Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Foreign Currency Exchange Rate Risks and Commodity Price Risk
We negotiate substantially all our purchase orders with foreign manufacturers in United States dollars. Thus, notwithstanding any fluctuation in foreign currencies, our cost for any purchase order is not subject to change after the time the order is placed. However, if the value of the United States dollar against local currencies were to decrease, manufacturers might increase their United States dollar prices for products.
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Our sales from the non-U.S. operations could be affected by currency fluctuations, primarily relating to the euro. We cannot fully anticipate all of our currency exposures and therefore foreign currency fluctuations may impact our business, financial condition, and results of operations. However, we believe that the risks related to these fluctuations are not material due to the low volume of transactions by us that are denominated in currencies other than the U.S. dollar.
Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our operating results. We have experienced increased costs in many aspects of our business due to the historic high rates of inflation in recent years. Beginning in fiscal 2023, we have implemented price increases on many of our products in an effort to mitigate the effect of higher costs. We expect inflationary pressures to continue in fiscal 2027. See our “Risk Factors Relating to the Operation of Our Business” and “Risk Factors Relating to the Economy and the Apparel Industry” contained under “Risk Factors.”
Interest Rate Exposure
We are subject to market risk from exposure to changes in interest rates relating to our ABL Credit Agreement. We borrow under this credit facility to support general corporate purposes, including capital expenditures and working capital needs. The U.S. Federal Reserve Board increased interest rates several times in fiscal 2024 and decreased interest rates in 2025 and 2026. It is unclear whether the Federal Reserve will reduce, increase or maintain the current interest rates in fiscal 2027. Additional increases in interest rates, or the continuation of the current rates, by the Federal Reserve will result in increases in our interest expense under our ABL Credit Agreement.
We had nominal borrowings under our ABL Credit Agreement during the year ended January 31, 2026. We estimate that each 100 basis point increase in our borrowing rates would result in additional interest expense to us of approximately $1 million for each $100 million outstanding our ABL Credit Agreement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data required pursuant to this Item begin on page F-1 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.