What changed in this filing

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Item 1A. Risk Factors

2026-05-08 compared with 2025-11-07 · 15 added, 50 removed, 1 unchanged (98% of the section changed)

policies related to global trade and tariffs could have a material adverse effect on our results of operations.

The current domestic and international political environment, including existing and potential changes to U.S.

policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy.

In 2018, the U.S.

imposed tariffs of 25% on steel and 10% on aluminum, with only a handful of countries exempt from the increase.

The new Trump administration recently enhanced these measures by increasing the tariffs on aluminum and steel to 50% for all countries except the United Kingdom, expanding the products on which the tariffs will be assessed to include derivative products containing steel or aluminum, and terminating all countrywide exemptions and the product specific exemption process.

There is an inclusion process through which domestic industry can request the U.S.

include new derivative steel and aluminum products that will be subject to the increased tariffs.

Throughout the first Trump administration, the U.S.

and China imposed a variety of tariffs on most goods traded between the two countries.

This included the imposition of tariffs on a substantial number of Chinese-origin goods resulting from the U.S.

investigation of Chinese theft of U.S.

intellectual property under Section 301 of the Trade Act of 1974, which the Biden administration continued and increased for a number of products.

and the European Union also imposed tariffs on each other’s products stemming from a dispute at the World Trade Organization related to aircraft.

The Biden administration and U.S.

Congress created significant uncertainty about their review of tariffs and future relationships between the U.S.

and other countries with respect to regulations.

Since taking office, the new Trump administration implemented various new strategies regarding tariffs.

President Trump invoked the International Emergency Economic Powers Act (“IEEPA”) to impose 25% tariffs on products from Mexico and 25% tariffs on products from Canada (with a lower 10% tariff on Canadian energy and energy resources) but exempted from the tariffs those products that are entitled to preferential treatment under the United States-Mexico-Canada Agreement.

President Trump also imposed a 20% tariff on all imports from China and Hong Kong under the International Emergency Economic Powers Act.

Acting on an investigation concluded during the first Trump administration, the current Trump administration imposed tariffs of 25% on certain passenger vehicles and light trucks and parts for those vehicles.

In April 2025, the Trump administration imposed a universal “reciprocal” tariff of at least 10% on all countries and higher rates for certain countries, which took effect on August 1, 2025.

While ongoing litigation challenges the IEEPA tariffs, arguing that the tariffs exceed the statutory authority under IEEPA, the U.S.

Court of Appeals for the Federal Circuit granted a temporary, administrative stay, which keeps the tariffs in place during ongoing litigation.

The tariff actions by the U.S.

may result in a

decrease of global trade volumes due to uncertainty, may create an administrative burden, and will cause retailers to make difficult decisions as to how to pay the tariff or absorb the cost into their profit margins.

While we have exposure to implemented tariffs at this time, in regard to our supply chain and end-user demand, any expansion in the types of tariffs implemented has the potential to negatively impact our supply chain costs and the operating performance of our customers, which in turn may negatively affect our sales, gross margin, and operating performance.

Additionally, there is a risk that continued U.S.

tariffs on imports could be met with additional retaliatory tariffs on U.S.-produced exports and that the broader trade uncertainty could intensify.

This has the potential to significantly impact global trade and economic conditions in many of the regions where we do business and have a material adverse effect on our results of operations.

In addition, with respect to sourcing products and raw materials from third-party suppliers in other countries, our ability to timely or successfully import such products or those made with such raw materials may be adversely affected by changes in U.S.

As a result, products we import into the U.S.

could be held for inspection by U.S.

Customs and Border Patrol (“U.S.

CBP”) based on a suspicion of noncompliance.

Additionally, the Uyghur Forced Labor Prevention Act (“UFLPA”) empowers the U.S.

CBP to withhold release of items produced in whole or in part in countries or by companies included on the UFLPA entities list, creating a presumption that such goods were produced using forced labor.

In January 2025, the Department of Homeland Security added to the UFLPA entity list, marking the largest single expansion of the list to date, and including a large supplier of critical minerals and one of the world’s largest textile manufacturers, both linked to forced labor practices in the People’s Republic of China.

Although we do not believe that our suppliers source materials from entities included on the UFLPA for the products they sell to us or use to manufacture our products, we could be subject to penalties, fines or sanctions if any of the suppliers from which we purchase goods is found to have dealings, directly or indirectly, with entities on the ULFPA entities list.

We are committed to complying with the UFLPA and have taken significant steps to assess and mitigate risks within our supply chain.

Given the complexity and multi-tiered nature of global supply chains, achieving full traceability for every supplier and sub-supplier presents substantial challenges.

However, we are continuously working to enhance our due diligence processes, leveraging available data and supplier engagement to ensure compliance to the fullest extent possible.

Recently, in September 2025, the U.S.

CBP issued a Withhold Release Order against bicycles, bicycle parts, and accessories manufactured in Taiwan by Giant Manufacturing Co.

Ltd., based on information of possible forced labor use.

The similarity in product offerings and our company’s products being associated with Giant Manufacturing Co.

may subject our Taiwan-based or other operations to increased scrutiny and review, which could result in compliance and reporting costs and hinder or delay the importation and delivery of our products manufactured in Taiwan.

With the majority of our manufacturing operations for our bike products occurring in Taiwan, any adverse order issued by the U.S.

CBP on our company or other manufacturers of bicycles, bicycle parts, and related accessories could negatively affect our business, financial condition or results of operations.

Our efforts to increase profitability and optimize costs—including, among other possible initiatives, current or future strategic transactions involving one or more of our businesses—may not be successful or could be significantly delayed, which may materially impact our operating results, financial condition, liquidity, and margins.

Due to challenges in the OEM market and broader market conditions impacting discretionary consumer spending, we implemented (and are continuing to implement) certain immediate and longer-term actions to strengthen our business, including aggressive cost management and strategic operational improvements.

In February 2026, we established the Transformation Committee, an advisory committee of the Board of Directors, to assist with efforts with respect to profitability, cost-cutting and margin improvement.

We also developed a plan to adjust our business structure to operate efficiently in a number of demand environments intended to protect margins and drive free cash flow to reduce leverage and strengthen our balance sheet.

However, our strategy to increase profitability and optimize costs relies on a number of factors, some of which are outside of our control, and may distract management, slow improvements to our products and services, and hinder production capability in certain situations.

If the Company enters into any strategic transactions involving one or more of our businesses in connection with these efforts, we may not achieve the expected benefits.

We cannot provide any assurance that our strategic initiatives will be successful, and we may not achieve measures to increase profitability or optimize costs on our anticipated timeline, or at all.

Failure to achieve our cost optimization targets or increase our profitability could have a material adverse effect on our results of operations, liquidity and financial condition.

Our optimization initiatives and strategic review of our portfolio of businesses could disrupt the Company’s ongoing business, present risks not currently contemplated, and materially adversely affect our business, reputation, results of operations and financial condition.

As part of our efforts to streamline our business and sharpen our focus on core operations, we are reviewing aspects of our business and considering potential transactions involving one or more of our businesses.

We have taken and may continue to take certain strategic actions in connection with this process that may result in divestitures, sales, dispositions or related transactions involving one or more of our businesses or assets.

These initiatives are subject to uncertainty, and no such actions may ultimately be pursued.

Our ability to identify and capitalize on opportunities or strategic transactions that would produce favorable results depend on a range of factors, which include, among others, market conditions, our ability to successfully market and execute potential transactions, third-party interest, valuation considerations and regulatory requirements.

In addition, our optimization initiatives may be complex, require management attention, and result in costs or disruptions to our business even if no transactions are completed.

If we are unsuccessful in implementing, or choose not to take, actions or other initiatives related to our ongoing strategic review, our business, reputation, results of operations and financial condition could be materially and adversely impacted.

Except as noted in this Item 1A, there have been no material changes to the risk factors described in our Form 10-K for the 2025 fiscal year ended January 2, 2026.

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-Q

Item 1A. Risk Factors