What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-04-02 compared with 2023-03-28 · 50 added, 41 removed, 195 unchanged (32% of the section changed)

4 unchanged sentences

MACROECONOMIC AND INDUSTRY RISKS

Inflationary pressures may adversely impact our business operations and financial condition.

Inflationary pressures in the United States and the global economy such as rising interest rates, higher product and transportation costs and wage inflation, as well as fears of a recession, are creating a complex and challenging retail environment that may impact discretionary spending.

The extent and duration of these pressures are uncertain and may limit our ability to meet incremental consumer demand, potentially impacting our net sales.

In addition, declines in consumer spending may result in reduced demand for our products, increased inventories, reduced orders from retailers for our products, order cancellations, lower revenues, higher discounts, pricing pressure and lower gross margins.

Macroeconomic factors, such as inflationary pressures and volatility in interest rates, also impact a number of accounting estimates, including impairment calculations, the value of inventory measured using the last-in, first out (“LIFO”) method,

and other estimates that utilize fair value.

These macroeconomic factors could result in incremental volatility in certain valuations and provisions required in the Company’s financial statements.

Supply chain disruptions may adversely impact our gross margin and earnings.

A disruption within our logistics or supply chain network could adversely affect our ability to deliver inventory in a timely manner, which could impair our ability to meet customer demand for products and result in lost sales and increased supply chain costs.

The lingering effects of the coronavirus (“COVID-19”) pandemic have resulted in supply chain disruptions and labor instability.

Vessel, container and other transportation shortages, labor shortages and port congestion have in the past delayed inventory orders and, in turn, deliveries to our wholesale customers and availability in our retail stores and e-commerce sites.

In addition, the vast majority of our products pass through the United States west coast ports and any slowdown or stoppage relating to labor agreement negotiations may further delay the receipt of inventory or increase costs.

The extent to which COVID-19, including the emergence of additional variants, will continue to impact our supply chain and business operations will depend on future developments, which are highly uncertain and cannot be predicted.

Consumer demand for our products may be adversely impacted by economic conditions and other factors.

Worldwide economic conditions continue to be uncertain.

Consumer confidence and spending are strongly influenced by general economic conditions and other factors, including inflation, concerns of a recession, rising interest rates, fiscal policy, the changing tax and regulatory environment, minimum wage rates and regulations, consumer debt levels, the availability of consumer credit, the liquidity of consumers’ assets, health care costs, currency exchange rates, taxation, energy costs, real estate values, foreclosure rates, unemployment trends, weather conditions and the economic consequences of military action or terrorist activities, such as the heightened geo-political tensions between China and Taiwan and the potential impact of sanctions on the domestic and global economy.

Consumer sentiment, including a preference for products made in the United States, may be impacted by the war in Eastern Europe, which may impact demand for our products that are sourced internationally.

Consumer confidence and spending are strongly influenced by general economic conditions and other factors, including inflation, concerns of a recession, elevated interest rates, fiscal policy, the changing tax and regulatory environment, minimum wage rates and regulations, consumer debt levels, the availability of consumer credit, the liquidity of consumers’ assets, health care costs, currency exchange rates, taxation, energy costs, real estate values, foreclosure rates, unemployment trends, weather conditions and the economic consequences of military action or terrorist activities, such as the heightened geo-political tensions between China and Taiwan and the potential impact of sanctions on the domestic and global economy.

Consumer sentiment, including a

preference for products made in the United States, may be impacted by the war in Eastern Europe, which may impact demand for our products that are sourced internationally.

In addition, with the majority of our supply originating in China, any significant negative development related to relations between United States and China may adversely impact the demand for our products sourced from China.

1 unchanged sentence

As a result, our customers may choose to purchase fewer of our products or purchase the lower priced products of our competitors, and our business, results of operations, financial condition and cash flows could be adversely affected.

Inflationary pressures and supply chain disruptions may adversely impact our business operations and financial results.

Inflationary pressures in the United States and the global economy such as elevated interest rates, higher product and transportation costs and wage inflation, as well as fears of a recession, are creating a complex and challenging retail environment that may impact discretionary spending.

The extent and duration of these pressures are uncertain and may limit our ability to meet incremental consumer demand, potentially impacting our net sales.

Macroeconomic factors, including these inflationary pressures and volatility in interest rates, also impact a number of accounting estimates, such as impairment calculations, the value of inventory measured using the last-in, first out (“LIFO”) method, and other estimates that utilize fair value.

These macroeconomic factors could result in incremental volatility in certain valuations and provisions required in the Company’s financial statements.

In addition, a disruption within our logistics or supply chain network could adversely affect our ability to deliver inventory in a timely manner, which could impair our ability to meet customer demand for products and result in lost sales and increased supply chain costs.

If we are unable to anticipate and respond to consumer preferences and fashion trends and successfully apply new technology, we may not be able to maintain or increase our net sales and earnings.

13 unchanged sentences

In addition, the success of our financial performance is dependent on the ability of our Famous Footwear segment to obtain products from our suppliers on a timely basis and on acceptable terms.

While we believe we have positive working relationships with our current suppliers, the loss of any of our major suppliers or product developed exclusively for our

Famous Footwear stores could have a material adverse effect on our business, financial condition and results of operations.

In addition, negative trends in global economic conditions, including the impact of the war in Eastern Europe, heightened tensions between China and Taiwan and the impact of COVID-19 in Southeast Asia, may adversely impact our suppliers.

If these third parties do not perform their obligations or are unable to provide us with the materials and services we need at prices and terms that are acceptable to us, our ability to meet our consumers’ demand could be adversely affected.

While we believe we have positive working relationships with our current suppliers, the loss of any of our major suppliers or product developed exclusively for our Famous Footwear stores could have a material adverse effect on our business, financial condition and results of operations.

In addition, negative trends in global economic conditions, including the impact of the wars in Israel and Eastern Europe and heightened tensions between China and Taiwan, or global pandemics, may adversely impact our suppliers.

third parties do not perform their obligations or are unable to provide us with the materials and services we need at prices and terms that are acceptable to us, our ability to meet our consumers’ demand could be adversely affected.

Customer concentration and other trends in customer behavior may lead to a reduction in or loss of sales.

Our wholesale customers include e-commerce retailers, national chains, department stores, mass merchandisers and independent retailers.

Our wholesale customers include e-commerce retailers, national chains, department stores, independent retailers and mass merchandisers.

Several of our customers operate multiple department store divisions.

20 unchanged sentences

We believe that our ability to compete successfully in the footwear industry depends on a number of factors, including style, price, performance, quality, location and service, as well as the strength of our brand names.

We remain competitive

by increasing awareness of our brands, improving the efficiency of our supply chain and enhancing the style, comfort, fashion and perceived value of our products.

However, our competitors may implement more effective marketing campaigns, adopt more aggressive pricing policies, make more attractive offers to potential employees, distribution partners and manufacturers, or respond more quickly to changes in consumer preferences than us.

We remain competitive by increasing awareness of our brands, improving the efficiency of our supply chain and enhancing the style, comfort, fashion and perceived value of our products.

However, our competitors may implement more effective marketing campaigns, adopt more aggressive pricing policies, make more attractive offers to potential employees, distribution

partners and manufacturers, or respond more quickly to changes in consumer preferences than us.

As a result, we may not be able to compete successfully in the future, and increased competition may result in price reductions, reduced gross margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand the development and marketing of our products, which could adversely impact our financial results.

17 unchanged sentences

International sourcing is subject to numerous risks, including trade relations, work stoppages, transportation delays (including delays at international and domestic ports) and costs (including customs duties, quotas, tariffs, anti-dumping duties, safeguard measures, cargo restrictions or other trade restrictions), domestic and international political instability, foreign currency fluctuations, variable economic conditions, expropriation, nationalization, natural disasters, terrorist acts and military conflict, changes in governmental regulations (including the U.S.

Foreign Corrupt Practices Act) and geo-political events, such as the current war between Russia and Ukraine and increased tensions between China and Taiwan.

Foreign Corrupt Practices Act) and geo-political events, such as the current wars in Israel and Ukraine and increased tensions between China and Taiwan.

Supply chain disruptions and port congestion have in the past delayed receipt of inventory and this could occur again in the future.

Delayed inventory receipt could delay deliveries to our wholesale customers, and reduce availability in our stores and e-commerce websites, which could adversely impact our financial results.

In addition, the imposition of tariffs or other costs on imported products may result in an increase in product prices, which may in turn

adversely impact our gross margins if we are unable to mitigate the impact of the costs.

In addition, the imposition of tariffs or other costs on imported products may result in an increase in product prices, which may in turn adversely impact our gross margins if we are unable to mitigate the impact of the costs.

At the same time, potential changes in manufacturing preferences, including, but not limited to the following, pose additional risk and uncertainty:

5 unchanged sentences

With the majority of our supply originating in China, a substantial portion of our supply could be at risk in the event of any significant negative development related to relations between United States and China.

In addition, international expansion in China may be hampered as a result of the adverse economic conditions that China is currently experiencing.

Although we believe we could find alternative manufacturing sources for the products that we currently source from third-party manufacturing facilities in China or other countries, we may not be able to locate alternative manufacturers on terms as favorable as our current terms, including pricing, payment terms, manufacturing capacity, quality standards and lead times for delivery.

2 unchanged sentences

If supply issues cause us to be unable to provide products consistent with our standards or manufacture our footwear in an efficient and cost-effective manner, our customers may cancel orders, refuse to accept deliveries or demand reductions in purchase prices, any of which could have a material adverse effect on our business and results of operations.

We also sell footwear in East Asia through our joint venture, and plan to increase international sales efforts as part of our growth strategy.

Our joint venture partners may have objectives that are different than our own.

In addition, we may be subject to increased legal risk associated with the joint venture if it fails to adhere to consistent levels of compliance standards as our fully-owned operations.

We are reliant upon our information technology systems, and any major disruption of these systems could adversely impact our ability to effectively operate our business.

3 unchanged sentences

If any of these systems fails to operate as expected, we experience problems with transitioning to upgraded or replacement systems, we fail to realize the expected return on our technology investment, a breach in security occurs or a natural disaster interrupts system functions, we may experience delays in product fulfillment, reduced efficiency in our operations, or delays in reporting our financial results to investors, or we may be required to expend significant capital to correct the problem, which may have an adverse effect on our results of operations and financial condition.

We are undergoing a multi-year enterprise resource planning (“ERP”) implementation, which will require significant financial and human capital resources.

The implementation of the new ERP system may be more difficult, costly or time-consuming than anticipated, and it is possible that the system will not yield the expected benefits.

Any disruptions, delays or deficiencies related to the new ERP system may materially and adversely impact our business operations, including our ability to process orders, manage our inventory, ship products to our customers, maintain our financial records, maintain effective internal control over financial reporting, or perform other business functions.

A cybersecurity breach may adversely affect our sales and reputation.

1 unchanged sentence

Consumers are also increasingly using mobile devices and applications to shop online and do comparison shopping.

Additionally, following the pandemic, a large portion of our Corporate employees shifted to a hybrid work schedule and are working remotely, which may result in heightened cybersecurity risk.

Additionally, a large portion of our Corporate employees are working remotely, which may result in heightened cybersecurity risk.

Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts.

While we believe we have taken reasonable and appropriate steps to protect sensitive information, hackers and data thieves operate sophisticated, large-scale attacks that could breach our information systems, despite ongoing security measures.

From time to time, we have experienced, and may continue to experience, attacks on our systems or those of our vendors.

While we believe we have taken reasonable and

appropriate steps to protect sensitive information, hackers and data thieves operate sophisticated, large-scale attacks that could breach our information systems, despite ongoing security measures.

In addition, we are required to comply with increasingly complex regulations designed to protect our business and personal data.

8 unchanged sentences

Inventory shortages may delay shipments to customers (and possibly require us to offer discounts or costly expedited shipping), negatively impact retailer and distributor relationships, adversely impact our sales results and diminish brand awareness and loyalty.

In addition, our retail stores are inherently subject to the risk of inventory loss and theft.

In recent years, the retail industry has experienced an increase in inventory shrinkage, and although we have taken steps to reduce inventory shrinkage, higher rates of shrinkage or increased costs associated with addressing inventory theft, including maintaining a safe store environment for our customers and associates, may have a material adverse impact on our results of operations.

A disruption in the effective functioning of our distribution centers could adversely affect our ability to deliver inventory on a timely basis.

10 unchanged sentences

Also, we have recently experienced changes in key senior management personnel, including our chief executive officer and chief financial officer.

Management transitions may create uncertainty, and if we do not successfully manage the transition, it could be disruptive to our daily operations or impact public or market perception, which could negatively impact our ability to operate effectively and have an adverse impact on our business.

Management transitions may create uncertainty, and if we do not successfully manage the transition, it

could be disruptive to our daily operations or impact public or market perception, which could negatively impact our ability to operate effectively and have an adverse impact on our business.

Our retail business depends on our ability to secure affordable and desirable leased locations without creating a competitive concentration of stores.

4 unchanged sentences

As a result, the number of consumers and financial performance of individual stores may decline and the average sales per square foot at our stores may be reduced.

Due to the changing

retail landscape, we may want to reduce the number of retail store locations but may be unable to successfully exit lease agreements.

Due to the changing retail landscape, we may want to reduce the number of retail store locations but may be unable to successfully exit lease agreements.

This may result in impairments or lease termination charges that adversely impact our financial results.

13 unchanged sentences

Damage to our brands and reputation could have a material adverse effect on our business, results of operations, financial position and cash flow.

A significant portion of our Famous Footwear sales are dependent on our Famous Footwear loyalty program, Famously You Rewards ("Rewards"), and any decrease in sales from Rewards could have a material adverse impact on our sales.

Rewards is a customer loyalty program that drives sales and traffic for the Famous Footwear segment.

9 unchanged sentences

We face the risk that the returns on acquisitions will not support the expenditures or indebtedness incurred to acquire such businesses.

We also face the risk that we will not be able to integrate acquisitions into our existing operations or divest our businesses effectively without substantial expense, delay or other operational or financial problems.

Integration may be hindered by, among other things, differing procedures, including internal controls, business practices and technology systems.

5 unchanged sentences

Other factors, such as changes in the mix of earnings in countries with differing statutory tax rates, changes in permitted deductions, interpretations, policies and treaties and the outcome of income tax audits in various jurisdictions, may result in higher taxes, lower profitability and increased volatility in our financial results.

Our commitments and shareholder expectations relating to environmental, social and governance ("ESG") considerations may expose us to liabilities, increased costs, reputational harm, and other adverse effects on our business.

In addition, changes in the tax laws of foreign jurisdictions may arise as a result of the Pillar Two (“Pillar Two”) Global Anti-Base Erosion model rules that were released by the Organization for Economic Cooperation and Development (OECD) in 2021.

The OECD continues to release guidance and many countries are implementing legislation to adopt the rules for tax years beginning in 2024.

Although the United States has not yet enacted legislation implementing Pillar Two, there can be no assurance that our effective tax rate or tax payments will not be adversely affected as countries independently amend their tax laws to adopt Pillar Two.

We are increasingly focused on ESG considerations relating to our business, including greenhouse gas emissions, human and civil rights and diversity, equity and inclusion.

New laws and regulations in these areas have been proposed and may be required to be adopted, and the criteria used by regulators and other relevant stakeholders to evaluate our ESG practices, capabilities, and performance may change rapidly, which in each case could require us to undertake costly initiatives or operational changes.

Non-compliance with these emerging rules or standards or a failure to address regulator, stakeholder and societal expectations may result in potential cost increases, litigation, fines, penalties, production and sales restrictions, brand or reputational damage, loss of customers, suppliers and commercial partners, failure to retain and attract talent, lower valuation and higher investor activism activities.

New laws and regulations in these areas, including those passed by the State of California and the SEC, will be required to be adopted, and may be passed by other states or regulatory agencies.

The criteria used by regulators and other relevant stakeholders to evaluate our ESG practices, capabilities, and performance may change rapidly, which in each case could require us to undertake costly initiatives or operational changes.

In addition, the requirements may not be uniform across jurisdictions, which may result in increased complexity and cost to become or remain compliant.

Non-compliance with these rules or standards or a failure to address regulator, stakeholder and societal expectations may result in potential cost increases, litigation, fines, penalties, production and sales restrictions, brand or reputational damage, loss of customers, suppliers and commercial partners, failure to retain and attract talent, lower valuation and higher investor activism activities.

Managing these considerations and implementing these goals and initiatives involves risks and uncertainties, including increased costs, and often depends on third-party performance or data that is outside our control.

10 unchanged sentences

In addition, if we, or our suppliers or international manufacturers, violate United States or international trade laws or regulations, we may be subject to additional duties, significant monetary penalties, the seizure and forfeiture of the products we are attempting to import or the loss of our import privileges.

Possible violations of United States or international laws or regulations could include inadequate record keeping of our imported products, misstatements or errors as to the origin, classification, marketing or valuation of our imported products, fraudulent visas or labor violations.

Possible violations of United States or international laws or regulations could include inadequate recordkeeping of our imported products, misstatements or errors as to the origin, classification, marketing or valuation of our imported products, fraudulent visas or labor violations.

The effects of these factors could render our conduct of business in a particular country undesirable or impractical and have a negative impact on our operating results.

28 unchanged sentences

If one or more of the financial institutions participating in the Credit Agreement were to default on its obligation to fund its commitment, the portion of the facility provided by such defaulting financial institution may not be available to us.

In addition, as of January 28, 2023, total borrowing availability under the Credit Agreement was $181.9 million.

In addition, as of February 3, 2024, total borrowing availability under the Credit Agreement was $308.5 million.

Failure to meet our debt covenants under the Credit Agreement may require the Company to seek waivers or amendments of the debt covenants, alternative or additional sources of financing or reduce expenditures.

In addition, borrowings under our Credit Agreement bear interest at variable rates.

As a result, increases in interest rates, such as those we are currently experiencing in this rising interest rate environment, could require a greater portion of our cash flow to be used to pay interest, which will negatively impact our net income and cash flow from operations.

ITEM 1B UNRESOLVED STAFF COMMENTS

There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934, as amended.

As a result, increases in interest rates, such as those we have recently experienced, could require a greater portion of our cash flow to be used to pay interest, which will negatively impact our net income and cash flow from operations.

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