What changed in this filing

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Item 1A. Risk Factors

2025-03-20 compared with 2024-03-21 · 265 added, 275 removed, 396 unchanged (58% of the section changed)

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• wages, jobs and unemployment trends;

• public health events (such as the COVID-19 pandemic) and their effect on our customers, team members, vendors/suppliers and other stakeholders;

• public health events (such as pandemics and epidemics) and their effect on our customers, team members, vendors/suppliers and other stakeholders;

• the housing market, including real estate prices and mortgage rates;

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Increasing volatility in financial markets may cause some of the aforementioned conditions to change with even greater degree of frequency and magnitude.

Our comparable sales, net sales per square foot, customer traffic or average value per transaction may be adversely affected if, for example, our customers reduce their purchases with us due to continued high inflation, job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, higher taxes, reduced access to credit, falling home prices and lower consumer confidence.

Our comparable sales, net sales per square foot, customer traffic or average value per transaction may be adversely affected if, for example, our customers reduce their purchases with us due to inflationary pressures, job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, higher taxes, reduced access to credit, falling home prices and lower consumer confidence.

A reduction in overall consumer spending which causes customers to shift their spending to products other than those sold by us or to products sold by us that are less profitable could result in lower net sales, decreases in inventory turnover or a reduction in profitability due to lower margins, which could make it more difficult for us to generate cash flow sufficient to satisfy our obligations under our indebtedness.

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For example, although we typically generate funds from our operations to pay our operating expenses and fund our capital expenditures, our ability to continue to meet these cash requirements over the long-term may require access to additional sources of funds, including our ABL Facility, incremental term loan facilities and the equity and debt capital markets.

Adverse financial and economic conditions, including as a result of continued increases in interest rates, may adversely affect our ability to draw on our ABL Facility, the ability of banks to honor draws on our ABL Facility or our ability to obtain incremental term loan facilities or access the equity and debt capital markets.

Adverse financial and economic conditions, including as a result of increases in interest rates, may adversely affect our ability to draw on our ABL Facility, the ability of banks to honor draws on our ABL Facility or our ability to obtain incremental term loan facilities or access the equity and debt capital markets.

In addition, adverse economic conditions could adversely affect our suppliers’ access to the capital and liquidity required to maintain their inventory, production levels, timeliness and product quality and to operate their businesses, which could adversely affect our supply chain, or could reduce our suppliers’ offerings of trade credit, customer incentives, vendor allowances, cooperative marketing expenditures and product promotions, which could adversely affect our results of operations.

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or global economy will be or whether or not it will be sustained.

If we are unable to predict or effectively react to changes in consumer tastes and preferences, or if we fail to acquire and sell brand name merchandise at competitive prices, or if we are not successful in managing our inventory balances, then we may lose customers and our sales may decline and our results of operations may be negatively affected.

A significant portion of the merchandise that we sell is manufactured in foreign countries, including China, which exposes us to various international risks, including additional tariffs, that could have a material adverse effect on our business and results of operations.

A significant portion of the merchandise that we sell, including merchandise we purchase from domestic suppliers and much of our private label brand merchandise, is manufactured in countries such as China, Bangladesh, Vietnam, and Brazil.

Foreign imports subject us to the risks of changes in import duties, quotas, loss of “most favored nation” status with the United States for a particular foreign country, delays in shipment, shipping port and ocean carrier constraints, supply and demand constraints, labor strikes, work stoppages, supply chain disruptions including those caused by extreme weather, natural disasters, public health events (such as pandemics) or other disruptions, freight cost increases and economic uncertainties (including the United States imposing anti-dumping or countervailing duty orders, tariffs, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices).

To the extent that any foreign manufacturers from whom we purchase products directly or indirectly employ labor, environmental, corruption, workplace safety, or other business practices that vary from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, potential claims of liability.

For example, in late 2021, the United States Government enacted the Uyghur Forced Labor Prevention Act (“UFLPA”), which presumes goods produced in the Xinjiang Uyghur Autonomous Region of China, or with labor linked to specified Chinese government-sponsored labor programs, were produced using forced labor and prohibits importation of such goods into the United States absent clear and convincing evidence proving otherwise.

Compliance with UFLPA could have a material adverse effect on our business, financial condition and results of operations.

Merchandise or raw materials purchased from alternative sources may be of lesser quality or more expensive than the merchandise or raw materials we currently were to cause a disruption of trade from the countries in which our suppliers are located, our inventory levels may be reduced or the costs of our merchandise may increase.

The political, health, safety, security, and economic environments of the countries in which we or our vendors obtain merchandise or raw materials have the potential to materially affect our operations.

In the event of disruptions or delays in supply due to economic, political, health, safety or security conditions in foreign countries or their relations with the United States, such disruptions or delays could adversely affect our results of operations unless and until alternative supply arrangements could be made.

For example, during the COVID-19 pandemic in China, we experienced a temporary closure of third party manufacturer facilities, interruptions in labor and product supply, and restrictions on the export or shipment of our products, which resulted in disruptions in our supply chain in China.

Also, for example on February 10, 2025 the Trump Administration has imposed 25% duties on all imports of steel, aluminum, and their derivative products, effective March 12, 2025.

The imposition of trade tariffs, sanctions or other regulations against merchandise imported by us, or the loss of “normal trade relations” status with the countries in which we or our vendors obtain merchandise or raw materials, could significantly increase our cost of products imported into the United States and harm our business.

Additionally, the prices charged for the merchandise that we purchase by foreign manufacturers may be affected by the fluctuation of their local currency against the U.S.

In addition, the federal government periodically considers other restrictions on the importation of products obtained by our vendors and us.

If the United States were to withdraw from or materially modify any international trade agreements to which it is a party, or if tariffs were raised on the foreign-sourced goods that we sell, or if border taxes were implemented, then the goods we import may become more expensive or may no longer be available at a commercially attractive price or at all, each of which in turn could have a material adverse effect on our business, financial condition and results of operations.

In addition, the increases in the costs of labor and other costs of doing business in China could significantly increase our costs to produce our merchandise and could have a negative impact on our net sales, operating income and net income.

Factors that could negatively affect our business include a potential significant revaluation of the Chinese Yuan, which may result in an increase in the cost of producing products in China, labor shortages and increases in labor costs in China, and difficulties in moving products manufactured in China through the ports on the western coast of North America, whether due to port congestion, labor disputes, product regulations and/or inspections or other factors, and natural disasters or health pandemics impacting China.

General trade tensions between the United States and China began escalating in 2018, with the Trump administration ultimately imposing multiple rounds of tariffs on imports from China, where we and many of our vendors source commodities.

As a result, we have experienced rising inventory costs on private label brand products we directly source from China, as well as national brand products from China that we source through our vendors.

These higher inventory costs have resulted in higher prices and/or lower margins, thus resulting in a negative impact to sales and/or gross margin.

These tariffs have had an adverse effect on our business, financial condition and results of operations.

In response to the tariffs, we have sought alternative suppliers or vendors, raised prices, and made changes to our operations.

On February 1, 2025, and again on March 4, 2025, President Trump issued executive orders increasing the tariff on products from China to 20% on top of any preexisting tariffs.

As a result, China has imposed retaliatory tariffs on the United States.

The continuation or escalation of the U.S.-China trade tensions could have further adverse effects on our sales and profitability, results of operations and financial condition.

Problems with operating, updating or implementing our information systems could disrupt our operations and negatively impact our business operations and materially and adversely affect our financial results.

The efficient operation of our business is dependent on the successful integration and operation of our information systems, some of which require interoperability to perform the intended function or are dependent on services managed or provided by third-parties.

For example, we rely on our information systems to manage merchandise planning and replenishment, warehousing and distribution, store operations, customer relationships, e-commerce, and customer transactions, optimize our overall inventory levels, process financial information and sales transactions, pay and receive funds, prevent security breaches and fraud, communicate internally and externally, provide support services, and comply with legal and regulatory obligations.

Our information systems, if not functioning properly or if failing to function altogether, could disrupt our ability to track, record, and analyze sales and inventory and could cause disruptions of operations, including, among other things, our ability to order, process and ship inventory, process financial information including credit card transactions, prepare financial statements, prevent data breaches and credit card fraud, process payrolls or vendor payments or engage in other similar normal business activities.

Our information systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, worms, other malicious computer programs, denial-of-service attacks, security breaches or other cybersecurity incidents, catastrophic events and severe weather such as fires, floods, tornadoes, earthquakes and hurricanes, and usage or coding errors by our team members or partners.

From time to time we have experienced, and we may in the future further experience, interruptions, damages, or failures of our information systems, some of which disrupt our business and cause us to expend additional resources to rectify.

Although we attempt to mitigate the risk of possible business interruptions by employing customary strategies, any material disruption, malfunction or any other similar problem in or with our information systems could negatively impact our business operations and materially and adversely affect our financial results.

From time to time, our information systems may require repair, upgrade, enhancement, integration and/or replacement for us to maintain successful current operations and achieve future sales and store growth.

Updating our existing information systems subjects us to numerous risks, including:

• loss of information;

• disruption of normal operations;

• changes in accounting or other operating procedures;

• changes in internal control over financial reporting or general computer controls;

• problems maintaining accuracy of historical data;

• allocation and dedication of key business resources to the updating of existing systems;

• ability to attract and retain adequate experienced technical resources and third-party contractors for the updating of existing systems;

• unknown impact on remaining systems;

• adequacy of training and change management to address critical changes in business processes and job functions;

• updated information system ultimately does not meet the needs of the business.

Any failure to successfully update and maintain our information systems, and any missteps, delays, cost overruns, vendor disputes, technical challenges or other similar issues that may arise during the updating of our information systems, could have a material impact on our business, financial condition, results of operations, internal controls over financial reporting and ability to manage our business effectively.

From time to time, we may undertake initiatives involving numerous information systems to improve and enhance our capabilities, whether for operational, financial or risk reduction purposes.

Any failure to timely, properly or adequately implement these information systems initiatives could result in increased costs or risks, the diversion of our management’s and team members’ attention and resources and could materially adversely affect our results of operations, our internal controls over financial reporting or general computer controls, our ability to manage our business effectively and possible disruption of our business operations or financial reporting.

If we are not successful in managing our inventory balances, our sales may decline and our results of operations may be negatively affected.

We must maintain sufficient inventory levels of merchandise that our customers desire to successfully operate our business.

A shortage of popular merchandise could reduce our net sales.

Conversely, we also must seek to avoid accumulating excess inventory to maintain appropriate in-stock levels.

If we overstock unpopular merchandise, then we may be forced to take significant inventory markdowns or miss opportunities for the sale of other merchandise, both of which could have a negative impact on our profitability, and, in turn, our sales may decline or we may be required to sell the merchandise we have obtained at lower prices.

For example, the popularity of much of the licensed apparel we offer is dependent on the performance of certain sporting teams throughout the course of the applicable sports seasons.

If we overestimate or underestimate the projected success of a certain sports team, we may have to take significant mark-downs of our licensed apparel for that sports team or we may miss the opportunity to sell additional licensed apparel or other products with that sports team’s logo.

The success of sporting teams is highly uncertain and difficult to predict.

In addition, factors beyond our control, such as severe weather, local safety concerns, player-lockouts or strikes, may significantly affect whether or not certain sports leagues are able to host their games in their usual seasons, and if they are, whether or not spectators can or are able to attend.

Our licensed apparel is significantly more popular when spectators are able to attend the games of the sports teams featured on such apparel.

If we are not successful in managing our inventory balances, our results of operations may be negatively affected.

If we are unable to predict or effectively react to changes in consumer tastes and preferences, or if we fail to obtain access to, and sell brand name merchandise at competitive prices, then we may lose customers and our sales may decline and our results of operations may be negatively affected.

The level of success we achieve is dependent on, among other factors, the frequency of merchandise and service innovations, how accurately and timely we predict consumer tastes and preferences regarding sporting goods and outdoor recreation merchandise, the level of consumer demand, the availability of merchandise, the related impact on the demand for existing merchandise, and the competitive environment.

Our products must appeal to a broad range of customers whose preferences cannot be predicted with certainty and are subject to change.

We must identify, obtain supplies of, and offer to our customers, attractive, innovative and high-quality merchandise on a continuous basis.

We must identify and obtain access to a broad assortment of brands and styles, to enable us to offer to our customers, attractive, innovative and high-quality merchandise on a continuous basis.

It is difficult to predict consistently and successfully the products and services our customers will demand as we often purchase products from our vendors several months in advance of the proposed delivery.

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• escalating costs of sporting and outdoor activities due to adverse changes in economic conditions, including inflation, rising fuel prices, rising participation fees and rising sporting license fees;

• severe weather and natural or man-made disasters (e.g., an oil spill closing large areas of hunting or fishing), including heat waves, freezes, hurricanes, tornadoes, large storms and floods, and the effects of such events on consumer demand for certain seasonal goods and the ability of large urban areas to continue spending on sporting goods and outdoor recreation products.

• severe weather and natural or man-made disasters (e.g., an oil spill closing large areas of hunting or fishing), including heat waves, freezes, hurricanes, tornadoes, large storms and floods.

Total consumer spending may not continue to increase at historical rates due to slowed production growth and shifts in population demographics, and it may not increase in certain product categories given changes in consumer interests and participation rates.

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In this regard, brand name merchandise that is in high demand may be allocated by brand name vendors based upon the vendors’ internal criterion which is beyond our control.

If we lose any of our brand name vendors or if any of our brand name vendors fail to supply us with their brand name merchandise, we may not be able to meet the demand of our customers for their brand names.

We must maintain sufficient inventory levels of merchandise that our customers desire to successfully operate our business.

A shortage of popular merchandise could reduce our net sales.

Conversely, we also must seek to avoid accumulating excess inventory to maintain appropriate in-stock levels.

For example, the popularity of much of the licensed apparel we offer is dependent on the performance of certain sporting teams throughout the course of the applicable sports seasons.

The success of sporting teams is highly uncertain and difficult to predict.

Our licensed apparel is significantly more popular when spectators are able to attend the games of the sports teams featured on such apparel.

If we are not successful in managing our inventory balances, our results of operations may be negatively affected.

Intense competition in the sporting goods and outdoor recreation retail industries could limit our growth and reduce our profitability.

The market for sporting and outdoor recreation goods is highly fragmented, intensely competitive, and continually evolving.

Our current and prospective competitors include many large companies, some of which have substantially greater market presence, name recognition and financial, marketing and other resources than us.

We compete directly or indirectly with the following categories of companies:

• mass general merchants;

• department stores;

• large format sporting goods stores;

• traditional sporting goods stores;

• specialty outdoor retailers;

• specialty footwear retailers;

• catalogue and internet retailers;

• suppliers that sell directly to customers.

Pressure from our competitors could require us to reduce our prices or increase our spending for advertising and promotion.

Traditional competitors have become increasingly promotional and, if our competitors reduce their prices, it may be difficult for us to reach our net sales goals without reducing our prices, which could impact our margins.

Increased competition in markets in which we have stores or the adoption by competitors of innovative store formats, aggressive pricing, promotion or delivery strategies and retail sale methods, such as the Internet, could cause us to lose market share and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, as the popularity and use of Internet sites, free merchandise shipping, and suppliers selling directly to consumers continue to increase, our business faces increased competition from various domestic and international sources, including our suppliers.

Additionally, the ability of consumers to compare prices on a real-time basis through the use of smartphones and digital technology puts additional pressure on us to maintain competitive prices vis-à-vis our competitors.

We may require significant capital in the future to sustain or grow our business, including our store and e-commerce activities, due to increased competition, and there is no assurance that cash flow from operations will be sufficient to meet those needs or that additional sources of capital will be available on acceptable terms or at all.

Our e-commerce activities expose us to various risks that could have a material adverse impact on our overall results of operations.

Our customers are increasingly using computers, tablets, mobile phones and other devices to shop in our stores and on-line for our products.

Our business has become increasingly omnichannel as we strive to deliver a seamless shopping experience to our customers through both online and in-store shopping experiences.

We utilize our own e-commerce platform that allows us to control our customer experience without relying on a single third-party provider.

Maintaining and continuing to improve our e-commerce platform involves substantial investment of capital and resources, integrating a number of information and management systems from different vendors, artificial intelligence initiatives, increasing supply chain and distribution capabilities, attracting, developing and retaining qualified personnel with relevant subject matter expertise, and effectively managing and improving the customer experience.

Our e-commerce operations are subject to numerous risks that could have a material adverse impact on our overall results of operations, including:

• expansion of our sales across the United States, thereby, subjecting us to the regulatory and other requirements of the 50 states;

• website operating issues, including website availability, system reliability, website operation, Internet connectivity, website errors, computer viruses, telecommunication failures, electronic break-ins or similar disruptions;

• overall website design and functionality, including search capabilities;

• the need to keep pace with rapid technological change and investments from competitors, and maintain investments necessary for our e-commerce operation;

• legal compliance issues related to the online sale of merchandise;

• intellectual property litigation related to the enforcement of patent rights;

• privacy and personal data security;

• protection against credit card and gift card fraud;

• fulfillment, inventory control and shipping issues for e-commerce transactions;

• tax issues, including state sales tax collection for e-commerce transactions;

• hiring, retention and training of personnel qualified to conduct our e-commerce operation;

• ability to procure adequate computer hardware and software and technology services and solutions from third-party providers;

• reduction in visits to, diversion and/or cannibalization of sales from, existing retail stores.

Our e-commerce activities also carry challenges such as identifying our e-commerce customer, marketing our website, establishing a profitable on-line merchandising mix, managing shipping costs to our customers, setting prices to compete against other on-line retailers, maintaining accurate website content and functionality, timely and accurately fulfilling orders, integrating our e-commerce business with our store operations, and growing the operation as part of our overall strategic plan.

In addition, offering different products through each channel could cause conflicts and cause some of our current or potential e-commerce customers to consider our competitors.

Offering products through our e-commerce platform could also cause some of our current or potential vendors to consider competing internet or mobile offerings of their products either on their own or through competing distributors.

If we do not successfully manage the risks and navigate the challenges associated with our e-commerce activities, it could have a material adverse effect on our results of operations.

Further, governmental regulation of e-commerce continues to evolve in such areas as marketing and advertising, taxation, privacy, data protection and privacy, pricing, content, copyrights, distribution, mobile communications, electronic contracts and other communications, consumer protection, the provision of online payment services, the design and operation of websites and the characteristics and quality of products and services.

Unfavorable changes to regulations in these areas could have a material adverse impact on our e-commerce activities.

Any failure to protect the integrity, confidentiality, and availability of our information systems (including our technology infrastructure and networks, third party services, and hosted and on-premises software) and data that we hold relating to us and our customers, team members, and partners (including vendors) could result in lost sales, fines, penalties, assessments, investigations, inquiries, and/or lawsuits, a loss of confidence in us, and harm to our reputation, business, results of operations, and financial condition.

The security of our information systems (including our technology infrastructure and networks, third party services, and hosted and on-premises software) and data (including from our customers, team members and partners) is critical to our business as a retailer, and we devote significant resources to protecting our information systems and data.

The security of our information systems (including our technology infrastructure and networks, third party services, artificial intelligence, and hosted and on-premises software) and data (including from our customers, team members and partners) is critical to our business as a retailer, and we devote significant resources to protecting our information systems and data.

In order to operate our business and to provide products and services to our customers, we collect, source, store, maintain, and process data that can be used to identify a person (i.e., personal data or personally identifiable information), including customers, partners, and team members, along with our intellectual property and proprietary business information.

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Our retail stores and online operations depend on the secure transmission and processing of confidential information and the continued operation of information systems necessary to perform store operations and to process transactions.

Our customers provide payment card and gift card information, alternative payment information, and other personal information to purchase products or services, enroll in promotional programs, apply for credit, create accounts and make purchases on our website or mobile applications, or otherwise communicate and interact with us.

Job applicants provide personal information in connection with their employment application and our team members provide personal information in connection with their continued employment.

We may share information about individual persons with partners assisting with certain aspects of our business.

Some personal data and personally identifiable information may be deemed sensitive or otherwise protected under applicable laws or regulations and may be subject to specific requirements for collection, processing, security, and disposal.

We and our partners rely on commercially available information security technology and industry standard operational practices for collecting, storing, maintaining, transmitting, protecting, and processing data.

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Threat actors may have the ability to defeat our security measures and may obtain access to data (including personal data or personally identifiable information) that we hold relating to us and our customers, team members, and vendors, or may cause operational harm.

For example, ransomware events could cause key systems to be unavailable for use, or credential stuffing attacks of customer accounts on our website could cause customer privacy breaches and authorized charges to payment or gift cards, or phishing/smishing attacks, in which attackers masquerade as a trustworthy entity in an electronic communication (including email or text message), could gain control of a user's device and/or credentials.

The techniques used by threat actors to attack or access systems and data evolve and may not be recognized until or after being launched against a target.

For example, ransomware events could cause key systems to be unavailable for use, or credential stuffing attacks of customer accounts on our website could cause customer privacy breaches and unauthorized charges to payment or gift cards, or phishing/smishing attacks, in which attackers masquerade as a trustworthy entity in an electronic communication (including email or text message), could gain control of a user's device and/or credentials.

The techniques used by threat actors to attack or access information systems and data evolve and may not be recognized until or after being launched against a target.

We may not have the resources or technical sophistication to anticipate, prevent or stop new or evolving cybersecurity incidents, including attacks to our information systems and data and those of our partners.

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The data privacy and cybersecurity regulatory environment is constantly changing, with new and increasingly rigorous or complex requirements.

Consumer data privacy and cybersecurity laws and related regulations have been enacted and additional laws and regulations are under consideration by various state and federal legislatures and regulatory authorities.

Consumer data privacy, cybersecurity, artificial intelligence, and related laws and related regulations have been enacted and additional laws and regulations are under consideration by various state and federal legislatures and regulatory authorities.

Maintaining compliance with those requirements may require significant effort, cost, new or improved technical capabilities, and changes to our business practices, and may limit our ability to obtain or use data to provide a personalized customer experience or to engage in certain marketing practices.

In addition, any alleged or actual failure to comply with applicable requirements could subject us to fines, sanctions, governmental investigations, lawsuits, reputational damage, and other risks and costs that may be difficult to anticipate but could become material.

A significant portion of the merchandise that we sell is manufactured in foreign countries, including China, which exposes us to various international risks that could have a material adverse effect on our business and results of operations.

Compliance with UFLPA could have a material adverse effect on our business, financial condition and results of operations.

Merchandise or raw materials purchased from alternative sources may be of lesser quality or more expensive than the merchandise or raw materials we currently purchase abroad.

If any of these or other factors were to cause a disruption of trade from the countries in which our suppliers are located, our inventory levels may be reduced or the costs of our merchandise may increase.

Also, the imposition of trade tariffs, sanctions or other regulations against merchandise imported by us, or the loss of “normal trade relations” status with the countries in which we or our vendors obtain merchandise or raw materials, could significantly increase our cost of products imported into the United States and harm our business.

The prices charged for the merchandise that we purchase by foreign manufacturers may be affected by the fluctuation of their local currency against the U.S.

In addition, the federal government periodically considers other restrictions on the importation of products obtained by our vendors and us.

A significant amount of our merchandise is produced in China.

The ongoing COVID-19 pandemic in China has led to, and may continue to lead to, significant governmental measures being implemented in China to control the spread of the virus, including, among others, restrictions on manufacturing and the movement of team members in many regions of the country.

These measures in China have resulted in, and may result in further, disruptions to our supply chain, including the temporary closure of third-party manufacturer facilities, interruptions in labor and/or product supply, or restrictions on the export or shipment of our products.

As a result, our third-party manufacturers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications.

If our third-party manufacturers' operations are again curtailed, we may need to seek alternate manufacturing sources, which may be more expensive.

Alternate sources may not be available or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect our results of operations.

The duration of the production and supply chain disruption, and related financial impact, cannot be estimated at this time.

Should such production and distribution closures continue or be re-imposed, the impact on our supply chain in China and globally could have a material adverse effect on our results of operations and cash flows.

These higher inventory costs have resulted in higher prices and/or lower margins, thus resulting in a negative impact to sales and/or gross margin.

Additionally, these tariffs have resulted in and could result in further retaliatory tariff actions by China and could ultimately result in further tariffs on merchandise that we, and many of our vendors, import from China.

These tariffs have had an adverse effect on our business, financial condition and results of operations.

In response, we have sought alternative suppliers or vendors, raised prices, and made changes to our operations.

The continuation of this situation could have further adverse effects on our sales and profitability, results of operations and financial condition.

Since the date of our last annual report, no significant modifications have been enacted relative to the escalated tariffs which impact our business.

Updating our existing information systems subjects us to numerous risks, including:

• loss of information;

• disruption of normal operations;

• changes in accounting or other operating procedures;

• changes in internal control over financial reporting or general computer controls;

• problems maintaining accuracy of historical data;

• allocation and dedication of key business resources to the updating of existing systems;

• ability to attract and retain adequate experienced technical resources and third-party contractors for the updating of existing systems;

• unknown impact on remaining systems;

• adequacy of training and change management to address critical changes in business processes and job functions;

• updated information system ultimately does not meet the needs of the business.

From time to time, we may undertake initiatives involving numerous information systems to improve and enhance our capabilities, whether for operational, financial or risk reduction purposes.

We depend on approximately 1,400 suppliers to supply us with the merchandise we purchase for resale and our significant dependence on these suppliers exposes us to risks associated with disruption in supply and losses of merchandise purchasing incentives that could have a material adverse effect on our business and results of operations.

We depend on approximately 1,400 suppliers to supply us in a timely and efficient manner with the merchandise we sell.

Our significant dependence on these suppliers exposes us to various risks that could have a material adverse effect on our business and results of operations.

In 2023, purchases from our largest vendor represented approximately 11% of our total inventory purchases.

The merchandise we sell is sourced from a wide variety of domestic and international suppliers and our ability to find qualified suppliers and access merchandise in a timely and efficient manner is often challenging, particularly with respect to merchandise sourced outside the United States.

We generally do not have long-term written contracts with our suppliers that would require them to continue supplying us with merchandise, particular payment terms or the extension of credit.

As a result, these suppliers could modify the terms of these relationships due to general economic conditions or otherwise.

If there is a disruption in supply from a principal supplier (which can occur for various reasons in or out of the control of these suppliers, including as a result of public health emergencies, such as the COVID-19 pandemic, and measures taken by the Chinese government or other governments in response to such events), we may experience merchandise out-of-stocks, delivery delays or increased delivery costs, or otherwise be unable to obtain the same merchandise from other suppliers in a timely and efficient manner and on acceptable terms, or at all, which could materially affect our results of operations and our customers’ confidence in us.

For example, during fiscal 2021, we began to see increased competition across the industry for resources throughout the supply chain, which resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.

As a result, we experienced a period of decreased or delayed supply and high inflation which negatively impacted transportation and inventory costs.

Over the past year, we have seen improvement to these constraints, resulting in decreased freight costs.

Fluctuations in the supply chain or changes in our relationships with our suppliers (which can occur for various reasons in or out of our control) have the potential to increase our expenses and adversely affect our results of operations.

The formation and/or strengthening of business partnerships between our suppliers and our competitors could directly alter the available supply of merchandise we desire to sell, which could have a material adverse effect on the level of customers purchasing merchandise from us and, thus, our results of operations.

Further, vendors increasingly sell their products directly to customers or through broadened or alternative distribution channels, such as department stores, family footwear stores, or e-commerce companies.

Moreover, many of our suppliers provide us with merchandise purchasing incentives, such as return privileges, volume purchasing allowances and cooperative advertising, and a decline or discontinuation of these incentives could severely impact our results of operations.

Harm to our reputation could adversely impact our ability to attract and retain customers, team members, vendors and/or other partners.

Negative publicity or perceptions involving us or our brands, products, team members, operations, vendors, spokespersons, or marketing and other partners may negatively impact our reputation and adversely impact our ability to attract and retain customers, team members, vendors and/or other partners.

Failure to detect, prevent or mitigate issues that might give rise to reputational risk or failure to adequately address negative publicity or perceptions could adversely impact our reputation, business, results of operations, and financial condition.

Issues that might pose a reputational risk include failure of our cybersecurity measures to protect against cybersecurity incidents, product liability and product recalls, our social media activity, our handling of issues relating to corporate responsibility matters, including our response to such matters, failure to comply with applicable laws and regulations or enforce our own policies, our policies related to the sale of firearms, ammunition and accessories, our policies relating to public health, public stances on controversial social or political issues, concerns surrounding labor, environmental, workplace safety and other practices that may vary from U.S.

standards in any of our foreign manufacturers, whether directly or indirectly, and any of the other risks enumerated in these risk factors.

As part of our marketing efforts, we rely on social media platforms and other digital marketing to attract and retain customers.

A variety of risks are associated with our social media activity and digital marketing, including the improper disclosure of proprietary information, negative comments about or negative incidents regarding us, exposure of personally identifiable information, fraud or out-of-date information.

The inappropriate use of social media and digital marketing vehicles by us, our customers, team members or others could increase our costs, lead to litigation or result in negative publicity that could damage our reputation.

Many social media platforms immediately publish the content, videos and/or photographs created or uploaded by their subscribers and participants, often without filters or checks on accuracy of the content posted.

Information posted on such platforms at any time may be adverse to our interests and/or may be inaccurate.

The dissemination of negative information related to us or our brands, products, team members, operations, vendors, spokespersons or partners could harm our business, results of operations and financial condition, regardless of the information’s accuracy, and the harm may be immediate without affording us an opportunity for redress or correction.

Furthermore, the prevalence of news coverage, the internet, and social media may accelerate and increase the potential scope of any negative publicity we might receive and could increase the negative impact of these issues on our reputation, business, results of operations, and financial condition.

A failure of our third-party vendors of outsourced business services and solutions to meet our performance standards and expectations could adversely affect our operations.

As part of our long-term strategy, we look for opportunities to cost-effectively enhance the capabilities of our business services.

In some cases, we outsource certain business services and solutions, and rely on the third-party vendors of these business services and solutions, to support a variety of our business functions, including portions of our information technology and management information systems, data security and credit card fraud detection, supply chain (including product manufacturers, logistics service providers or independent distributors), retail operations, administrative services and other core business functions.

In some cases, we rely on a single vendor for such services.

While we believe we conduct appropriate due diligence before entering into agreements with these third-parties, if we fail to properly manage these vendors or if they fail to meet, or are prevented from meeting, our performance standards and expectations, then our reputation, sales, and results of operations could be adversely affected.

Any significant interruption in the operations of these service providers, over which we have no control, could also have an adverse effect on our business.

In addition, we could face increased costs or incur substantial time in finding and implementing replacement service vendors or, alternatively, hiring new team members, making additional technology purchases, and changing information systems configurations to provide these business services and solutions in-house.

Intense competition in the sporting goods and outdoor recreation retail industries could limit our growth and reduce our profitability.

The market for sporting and outdoor recreation goods is highly fragmented, intensely competitive, and continually evolving.

Our current and prospective competitors include many large companies, some of which have substantially greater market presence, name recognition and financial, marketing and other resources than us.

We compete directly or indirectly with the following categories of companies:

• mass general merchants;

• department stores;

• large format sporting goods stores;

• traditional sporting goods stores;

• specialty outdoor retailers;

• specialty footwear retailers;

• catalogue and internet retailers;

• suppliers that sell directly to customers.

Pressure from our competitors could require us to reduce our prices or increase our spending for advertising and promotion.

A significant disruption to our distribution network or the timely receipt of inventory could adversely impact sales or increase our transportation costs, which would decrease our profits.

We rely upon various means of transportation, including ships and trucks, to deliver products from vendors to our distribution centers and from our distribution centers to our stores.

Consequently, our results can vary depending upon numerous factors affecting transportation, including the price of fuel and the availability of trucks and ships.

The price of fuel and demand for transportation services has fluctuated significantly over the last few years, and has resulted in increased costs for us and our vendors.

For example, during fiscal 2021, we experienced a period of decreased or delayed supply and high inflation as a result of increased competition across the industry for resources, which constrained the supply chain and negatively impacted our transportation and inventory costs.

While we have seen some improvement to these constraints, resulting in decreased freight costs over the past couple of years, we may from time to time experience decreased or delayed supply.

In addition, changes in regulations may result in higher fuel costs through taxation, transportation restrictions or other means.

Fluctuations in transportation costs and availability could adversely affect our results of operations.

Labor shortages in the transportation industry have historically had and could potentially continue to negatively affect transportation costs and our ability to supply our stores in a timely manner.

In particular, our business is highly dependent on the shipping and trucking industry to deliver products to our distribution centers and our stores.

Our results of operations may be adversely affected if we, or our vendors, are unable to secure adequate transportation resources at competitive prices to fulfill our delivery schedules to our distribution centers or our stores.

Difficulties in moving products manufactured overseas and through the ports of North America, whether due to port congestion, government shutdowns, labor disputes, product regulations and/or inspections or other factors, including man-made or natural disasters and public health events, could negatively affect our business.

We may not be able to continue our store growth plans successfully or continue to manage our growth effectively, and our new stores may not generate sales levels necessary to achieve store-level sales or profitability comparable to that of our existing stores, which could materially and adversely affect our business, financial condition and results of operations.

Our strategy includes opening stores in existing markets and, from time to time, new markets.

Our growth strategy includes opening stores in existing markets and, from time to time, new markets.

We must successfully choose our store sites, execute favorable real estate transactions on terms that are acceptable to us, construct and equip the stores with furnishings and appropriate merchandise, hire and train competent personnel and effectively open and operate these new stores and integrate the stores into our operations, and we may need to expand our distribution infrastructure, including the addition of new distribution centers.

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Expansion into new markets could also bring us into direct competition with retailers with whom we have no past experience as direct competitors.

As a result of our anticipated growth, we may become increasingly reliant on entry into new markets to grow, we may face additional risks and our results of operations could suffer.

To the extent that we are not able to meet new challenges, our sales could decrease and our operating costs could increase.

To the extent that we are not able to meet new challenges in expanding in new and existing markets, our sales could decrease and our operating costs could increase.

There also can be no assurance that we will be able to continue our expansion plans successfully or continue to manage our growth effectively, or that our new stores will generate sales levels necessary to achieve store-level profitability or profitability comparable to that of our existing stores.

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Thus, our failure to achieve our expansion plans could materially and adversely affect our business, financial condition and results of operations.

Our e-commerce activities expose us to various risks that could have a material adverse impact on our overall results of operations.

Our customers are increasingly using computers, tablets, mobile phones and other devices to shop in our stores and on-line for our products.

Our business has become increasingly omnichannel as we strive to deliver a seamless shopping experience to our customers through both online and in-store shopping experiences.

We utilize our own e-commerce platform that allows us to control our customer experience without relying on a single third-party provider.

Maintaining and continuing to improve our e-commerce platform involves substantial investment of capital and resources, integrating a number of information and management systems from different vendors, increasing supply chain and distribution capabilities, attracting, developing and retaining qualified personnel with relevant subject matter expertise, and effectively managing and improving the customer experience.

Our e-commerce operations are subject to numerous risks that could have a material adverse impact on our overall results of operations, including:

• expansion of our sales across the United States, thereby, subjecting us to the regulatory and other requirements of the 50 states;

• the need to keep pace with rapid technological change and investments from competitors, and maintain investments necessary for our e-commerce operation;

• legal compliance issues related to the online sale of merchandise;

• intellectual property litigation related to the enforcement of patent rights;

• privacy and personal data security;

• protection against credit card and gift card fraud;

• fulfillment, inventory control and shipping issues for e-commerce transactions;

• tax issues, including state sales tax collection for e-commerce transactions;

• hiring, retention and training of personnel qualified to conduct our e-commerce operation;

• ability to procure adequate computer hardware and software and technology services and solutions from third-party providers;

• reduction in visits to, diversion and/or cannibalization of sales from, existing retail stores.

Our e-commerce activities also carry challenges such as identifying our e-commerce customer, marketing our website, establishing a profitable on-line merchandising mix, managing shipping costs to our customers, setting prices to compete against other on-line retailers, maintaining website content, timely and accurately fulfilling orders, integrating our e-commerce business with our store operations, and growing the operation as part of our overall strategic plan.

In addition, offering different products through each channel could cause conflicts and cause some of our current or potential e-commerce customers to consider our competitors.

If we do not successfully manage the risks and navigate the challenges associated with our e-commerce activities, it could have a material adverse effect on our results of operations.

Unfavorable changes to regulations in these areas could have a material adverse impact on our e-commerce activities.

Our success depends on the effectiveness of our marketing and advertising programs.

Brand marketing and advertising significantly affect sales at our locations, as well as e-commerce sales.

Our marketing and advertising programs may not be successful, which may prevent us from attracting new customers and retaining existing customers.

If sales decline, we will have fewer funds available for marketing and advertising, which could materially and adversely affect our revenues, business and results of operations.

As part of our marketing efforts, we rely on print, television and radio advertisements, as well as search engine marketing, web advertisements, social media platforms and other digital marketing to attract and retain customers.

These efforts may not be successful, resulting in expenses incurred without the benefit of higher revenues or increased customer or team member engagement.

Customers are increasingly using internet sites and social media to inform their purchasing decisions and to compare prices, product assortment, and feedback from other customers about quality, responsiveness and customer service before purchasing our services and products.

If we are unable to continue to develop successful marketing and advertising strategies, especially for online and social media platforms, or if our competitors develop more effective strategies, we could lose customers and our sales could decline.

Our failure to attract, train and retain quality team members in sufficient numbers, increases in wage and labor costs, and changes in laws and other labor issues could adversely affect our business.

The success of our business depends significantly on our ability to hire and retain quality team members, including store managers, Enthusiasts and other store team members, distribution center team members and corporate directors, managers and other personnel.

We plan to expand our team member base to manage our anticipated growth.

Competition for non-entry-level personnel, particularly for team members with retail experience, is highly competitive.

Additionally, our ability to maintain consistency in the quality of customer service in our stores is critical to our success.

Many of our store team members are in entry-level or part-time positions that historically have high rates of turnover, which can lead to increased training and retention costs, particularly if employment opportunities increase.

We are also dependent on the team members who staff our distribution centers, many of whom are skilled.

We may be unable to meet our labor needs and control our costs due to external factors such as the availability of a sufficient number of qualified persons in the work force of the markets in which we operate, competition, unemployment levels, changes in immigration laws, demand for certain labor expertise, prevailing wage rates, wage inflation, changing demographics, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and the impacts of man-made or natural disasters, such as tornadoes, hurricanes, and public health events.

We have experienced, and expect to continue to experience, a shortage of labor for certain functions, which has increased our labor costs and negatively impacted our profitability.

The extent and duration of the effect of these labor market challenges are subject to numerous factors, including availability of qualified persons in the markets where we and our contracted service providers operate and unemployment levels within these markets, behavioral changes, prevailing wage rates and other benefits, inflation, adoption of new or revised employment and labor laws and regulations (including immigration/visa processing) or government programs, safety levels of our operations, and our reputation within the labor market.

Recent or potential future legislative initiatives may seek to increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states or markets.

As federal or state minimum wage rates increase, we may need to increase not only the wage rates of our minimum wage team members, but also the wages paid to our other hourly team members as well.

Further, should we fail to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our customer service to suffer.

Any increase in the cost of our labor could have an adverse effect on our operating costs, financial condition and results of operations.

If we are unable to hire and retain store-level team members capable of providing a high level of customer service, skilled distribution center team members or other qualified personnel, our business could be materially adversely affected.

Although none of our team members are currently covered under collective bargaining agreements, we cannot guarantee that our team members will not elect to be represented by labor unions in the future.

If some or all of our entire workforce were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements or work practice, it could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to protect against inventory shrink, our results of operations and financial condition could be adversely affected.

Our business depends on our ability to effectively manage our inventory.

We have historically experienced loss of inventory (also called shrink) due to damage, theft (including from organized retail crime), and other causes.

We continue to experience elevated levels of inventory shrink relative to historical levels, which has adversely affected, and could continue to adversely affect, our results of operations and financial condition.

To protect against rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our reputation, customer experience, and results of operations.

In addition, sustained high rates of inventory shrink at certain stores could impact the profitability of those stores and result in the impairment of long-term assets.

We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business.

For our sales to our customers, we accept a variety of payment methods, including credit cards, debit cards, electronic funds transfers and electronic payment systems.

Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements, including obligations to implement enhanced authentication processes that could result in increased costs and liability, and reduce the ease of use of certain payment methods.

For certain payment methods, including credit and debit cards, as well as electronic payment systems, we pay interchange and other fees, which may increase over time.

We rely on independent service providers for payment processing, including credit and debit cards.

If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed.

The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems.

We are also subject to payment card association operating rules and agreements, including data security rules and agreements, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply or increase our costs of compliance.

If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or customers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our customers, or process electronic fund transfers or facilitate other types of payments.

Any failure to comply could harm our brand, reputation, business and results of operations.

The occurrence of severe weather events, catastrophic public health events, natural or man-made disasters, social and political conditions or civil unrest could significantly damage or destroy our retail locations, could prohibit consumers from traveling to our retail locations or could prevent us from resupplying or staffing our stores or distribution centers or fulfilling our e-commerce orders, especially during peak shopping seasons.

Unforeseen events, including public health events, such as pandemics, natural disasters, such as earthquakes, hurricanes, tornadoes, freezes, snow or ice storms, floods and heavy rains, heatwaves, and man-made disasters, such as an oil spill closing large areas of hunting or fishing, could disrupt our operations or the operations of our suppliers, as well as affect the behavior of our consumers.

For example, frequent or unusually heavy snowfall, ice storms, rainstorms or other 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, extreme weather conditions could result in disruption or delay of production and delivery of materials and products in our supply chain and cause staffing shortages in our stores.

Global climate change may result in significant natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, and flooding.

Socio-political factors, such as foreign wars, civil unrest or other economic or political uncertainties that contribute to consumer unease or harm to our supply chain or store base, may also result in decreased discretionary spending, property damage and/or business interruption losses.

For example, we may face losses related to the civil unrest in the United States, such as that which occurred in late May 2020 in response to reported incidents of police violence.

To the extent these events result in the closure of one or more of our distribution centers, a significant number of stores, or our corporate headquarters or impact one or more of our key suppliers, our operations and financial performance could be materially adversely affected through an inability to support our business, resupply or staff our stores, distribution centers or corporate headquarters or fulfill our e-commerce orders, especially during peak shopping seasons, and through lost sales and any precautions that we may take may not be adequate to mitigate the impact of such events.

If these events impact areas in which we have our corporate headquarters, distribution centers, a concentration of retail stores or vendor sources or foreign and/or U.S.

ports, such events could have a material adverse effect on our business, financial condition and results of operations.

Our stores are located primarily in the southern United States which could subject us to regional risks.

Because our stores are located primarily in the southern United States, we are subject to regional risks, such as the regional economy, weather conditions and natural disasters such as floods, droughts, tornadoes and hurricanes.

Man-made disasters, such as an oil spill in the Gulf of Mexico, a nuclear power plant crisis or other events, may also impact our regional area.

We sell a significant amount of merchandise related to outdoor activities which can be adversely affected by such events that may postpone the start of or shorten sports seasons or inhibit participation in other outdoor activities or otherwise have a significant impact on our operations.

Several of our competitors operate stores across the United States and thus are not as vulnerable to the risks of operating in one region.

If there is a regional economic downturn or any other adverse regional event in the southern United States, there could be an adverse impact on our net sales and results of operations and our ability to implement our planned expansion program.

Fluctuations in merchandise costs, increases in commodity prices and other factors could negatively impact our consolidated and combined results of operations.

The cost of our merchandise is affected, in part, by the price of raw materials.

A substantial rise in the price of raw materials, including as a result of increases in commodity prices and tariffs on them, could dramatically increase the costs associated with manufacturing the merchandise that we purchase from our suppliers, which could cause the price of our merchandise to increase and could have a negative impact on our sales and profitability.

If we increase the price for our products in order to maintain gross margins for our products, such increase may adversely affect demand for, and sales of, our products, which could have a material adverse effect on our financial condition and results of operations.

A disruption in the operation of our distribution centers would affect our ability to deliver merchandise to either our stores or customers, which could adversely impact our revenues and harm our business and financial results.

We operate three distribution centers located in Katy, Texas;

Twiggs County, Georgia;

and Cookeville, Tennessee, to manage the receipt, storage, sorting, packing and distribution of our merchandise to the appropriate stores or to the customer directly.

We depend in large part on the orderly operation of our receiving and distribution process, which depends, in turn, on adherence to shipping schedules, proper functioning of our information technology and inventory control systems and overall effective management of our distribution centers.

A disruption or a prolonged interruption in the operations at any of these distribution centers or third-party transportation providers due to a work stoppage, labor shortage, operations significantly below historical efficiency levels, supply chain disruption, public health events (such as pandemics), severe weather (such as tornadoes) or natural or man-made disasters (including events that may be caused or exacerbated by climate change), system failures or cyber incidents, slowdowns or strikes, acts of terror or other unforeseen events in the areas or regions of these facilities could impair our ability to adequately stock our stores, process returns of products to vendors and ship products to our e-commerce customers, thereby adversely affecting our sales and profitability.

In addition, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores and customers during the time it takes for us to reopen or replace these distribution centers.

Although we maintain business interruption and property insurance for these facilities, there can be no assurance that our insurance coverage will be sufficient, or that insurance proceeds will be timely paid to us, if our distribution centers are shut down or interrupted for any unplanned reason.

We depend on key personnel in order to support our existing business and future initiatives and may not be able to retain or replace these team members, recruit additional qualified personnel or effectively manage succession.

Our future success may be adversely impacted if we are not able to attract, retain and develop talent and future leaders, including our senior executives and team members.

Our senior executive team closely supervises all major aspects of our business, including the design and development of our strategy, and procurement of merchandise;

operation of our information technology platforms, supply chain, and store network;

development and retention of critical talent;

and financial planning, reporting and compliance.

Our senior executive team has substantial experience and expertise in our retail business, and serves an integral role in the growth and support of our various initiatives.

If we were to lose the leadership of senior executives or other key team members without appropriate successors in place, our business could be adversely affected.

In addition, if significant unexpected turnover occurs at the team member level, the loss of the services of these individuals, or any resulting negative perceptions of our business, could damage our reputation and our business.

Competition for such qualified talent is significant, and we cannot be sure we will be able to find suitable successors promptly, or at all, or to successfully integrate any successors, or that we will be able to attract, retain, and develop a sufficient number of qualified individuals in future periods.

We depend on approximately 1,500 suppliers to supply us with the merchandise we purchase for resale and our significant dependence on these suppliers exposes us to risks associated with disruption in supply and losses of merchandise purchasing incentives that could have a material adverse effect on our business and results of operations.

We depend on approximately 1,500 suppliers to supply us in a timely and efficient manner with the merchandise we sell.

Our significant dependence on these suppliers exposes us to various risks that could have a material adverse effect on our business and results of operations.

In 2024, purchases from our largest vendor represented approximately 11% of our total inventory purchases.

We generally do not have long-term written contracts with our suppliers that would require them to continue supplying us with merchandise, particular payment terms or the extension of credit.

As a result, these suppliers could modify the terms of these relationships due to general economic conditions or otherwise.

If there is a disruption in supply from a principal supplier (which can occur for various reasons in or out of the control of these suppliers, including as a result of public health emergencies, and measures taken by the Chinese government or other governments in response to such events), we may experience merchandise out-of-stocks, delivery delays or increased delivery costs, or otherwise be unable to obtain the same merchandise from other suppliers in a timely and efficient manner and on acceptable terms, or at all, which could materially affect our results of operations and our customers’ confidence in us.

As a result, we experienced a period of decreased or delayed supply and high inflation which negatively impacted transportation and inventory costs.

Over the past year, we have seen improvement to these constraints, resulting in decreased freight costs.

Our private label brand merchandise exposes us to various risks generally encountered by companies that source, manufacture, market and retail exclusive private label brand merchandise.

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Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition.

We operate three distribution centers located in Katy, Texas;

Twiggs County, Georgia;

and Cookeville, Tennessee, to manage the receipt, storage, sorting, packing and distribution of our merchandise to the appropriate stores or to the customer directly.

As a result of damage to, or prolonged interruption of, operations or inventory at any of these facilities, or with respect to third-party transportation providers, due to a work stoppage, labor shortage, operations significantly below historical efficiency levels, supply chain disruption, public health events (such as pandemics), severe weather (such as tornadoes) or natural or man-made disasters (including events that may be caused or exacerbated by climate change), system failures or cyber incidents, slowdowns or strikes, acts of terror or other unforeseen events in the areas or regions of these facilities could impair our ability to adequately stock our stores, process returns of products to vendors and ship product to our e-commerce customers, thereby adversely affecting our sales and profitability.