What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-03-18 compared with 2021-03-19 · 116 added, 102 removed, 275 unchanged (44% of the section changed)

3 unchanged sentences

external, strategic, operational, regulatory and legal, and financial and market.

Each of the following risk factors should carefully be considered in conjunction with other information provided in this Annual Report on Form 10-K and in our other public disclosures.

Each of the following risk factors should be carefully considered in conjunction with other information provided in this Annual Report on Form 10-K and in our other public disclosures.

The risks described below highlight potential events, trends or other circumstances that could adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing and, consequently, the market value of our common stock and debt instruments.

4 unchanged sentences

External Risks

The COVID-19 pandemic has subjected our business, operations and financial condition to a number of risks, and those risks may intensify or last for an extended period of time.

The ongoing COVID-19 pandemic has subjected our business, operations and financial condition to a number of risks, and those risks may intensify or last for an extended period of time.

Future pandemics may also introduce similar risks.

Risks Related to Sales and Customer Demand :

At various times during fiscal 2021, the pandemic and the operational changes we have made have resulted in significant reductions in customer visits to, and spending at, our stores.

The extent to which the pandemic continues to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration of the pandemic;

At various times throughout the ongoing COVID-19 pandemic , the pandemic and the operational changes we have made have resulted in significant reductions in customer visits to, and spending at, our stores.

the extent of the impact on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates, consumer discretionary spending and consumer confidence;

actions governments take, including governments’ positions towards monetary and/or fiscal policy, including potential stimulus or the timing and nature of loosening of restrictions imposed in response to the pandemic and its resurgence;

interruptions and other supply chain issues;

actions businesses and individuals take in their ongoing responses to the pandemic;

and our ability to successfully navigate those impacts.

COVID-19 has caused consumers to allocate a higher share of wallet to consumer electronics.

During the pandemic, consumer spending on consumer electronics has generally been higher than pre-pandemic levels.

After the pandemic, consumers might shift their spending back towards categories or industries that were affected by the pandemic and away from consumer electronic categories.

In addition, the pandemic has caused some products and services to be in high demand, and we may not be able to meet this demand in all of our categories due to product shortages or decisions by our vendors to allocate products to certain customers due to the circumstances resulting from the pandemic, and our vendors may increase prices, each of which may adversely impact our revenue and profitability.

The pandemic has, and may continue to, negatively impact our products and services that historically have been more likely to be purchased in a physical store than online.

The pandemic has negatively impacted, and may continue to negatively impact, our products and services that historically have been more likely to be purchased in a physical store than online.

Risks Related to Operations :

The pandemic has forced us to make a number of operational changes.

The pandemic forced us to make a number of operational changes.

Although we continue to offer a contactless, curbside model for those who prefer to shop that way, we could be required to return to a curbside-only model or close stores due to the current or future resurgence of the pandemic (including the potential emergence of new and more transmissible variants, such as the Delta and Omicron variants).

Our ability to continue to sell our products and services is highly dependent on our ability to maintain the safety of our customers and those employees who are needed to work at our stores and distribution facilities.

Failure to maintain the recommended or required safety standards as defined by the Centers for Disease Control and Prevention and local governments could also result in an increased risk of regulatory action or civil litigation.

The ability of our employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19.

Failure to maintain the recommended or required safety standards as defined by the CDC , federal and state Occupational Safety and Health agencies and local governments could also result in an increased risk of regulatory action or civil litigation.

The ability of our employees to work may continue to be significantly impacted by individuals contracting or being exposed to COVID-19 and its resurgences and by the availability and efficacy of vaccinations, particularly against new variants of COVID-19 .

While we are following the requirements of governmental authorities and taking preventative and protective measures to prioritize the safety of our customers and employees, these measures may not be successful, and we may be required to temporarily close distribution centers or stores from time to time, halt certain services or take other measures.

Also, if we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate for a particular region or our company as a whole, we could suffer damage to our reputation and our brand, which could adversely affect our business in the future.

Additionally, while we have continued to prioritize the health and safety of our employees and customers as we continue to operate during the pandemic, we face an increased risk of litigation related to our operating environments.

Also, if our customers and employees do not perceive our response to be appropriate or adequate for a particular region or our company as a whole, we could suffer damage to our reputation and our brand, which could adversely affect our business in the future.

Additionally, while we have continued to prioritize the health and safety of our employees and customers as we continue to operate during the pandemic, we may face an increased risk of litigation related to our operating environments.

The pandemic may also cause increased cybersecurity risk, as cybercriminals attempt to capitalize from the disruption, including remote working arrangements.

Preparing for and responding to the continuing pandemic could divert management’s attention from our key strategic priorities;

3 unchanged sentences

Risks Related to Profitability :

To the extent COVID-19 continues to cause fundamental shifts in the channels in which customers choose to engage us, our profitability and our profitability rate may be adversely impacted.

For example, at various times in fiscal 2021, we continued to pay rent for a number of physical stores that were closed and not generating sales (and we may need to do so again in the future), our online mix of products and services generally produces lower gross profit rates than in-store sales, and we offer some products and services that historically are more likely to be purchased in a physical store than online.

We also do not offer or have limited digital and online offerings for certain products and services that have higher profitability rates.

To the extent we are not able to maintain or increase the level of customer traffic in our stores or maintain or enable a more profitable mix of sales in our digital and online channels, our profitability and profitability rates may be materially negatively impacted.

We have also incurred additional costs due to the operational changes we have made in response to the pandemic, and these costs have adversely impacted our profitability.

As a result of disruptions to our supply chain, primarily due to mandatory shutdowns in locations where our products are manufactured, we are experiencing, and may continue to experience, increased costs for shipping and transportation resources.

To the extent the pandemic continues to cause fundamental shifts in the channels in which customers choose to engage us, our profitability may be adversely impacted.

Facility c osts such as rent, depreciation and property taxes are largely fixed, regardless of whether we are able to keep our stores open, and our online mix of products and services generally produces lower gross profit rates than in-store sales .

We also tend to see lower online revenue for certain service offerings that have higher profitability rates.

We have also incurred costs due to the operational changes we have made in response to the pandemic, and these costs have adversely impacted our profitability.

As a result of disruptions to our supply chain, primarily due to mandatory shutdowns in locations where our products are manufactured and domestic labor shortages impacting the ports, our distribution centers and our product delivery services , we are experiencing, and may continue to experience, increased costs for shipping and transportation resources.

If we are unable to manage these costs and supply chain disruptions, our profitability may be adversely impacted.

Even after the COVID-19 pandemic subsides, we could experience a longer-term impact on our costs, for example, the need for enhanced health and hygiene requirements in one or more regions in attempts to counteract future outbreaks.

In the event of decreased store traffic, certain of our stores may not generate revenue sufficient to meet operating expenses, which could adversely affect the value of our owned and leased properties, potentially requiring us to record more significant non-cash impairment charges in future periods.

Even after the pandemic subsides, we could experience a longer-term impact on our costs, for example, the need for enhanced health and hygiene and testing requirements to counteract the risk of future outbreaks.

In the event of continued decreased store traffic, certain of our stores may not generate revenue sufficient to meet operating expenses, which could adversely affect the value of our owned and leased properties, potentially requiring us to record more significant non-cash impairment charges in future periods.

Risks Related to Our Debt and Global Financing Markets :

Although we repaid in full the amounts we had borrowed under our revolving credit facility during fiscal 2021, we may find it necessary to increase our cash position and our short-term debt in the future in response to further resurgences of COVID-19.

We may find it necessary to increase our cash position and our debt in the future in response to further resurgences of COVID-19.

In the event we are required to raise capital, our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects, our credit ratings and our business and industry outlook.

9 unchanged sentences

• their appetite for complementary services (for example, protection plans).

Real GDP growth, consumer confidence, the COVID-19 pandemic, inflation, employment levels, oil prices, interest rates, tax rates, availability of consumer financing, housing market conditions, foreign currency exchange rate fluctuations, costs for items such as fuel and food and other macroeconomic trends can adversely affect consumer demand for the products and services that we offer.

Real GDP growth, consumer confidence, the COVID-19 pandemic, inflation (including wage inflation), employment levels (including as a result of an increasingly tight job market), oil prices, interest rates, tax rates, availability of consumer financing, housing market conditions, foreign currency exchange rate fluctuations, costs for items such as fuel and food and other macroeconomic trends can adversely affect consumer demand for the products and services that we offer.

In addition to general levels of inflation, we are also subject to risks of specific inflationary pressures on product prices due to, for example, high consumer demand, component shortages and supply chain disruption.

We may be unable to increase our prices sufficiently to offset these pressures.

Geopolitical issues around the world and how our markets are positioned can also impact macroeconomic conditions and could have a material adverse impact on our financial results.

Future outbreaks, epidemics and/or pandemics could adversely impact our operating results.

The risk of or actual occurrence of national, international or global outbreaks, epidemics, and/or pandemics, could have a material adverse impact on our business, including but not limited to, our sales and customer demand, operations and supply chain, financial results, capital financing or other financing activities and all other stated risks identified in these risk factors.

For example, the ultimate impact of the conflict in Ukraine on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, consumer confidence and demand for our products and services.

Russia is a significant global producer of both fuel and raw materials used in certain of the products we sell, including nickel, aluminum and copper.

Disruptions in the markets for those inputs or other inputs produced by Russia, whether due to sanctions, market pressure not to purchase inputs from Russia or otherwise, could increase overall material costs for many of the products we sell.

We cannot predict the extent or duration of sanctions in response to the conflict in Ukraine, nor can we predict the effects of legislative or other governmental actions or regulatory scrutiny of Russia, its allies or other countries with which Russia has significant trade or financial ties, including China.

The conflict in Ukraine may also exacerbate geopolitical tensions globally.

Similarly, further deterioration of relations between Taiwan and China, the resulting actions taken, the response of the international community and other factors affecting trade with China or political or economic conditions in Taiwan could disrupt the manufacturing of products or hardware components in the region, such as semiconductors and television panels sourced from Taiwan or the broader array of products sourced from China.

One or more of these factors could have a material adverse effect on our supply chain, the cost of our products or our revenues and financial results.

Catastrophic events could adversely affect our operating results.

The risk or actual occurrence of various catastrophic events could have a material adverse effect on our financial performance.

Such events may be caused by, for example:

• natural disasters or extreme weather events;

Such events may consist of, or be caused by, for example:

• natural disasters or extreme weather events, including those related to climate change;

• diseases or pandemics (including COVID-19) that have affected and may continue to affect our employees, customers or partners;

2 unchanged sentences

In recent years, we have observed an increase in the number and severity of certain catastrophic events in many of our markets.

Such events can adversely affect our work force and prevent employees and customers from reaching our stores and properties and can disrupt or disable portions of our supply chain and distribution network.

They can also affect our information technology systems, resulting in disruption to various aspects of our operations, including our ability to transact with customers and fulfill orders.

Further, external social activism, tension and violence resulting from external events impacting social justice and inequality, and our position and response to them, may adversely affect our employees, customers, properties and the communities in which we operate.

Such events can adversely affect our workforce and prevent employees and customers from reaching our stores and properties.

They can also disrupt or disable portions of our supply chain, distribution network and third-party business operations that may impact our ability to procure goods or services required for business operations at the quantities and levels we require.

Finally, such events can also affect our information technology systems, resulting in disruption to various aspects of our operations, including our ability to transact with customers and fulfill orders.

Three of our largest states by total sales are California, Texas and Florida, areas where natural disasters and extreme weather conditions have been, and could continue to be, more prevalent.

Natural disasters and climate-related events in those states and other areas where our sales and operations are concentrated could result in significant physical damage to or closure of our stores, distribution centers or other facilities.

Further, external social activism, tension and violence resulting from external events impacting social justice and inequality, and our response to them, may adversely affect our employees, customers, properties and the communities in which we operate.

As a consequence of these or other catastrophic events, we may endure interruption to our operations or losses of property, equipment or inventory, which could adversely affect our revenue and profitability.

2 unchanged sentences

This manifests itself in a variety of ways:

the emergence of new products and categories, rapid maturation of categories, cannibalization of categories, declining price points and product replacement and upgrade cycles.

the emergence of new products and categories, the often rapid maturation of categories, cannibalization of categories, changing price points and product replacement and upgrade cycles.

This rapid pace of change can be hard to predict and manage, and there is no guarantee we can effectively do this all the time.

23 unchanged sentences

Our strategy of offering high-quality services and assistance for our customers requires a highly-trained and engaged workforce.

The turnover rate in the retail sector is relatively high and there is an ongoing need to recruit and train new employees.

The turnover rate in the retail sector is relatively high and has increased during the pandemic, and there is an ongoing need to recruit and train new employees.

Factors that affect our ability to maintain sufficient numbers of qualified employees include, for example, employee engagement, our reputation, unemployment rates, competition from other employers, availability of qualified personnel and our ability to offer appropriate compensation and benefit packages.

2 unchanged sentences

We operate in a competitive labor market and there is a risk that market increases in compensation and employer-provided benefits could have a material adverse effect on our profitability.

Our increase in the starting hourly wage for all domestic employees implemented in fiscal 2021, as well as continued market pressure to increase employee hourly wage rates, increased cost pressure on employer-provided benefits.

Our ability to implement corresponding adjustments within our labor model and compensation and benefit packages could have a material adverse impact to the profitability of our business.

Our strategy to expand into new products, services and technologies brings new business, financial and regulatory risks.

We may also be subject to continued market pressure to increase employee hourly wage rates and increased cost pressure on employer-provided benefits.

Our need to implement corresponding adjustments within our labor model and compensation and benefit packages could have a material adverse impact to the profitability of our business.

Our strategy to expand into new products, services , health and technologies brings new business, financial and regulatory risks.

As we introduce new products and services, using new technologies and applications, we may have limited experience in these newer markets and regulatory environments and our customers may not like our new value propositions.

These offerings may present new and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions, failures or other issues.

For example, as our value proposition evolves to support the healthcare industry with technology, we are subject to privacy and information security rules, such as the Health Insurance Portability and Accountability Act, and/or subject to increased potential liability risk.

These offerings may present new and difficult technology and regulatory challenges, and we may be subject to claims if customers of these offerings experience service disruptions, failures or other issues.

This expanded risk increases the complexity of our business and places significant responsibility on our management, employees, operations, systems, technical expertise, financial resources, and internal financial and regulatory control and reporting functions.

1 unchanged sentence

They may also involve significant laws or regulations that are beyond our current expertise.

In fiscal 2021 we continued to invest in our health strategy and our underlying purpose to enrich lives through technology.

The new health-related services offered might expose us to liability risk resulting from failures in the fulfillment of these services.

In addition, the services and systems used could expose us to customer data privacy and information security risks, as well as business or system interruption risks.

These and other related issues could have a material adverse impact on our financial results.

Our focus on services as a strategic priority exposes us to certain risks that could have a material adverse impact on our revenue and profitability as well as our reputation.

The healthcare space in which we operate is highly regulated from a product safety and quality perspective, and its services and products, including parts or materials from suppliers, are subject to regulation by various government and regulatory agencies, including the U.S.

Food and Drug Administration (“FDA”).

In the European Union, a Medical Device Regulation was published in 2017 that will impose significant additional pre-market and post-market requirements on some of our offerings.

With our focus on healthcare, new products and services may frequently require regulatory approvals for market introduction.

The number and diversity of regulatory bodies add complexity and may negatively impact time to market and implementation costs.

Non-compliance with conditions imposed by regulatory authorities could result in product recalls, a temporary ban on products, stoppages at production facilities, remediation costs, fines or claims for damages.

Product safety incidents or user concerns could trigger business reviews by the FDA or other regulatory agencies, which, if failed, could trigger these impacts.

In addition, the ongoing digitalization of Best Buy Health’s products and services, including our holding of personal health data and medical data, increases the importance of compliance with data privacy and similar laws.

The services and systems used in certain instances subject us to privacy and information security requirements, such as the Health Insurance Portability and Accountability Act, and could expose us to customer data privacy and information security risks, as well as business or system interruption risks.

Given our acquisition of Current Health Ltd., a care-at-home technology platform, we also are subject to the UK General Data Protection Regulation (“GDPR”) and other newly applicable regulatory frameworks.

These and other related issues could have a material adverse impact on our financial results and reputation .

Our focus on services exposes us to certain risks that could have a material adverse impact on our revenue and profitability, as well as our reputation.

We offer a full range of services that complement our product offerings, including consultation, delivery, design, installation, memberships, protection plans, repair, set-up, technical support, and health, safety and caregiving monitoring and support.

3 unchanged sentences

• increased labor expense to fulfill our customer promises;

• increased pressure on margins as we roll out our Totaltech membership offering, which includes incremental customer benefits, and associated costs, compared to our previous Total Tech Support offer, and the risk that increased volumes will not fully compensate for lower margins, or for loss of revenue and profit from revenue streams that are now included as benefits ;

• pressure on traditional labor models to meet the evolving landscape of offerings and customer needs;

• use of third-party services that do not meet our standards or comply with applicable labor and independent contractor regulations, leading to potential reputational damage and liability risk;

• increased risk of errors or omissions in the fulfillment of services;

8 unchanged sentences

We source the products we sell from a wide variety of domestic and international vendors.

In fiscal 2021 our 20 largest suppliers accounted for approximately 80% of the merchandise we purchased, with five suppliers - Apple, Samsung, Hewlett-Packard, LG and Sony - representing approximately 57% of total merchandise purchased.

In fiscal 2022, our 20 largest suppliers accounted for approximately 79 % of the merchandise we purchased, with five suppliers – Apple, Samsung, HP, LG and Sony - representing approximately 56 % of total merchandise purchased.

We generally do not have long-term written contracts with our vendors that would require them to continue supplying us with merchandise.

15 unchanged sentences

Damage to the perception or reputation of our brands could result in, among other things, declines in revenues and customer loyalty, decreases in gift card and service plan sales, lower employee retention and productivity and vendor relationship issues, all of which could materially adversely affect our revenue and profitability.

We are subject to risks associated with company transformation.

Our transformational activities within the organization are necessary to fully support our strategic vision for future customer and income growth, including our Building the New Blue Strategy, and any decreased capability to undertake those activities may have a material adverse impact on achieving that strategy.

Any limitations in organizational, financial or operational infrastructure could decrease our ability to realize transformational objectives supporting our key strategic initiatives relating to our development of competitive advantages, creating solutions for customers and providing differentiated value.

If we do not have access to, or fail to dedicate, the appropriate people, management focus and resources to implementing these transformational objectives, our long-term growth and profitability could be adversely affected.

The COVID-19 pandemic has further demonstrated the necessity for transformation, and as a result, has increased pressure on the timeline of these activities.

The increased pressure to transform quickly and accelerate the implementation of the strategy could have an adverse impact on the overall implementation performance of these objectives and our long-term growth and profitability .

As an example, we have seen that our online mix of products and services generally produces lower profit margins than in-store sales.

Therefore, the continued transformation to a more digitally-driven business after COVID-19 could put sustained pressure on our costs and profitability.

Failure to effectively manage strategic ventures, alliances or acquisitions could have a negative impact on our business.

We may decide to enter into new joint ventures, partnerships, alliances or acquisitions with third parties (collectively, "new ventures").

We may decide to enter into new joint ventures, partnerships, alliances or acquisitions with third parties (collectively, “new ventures”).

Assessing the viability of new ventures is typically subject to significant uncertainty, and the success of such new ventures can be adversely affected by many factors, including, for example:

• different and incremental business risks of the new venture not identified in our diligence assessments;

• failure to motivate and retain key employees of the new venture;

• failure to attract, motivate and retain key employees of the new venture;

• uncertainty of forecasting financial performance;

• failure to integrate aspects of the new venture into our existing business, such as new product or service offerings or information technology systems;

• failure to maintain appropriate internal control over financial reporting;

• failure to maintain appropriate internal controls over financial reporting;

• failure to generate expected synergies, such as cost reductions;

• unforeseen changes in the business environment of the new venture;

• disputes or strategic differences with other third-party participants in the new venture;

• disputes or strategic differences with key employees or other third-party participants in the new venture;

• adverse impacts on relationships with vendors and other key partners of our existing business or the new venture.

If new ventures are unsuccessful, our liquidity and profitability could be materially adversely affected, and we may be required to recognize material impairments to goodwill and other assets acquired.

New ventures may also divert our financial resources and management's attention from other important areas of our business.

New ventures may also divert our financial resources and management’s attention from other important areas of our business.

Failure to effectively manage our real estate portfolio may negatively impact our operating results.

Effective management of our real estate portfolio is critical to our multi-channel strategy.

Effective management of our real estate portfolio is critical to our omnichannel strategy.

Failure to identify and secure suitable locations for our stores and other facilities could impair our ability to compete successfully and our profitability.

Most of our properties are leased, of which some are subject to long-term leases.

Most of our properties are leased under multi-year contracts.

As such, it is essential that we effectively evaluate a range of factors that may influence the success of our long-term real estate strategy.

Such factors include, for example:

• changing patterns of customer consumption and behavior, particularly in light of an evolving multi-channel environment;

• changing patterns of customer consumption and behavior, particularly in light of an evolving omnichannel environment;

• our ability to adjust store operating models to adapt to these changing patterns, as we have done with our curbside pick-up and ship-from-store models;

• the location and appropriate number of stores, supply chain and other facilities in our portfolio;

16 unchanged sentences

Operational Risks

Interruptions and other factors affecting our supply chain, including in-bound deliveries from our vendors, may adversely affect our business.

Our supply chain is a critical part of our operations, particularly in light of industry trends and initiatives, such as ship-from-store and the emphasis on fast delivery when purchasing online.

We depend on our vendors'

abilities to deliver products to us at the right location, at the right time and in the right quantities.

Interruptions and other factors affecting our stores and supply chain, including in-bound deliveries from our vendors, may adversely affect our business.

Our stores and supply chain assets are a critical part of our operations, particularly in light of industry trends and initiatives, such as ship-from-store and the emphasis on fast delivery when purchasing online.

We depend on our vendors’ abilities to deliver products to us at the right location, at the right time and in the right quantities.

We also depend on third parties for the operation of certain aspects of our supply chain network.

4 unchanged sentences

• limitations in capacity;

• global supply-chain impacts that could hinder our vendors’ ability to meet our demand for product volumes and timing;

• increased levels of inventory loss due to organized crime, theft or damage;

• risk to our employees and customers arising from burglary or robbery from our stores or other facilities;

• consolidation or business failures in the transportation and distribution sectors;

• labor strikes or slow-downs impacting ports or any other aspect of our supply chain;

• labor strikes, slow-downs or labor shortages, including as a result of an increasingly competitive job market, affecting our stores or impacting ports or any other aspect of our supply chain;

• diseases, pandemics (including COVID-19), outbreaks and other health-related concerns;

• damages or other loss to products;

• increasing transportation costs;

1 unchanged sentence

It is important that we maintain optimal levels of inventory in each store and distribution center and respond rapidly to shifting demands.

Any disruption to, or inefficiency in, our supply chain network could damage our revenue and profitability.

Any disruption to, or inefficiency in, our supply chain network, whether due to geopolitical conflicts, COVID-19 or other factors, could damage our revenue and profitability.

The risks associated with our dependence on third parties are greater for small parcel home deliveries because of the relatively small number of carriers with the scope and capacity required by our business.

2 unchanged sentences

We utilize third-party vendors for certain aspects of our operations, and any material disruption in our relationship or their services may have an adverse impact on our business.

We engage key third-party business partners to support various functions of our business, including, but not limited to, information technology, web hosting and cloud-based services, human resource operations, customer loyalty programs, promotional financing and customer loyalty credit cards, gift cards, customer warranty, delivery and installation, technical support, transportation and insurance programs.

We engage key third-party business partners to support various functions of our business, including, but not limited to, delivery and installation, customer warranty, information technology, web hosting and cloud-based services, customer loyalty programs, promotional financing and customer loyalty credit cards, gift cards, technical support, transportation, insurance programs and human resource operations.

Any material disruption in our relationships with key third-party business partners or any disruption in the services or systems provided or managed by third parties could impact our revenues and cost structure and hinder our operations, particularly if a disruption occurs during peak revenue periods.

5 unchanged sentences

• we may be subject to regulatory compliance and/or product liability claims relating to personal injury, death or property damage caused by exclusive brands products, some of which may require us to take significant actions, such as product recalls;

• we have experienced and are likely to continue to experience disruptions in manufacturing and logistics due to COVID-19, and we may experience disruptions in manufacturing or logistics in the future due to inconsistent and unanticipated order patterns, our inability to develop long-term relationships with key manufacturers, other diseases or pandemics, unforeseen natural disasters or geopolitical crises, such as the conflict in Ukraine and this conflict’s potential impact on global geopolitical tensions, including with China or between China and Taiwan;

• we may not be able to locate manufacturers that meet our internal standards, whether for new exclusive brands products or for migration of the manufacturing of products from an existing manufacturer;

16 unchanged sentences

We rely heavily on these information technology systems to manage all key aspects of our business, including demand forecasting, purchasing, supply chain management, point-of-sale processing, services fulfillment, staff planning and deployment, financial management, reporting and forecasting and safeguarding critical and sensitive information.

Our information technology systems and those of our partners 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 (through cyber-attacks and other malicious actions), catastrophic events (such as fires, tornadoes, earthquakes and hurricanes) and usage errors by our employees.

Our information technology systems and those of our partners 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 (through cyber-attacks and other malicious actions, including the recent increasing use of “ransomware” and phishing attacks), catastrophic events (such as fires, tornadoes, earthquakes and hurricanes) and usage errors by our employees.

While we have adopted, and continue to enhance, business continuity and disaster recovery plans and strategies, there is no guarantee that such plans and strategies will be effective, which could interrupt the functionality of our information technology systems or those of third parties.

The failure or interruption of these information systems, data centers or their backup systems could significantly disrupt our business and cause higher costs and lost revenues and could threaten our ability to remain in operation.

As we continue to migrate more systems to the cloud, we may face additional risks that may compromise our security or disrupt our business capabilities, including ensuring the proper configuration, the unknowns of operating more workloads in the cloud, securing systems in the cloud and the types of cloud-based services we leverage.

We face a heightened risk of cybersecurity attacks or data security incidents and are more dependent on internet and telecommunications access and capabilities.

1 unchanged sentence

If we fail to secure these systems against attacks or fail to effectively upgrade and maintain our hardware, software, network and system infrastructure and improve the efficiency and resiliency of our systems, it could cause system interruptions and delays.

Disruptions to these services, such as those caused by unforeseen traffic levels, malicious attacks, other technical difficulties or events outside of our control, such as natural disasters, power or telecommunications failures or loss of critical data, could prevent us from accepting and fulfilling customer orders for products or services, which could cause us to forgo material revenues, incur material costs and adversely affect our reputation.

Disruptions to these services, such as those caused by unforeseen traffic levels, malicious attacks by governments, criminals or other non-state actors, other technical difficulties or events outside of our control, such as natural disasters, power or telecommunications failures or loss of critical data, could prevent us from accepting and fulfilling customer orders for products or services, which could cause us to forgo material revenues and incur material costs and could adversely affect our reputation.

Further, as our online sales have increased and have become critical to our growth, and as we have shifted to remote working arrangements for many employees, the risk of any interruption of our information technology system capabilities is heightened, as well as the risk that customer demand exceeds the capacity of our online operations.

1 unchanged sentence

Failure to prevent or effectively respond to a breach of the privacy or security of our customer, employee, vendor or company information could expose us to substantial costs and reputational damage, as well as litigation and enforcement actions.

Our business involves the collection, use and storage of personal information, including payment card information, as well as confidential information regarding our employees, vendors and other company information.

We also share personal and confidential information with suppliers and other third parties, as well as use third-party technology and systems which transmit information for a variety of activities.

Our business involves the collection, use and storage of personal information, including payment card information and protected health information , as well as confidential information regarding our employees, vendors and other company information.

We also share personal and confidential information with suppliers and other third parties, as well as use third-party technology and systems which process and transmit information for a variety of activities.

We have been the target of attempted cyber-attacks and other security threats, and we may be subject to breaches of our information technology systems.

While we engage in significant data-protection efforts, criminal activity, such as cyber-attacks, lapses in our controls or the intentional or negligent actions of employees, business associates or third parties, may undermine our privacy and security measures, and, as a result, unauthorized parties may obtain access to our data systems and misappropriate employee, customer and other confidential data, or authorized parties may use or share personal information in an inappropriate manner.

Furthermore, because the methods used to obtain unauthorized access change frequently and may not be immediately detected, we may be unable to anticipate such attacks or promptly and effectively respond to them.

3 unchanged sentences

Our efforts to protect against such compromises and ensure appropriate handling of customer data on devices we manufacture, sell and service may not be effective, resulting in potential liability and damage to our customer relationships.

Increasing costs associated with information security and privacy, such as increased investment in technology and qualified staff, costs of compliance, costs resulting from fraud and costs of cyber and privacy insurance, could cause our business and results of operations to suffer materially.

Additionally, new laws, such as the California Consumer Privacy Act , are expanding our obligations to protect the privacy and security of customer data, requiring additional resources and creating incremental risk arising from a potential breach.

Increasing costs associated with information security and privacy, such as increased investment in technology and qualified staff, costs of compliance, costs resulting from fraud or criminal activity and costs of cyber and privacy insurance, could cause our business and results of operations to suffer materially.

Additionally, new laws, such as the California Privacy Rights Act , Virginia Consumer Data Protection Act, and the Colorado Privacy Act, and laws newly applicable to us, such as the UK GDPR, are expanding our obligations to protect and honor the privacy and security of customer data, requiring additional resources and creating incremental risk arising from a potential breach.

In addition, any compromise of our data security may materially increase the costs we incur to protect against such breaches and could subject us to additional legal risk.

Product safety and quality concerns could have a material adverse impact on our revenue and profitability.

If the products we sell fail to meet applicable safety standards or our customers'

expectations regarding safety and quality, we could be exposed to increased legal risk and our reputation may be damaged.

If the products we sell fail to meet applicable safety standards or our customers’ expectations regarding safety and quality, we could be exposed to increased legal risk and our reputation may be damaged.

Failure to take appropriate actions in relation to product recalls could lead to breaches of laws and regulations and leave us susceptible to government enforcement actions or private litigation.

2 unchanged sentences

As an employer of approximately 105,000 people in a large number of different jurisdictions, we are subject to risks related to employment laws and regulations including, for example:

• the organization of unions and related regulations that affect the nature of labor relations, changes to which the National Labor Relations Board frequently considers;

• laws that impact the relationship between the company and independent contractors;

• the organization of unions and related rules that affect the nature of labor relations, changes to which the National Labor Relations Board frequently considers;

• laws that impact the relationship between the company and independent contractors and the classification of employees and independent contractors;

• laws that impact minimum wage, sick time, paid leave and scheduling requirements that could directly or indirectly increase our payroll costs and/or impact the level of service we are able to provide.

1 unchanged sentence

Regulatory and Legal Risks

We are subject to statutory, regulatory and legal developments which could have a material adverse impact on our business.

We are subject to statutory, regulatory and legal developments that could have a material adverse impact on our business.

Our statutory, regulatory and legal environments expose us to complex compliance and litigation risks that could have a material adverse effect on our operations.

8 unchanged sentences

contracted worker labor laws;

corporate governance matters;

corporate governance matters (including increased focus on environmental, social and governance matters by certain investors and regulators);

escheatment rules;

rules governing pricing, content, distribution, copyright, mobile communications, electronic device certification or payment services;

and/or other as yet unknown legislation that could affect how we operate and execute our strategies as well as alter our expense structure;

• the impact of litigation trends, including class-action lawsuits involving consumers and shareholders, and labor and employment matters;

• the impact of the transition in presidential administrations and changes in the federal executive and legislative branches on the development, or changes in, laws, regulations and policies, such as economic, fiscal, tax, retail, labor and social policies.

The impact of the potential implementation of more restrictive trade policies, higher tariffs or the renegotiation of existing trade agreements in the U.S.

and/or other future legislation that could affect how we operate and execute our strategies as well as alter our expense structure;

• the impact of litigation, including class-action lawsuits involving consumers and shareholders, and labor and employment matters;

• the impact of changes in the federal executive and legislative branches on the development, or changes in, laws, regulations and policies, such as economic, fiscal, tax, retail, labor and social policies.

The impact of geo-political tensions, including the potential implementation of more restrictive trade policies, higher tariffs or the renegotiation of existing trade agreements in the U.S.

or countries where we sell our products and services or procure products could have a material adverse effect on our business.

In particular, future trade disputes or future phases of trade negotiations with China could lead to the imposition of tariffs or other trade actions that could adversely affect our supply chain and our business and could require us to take action to mitigate those effects, as we did in fiscal 2020.

Further, the impact of potential changes in U.S.

or other countries'

tax laws and regulations or evolving interpretations of existing laws, including additional guidance and legislation related to the Tax Cuts and Jobs Act and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, could adversely affect our financial condition and results of operations.

Further, the impact of potential changes in U.S., state or other countries’ tax laws and regulations or evolving interpretations of existing laws, could adversely affect our financial condition and results of operations.

Regulatory activity that affects the retail sector has grown in recent years, increasing the risk of fines and additional operating costs associated with compliance.

Additionally, defending against lawsuits and other proceedings may involve significant expense and divert management's attention and resources from other matters .

Further, as the COVID-19 pandemic and community spread of the virus continues to persist, we will continue to face risk and uncertainty as it relates to state and local government orders, which may restrict how we do business and potentially impact our performance and profitability.

Additionally, defending against lawsuits and other proceedings may involve significant expense and divert management’s attention and resources from other matters.

Concern over climate change may result in new or additional legal, legislative and regulatory requirements to reduce or mitigate the effects of climate change on the environment, which could result in future tax, compliance, transportation and utility cost increases.

Our own climate change-oriented initiatives, such as our attempts to increase energy efficiency during store construction and remodeling, could also increase our costs.

In addition, changes to the environment, both long-term and short-term, may affect consumer shopping behavior in a way that negatively impacts our revenue, revenue mix and profitability.

Further, as the COVID-19 pandemic and its resurgences persist, we will continue to face risk and uncertainty as it relates to federal, state and local government public health orders or mandates, which may restrict how we do business and potentially impact our performance and profitability.

Our international activities are subject to many of the same risks as described above, as well as to risks associated with the legislative, judicial, regulatory, political, economic and cultural factors specific to the countries or regions in which we operate.

We operate retail locations in Canada, and during the third quarter of fiscal 2021, we made the decision to exit our operations in Mexico .

We operate retail locations in Canada.

All of our former stores in Mexico were closed as of the end of the first quarter of fiscal 2022.

In addition, most of our exclusive brands products are manufactured by contract manufacturers based in southeast Asia.

We also have wholly owned legal entities registered in various other foreign countries, including Barbados, Bermuda, China, Hong Kong, Luxembourg, the Republic of Mauritius and the U.K.

During fiscal 2021 our International segment's operations generated 8% of our revenue.

We also have wholly owned legal entities registered in various other foreign countries, including Bermuda, China, Hong Kong, Luxembourg, the Republic of Mauritius and the U.K.

During fiscal 2022, our International segment’s operations generated approximately 8 % of our revenue.

In general, the risk factors identified above also have relevance to our International operations.

8 unchanged sentences

• difficulties encountered in exerting appropriate management oversight to operations in remote locations.

• risks we may encounter in exiting our operations in Mexico.

These factors could significantly disrupt our International operations and have a material adverse effect on our revenue and profitability and could lead us to incur material impairments and other exit costs.

3 unchanged sentences

However, some of our operating costs are fixed and/or are subject to multi-year contracts.

Some elements of our costs may be higher than our competitors'

because of, for example, our extended retail footprint and structure, our hourly pay structure, our differentiated service offerings or our levels of customer service.

Some elements of our costs may be higher than our competitors’ because of, for example, our extended retail footprint and structure, our hourly pay structure, our differentiated service offerings or our levels of customer service.

Accordingly, our ongoing drive to reduce costs and increase efficiency represents a strategic imperative.

3 unchanged sentences

In addition, the holiday shopping season also incorporates many other unpredictable factors, such as the level of competitive promotional activity, new product release activity and customer buying patterns, which makes it difficult to forecast and react to these factors quickly.

Unexpected events or developments, such as natural or man-made disasters, changes in consumer demand, economic factors, product sourcing issues, cyber-attacks, failure or interruption of management information systems or disruptions in services or systems provided or managed by third-party vendors could significantly disrupt our operations.

In addition, during fiscal 2021, we extended the holiday shopping season starting in mid-October, while closing stores on Thanksgiving Day.

These changes could bring additional unknown risks related to the sales performance of the holiday shopping season.

Unexpected events or developments, such as resurgences of the COVID-19 pandemic, natural or man-made disasters, changes in consumer demand, economic factors, product sourcing issues, cyber-attacks, failure or interruption of management information systems or disruptions in services or systems provided or managed by third-party vendors could significantly disrupt our operations.

As a result of these factors, there is risk that our fiscal fourth quarter and annual results could be adversely affected.

3 unchanged sentences

We believe our financing programs generate incremental revenue from customers who prefer the financing terms to other available forms of payment or otherwise need access to financing in order to make purchases.

Approximately 25% of our fiscal 2021 revenue was transacted using one of the company's branded cards.

Approximately 25 % of our fiscal 2022 revenue was transacted using one of the company’s branded cards.

In addition, we earn profit-share income and share in any losses from certain of our banking partners based on the performance of the programs.

1 unchanged sentence

Adverse changes to any of these factors could impair our ability to offer these programs to customers and reduce customer purchases and our ability to earn income from sharing in the profits of the programs.

In addition, we may experience pressure from lower profit-sharing revenue related to our private label and co-branded credit card arrangements, as the economic ramifications of COVID-19 may lead to higher credit card defaults over time, which would have an adverse effect on our profitability.

Constraints in the capital markets or our vendor credit terms may have a material adverse impact on our liquidity.

12 unchanged sentences

We may provide public guidance on our expected financial results or other forward-looking information for future periods.

When we provide guidance, we believe that this guidance provides investors and analysts with a better understanding of management's expectations for the future and is useful to our existing and potential shareholders, but such guidance is comprised of forward-looking statements subject to the risks and uncertainties described in this report and in our other public filings and public statements.

When we provide guidance, we believe that this guidance provides investors and analysts with a better understanding of management’s expectations for the future and is useful to our existing and potential shareholders, but such guidance is comprised of forward-looking statements subject to the risks and uncertainties described in this report and in our other public filings and public statements.

Our actual results may not be in line with guidance we have provided.

8 unchanged sentences

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