert our management and key personnel from our business operations.

19 unchanged sentences

Changes in the regulatory or compliance landscape could have a material adverse impact on our business.

We are subject to numerous laws and regulations, including customs, truth-in-advertising, securities laws, consumer protection, general privacy, health information privacy, identity theft, online privacy, general employment laws, employee health and safety, minimum wage laws, unsolicited commercial communication and zoning and occupancy laws and ordinances that regulate retailers generally and/or govern the importation, intellectual property, promotion and sale of merchandise and the operation of retail stores, digital operations and distribution centers.

retailers generally and/or govern the importation, intellectual property, promotion and sale of merchandise and the operation of retail stores, digital operations and distribution centers.

If these laws and regulations were to change, or were violated by our management, associates, suppliers, vendors or other parties with whom we do business, the costs of certain merchandise could increase, or we could experience delays in shipments of our merchandise, be subject to fines or penalties, temporary or permanent store closures, increased regulatory scrutiny or suffer reputational harm, which could reduce demand for our merchandise and adversely affect our business and results of operations.

1 unchanged sentence

Laws and regulations at the local, state, federal and various international levels frequently change, and the ultimate cost of compliance cannot be precisely estimated.

In addition, there continues to be uncertainty as to the terms surrounding the United Kingdom’s recent exit from the European Union and final terms could result in additional administrative burdens to adhere to changes in regulatory frameworks concerning critical areas, including, but not limited to, the movement of goods or the movement of people.

Changes in the legal or regulatory environment affecting responsible sourcing, supply chain transparency, or environmental protection, among others, could also cause our costs to increase.

There is heightened uncertainty as to the ultimate scope and duration of COVID-19 and, as a result, government authorities have taken certain precautionary actions to mitigate the spread of COVID-19.

These actions that have impacted our operations and any changes in regulations, the imposition of additional regulations, or the enactment of any new or more stringent legislation, could have a material adverse impact on our business and results of operations, including, but not limited to, the following actions:

In addition, the United Kingdom’s recent exit from the European Union could result in additional administrative burdens to adhere to changes in regulatory frameworks concerning critical areas, including, but not limited to, the movement of goods or the movement of people.

Changes in the legal or regulatory environment affecting responsible sourcing, supply chain transparency, or environmental protection, among others, may result in increased compliance costs for us and our business partners.

There is continued uncertainty as to the ultimate scope and duration of COVID-19 and, as a result, government authorities have taken certain actions to mitigate the spread of COVID-19.

These actions have impacted our operations and any changes in regulations, the imposition of additional regulations, or the enactment of any new or more stringent legislation, could have a material adverse impact on our business and results of operations, including, but not limited to, the following actions:

imposing restrictions on public gatherings and human interactions;

7 unchanged sentences

Failure to comply with such regulations could result in fines, penalties, or lawsuits and could have a material adverse impact on our business.

Our Asset-Based Revolving Credit Agreement, as amended, expires on October 19, 2022 and our Term Loan Agreement, as amended, has a maturity date of August 7, 2021.

Both our Asset-Based Revolving Credit Agreement and our Term Loan Agreement contain restrictive covenants that, subject to specified exemptions, restrict our ability to incur indebtedness, grant liens, make certain investments, pay dividends or distributions on our capital stock and engage in mergers.

In addition, the inability to obtain credit on commercially reasonable terms in the future could adversely impact our liquidity and results of operations.

The agreements related to our senior secured asset-based revolving credit facility and our senior secured notes include restrictive covenants that limit our flexibility in operating our business and our inability to obtain credit on reasonable terms in the future could have an adverse impact on our business.

Our senior secured asset-based revolving credit agreement, as amended (the “ABL Facility”), expires on October 19, 2022 and our senior secured notes, which have a fixed 8.75% interest rate, will mature on July 15, 2025 (the “Senior Secured Notes”).

Both our ABL Facility and the indenture governing our Senior Secured Notes contain restrictive covenants that, subject to specified exemptions, restrict, among other things, the following:

our ability to incur, assume or guarantee additional indebtedness;

grant or incur liens;

sell or otherwise dispose of assets, including capital stock of subsidiaries;

make investments in certain subsidiaries;

pay dividends or make distributions on our capital stock;

redeem or repurchase capital stock;

change the nature of our business;

and consolidate or merge with or into, or sell substantially all of our assets to another entity.

If an event of default occurs, any outstanding obligations under the Senior Secured Notes and the ABL Facility could be declared immediately due and payable or the lenders could foreclose on or exercise other remedies with respect to the assets securing the indebtedness under the Senior Secured Notes and the ABL Facility.

In addition, there is no assurance that we would have the cash resources available to repay such accelerated obligations.

In addition, the Senior Secured Notes and ABL Facility are secured by certain of our real property, inventory, intellectual property, general intangibles and receivables, among other things, and lenders may exercise remedies against the collateral in the event of our default.

We have, and expect to continue to have, a level of indebtedness.

In addition, we may, from time to time, incur additional indebtedness.

We may need to refinance all or a portion of our existing indebtedness before maturity, including the Senior Secured Notes, and any indebtedness under the ABL Facility.

There can be no assurance that we would be able to obtain sufficient funds to enable us to repay or refinance our debt obligations on commercially reasonable terms, or at all.

Changes in market conditions could potentially impact the size and terms of a replacement facility or facilities in the future.

The inability to obtain credit on commercially reasonable terms in the future could adversely impact our liquidity and results of operations as well as limit our ability to take advantage of business opportunities that may arise.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors