We operate in a rapidly changing environment that involves a number of risks that could materially and adversely affect our business, financial condition, prospects, operating results or cash flows.
−Removed: For a detailed discussion of risks that affect our business, refer to the sections entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 (“2019 Form 10-K”) and in our Quarterly Reports on Form 10-Q for the quarterly periods ended May 2, 2020 and August 1, 2020 (collectively, “2020 Form 10-Qs”).
−Removed: The risks described herein and those described in our 2019 Form 10-K and in our 2020 Form 10-Qs are not the only risks we face.
+Added: For a detailed discussion of certain risks that affect our business, refer to the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021 (“2020 Form 10-K”).
+Added: There have been no material changes to the risk factors disclosed in our 2020 Form 10-K.
+Added: The risks described in our 2020 Form 10-K are not the only risks we face.
We describe in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I of this quarterly report certain known trends and uncertainties that affect our business.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business, operating results and financial condition.
−Removed: We have identified additional material changes to our risk factors set forth below.
−Removed: Risks Related to Our Business
−Removed: The COVID-19 pandemic poses significant and widespread risks to our business as well as to the business environment and the markets in which we operate.
−Removed: The global outbreak of the novel coronavirus disease (“COVID-19”) and resulting health crisis had an immediate and widespread impact on our customers, our business environment, the economic climate in the U.S.
−Removed: and globally, and financial and consumer markets.
−Removed: The initial wave of the COVID-19 outbreak caused disruption to our business operations, as we temporarily closed all of our retail locations on March 17, 2020 in response to the public health crisis.
−Removed: While our retail locations were substantially closed at the end of the first fiscal quarter on May 2, 2020, during the second fiscal quarter we had reopened substantially all of our retail locations.
−Removed: As of the end of the third fiscal quarter on October 31, 2020 we had reopened all of our Galleries and Outlets and 8 out of 10 of our restaurants.
−Removed: During the time period of October through early December 2020, there has been a spike in reported COVID-19 cases in various parts of both the U.S.
−Removed: The recent surge in cases has led to the imposition of increasing levels of restriction on our physical operations with respect to Galleries, Outlets and restaurants.
−Removed: These limitations include restrictions on the level of occupancy that is permitted in some locations as well as full closure requirements for other locations.
−Removed: have experienced strong demand for our products in connection with prior closure requirements earlier in this year, our overall demand in specific markets correlates favorably with our customers’ ability to access our Galleries and Outlets.
−Removed: Accordingly, we do anticipate some negative impact to overall demand in connection the restrictions on our physical locations and the duration and extent of these operational limits cannot be predicted with certainty.
−Removed: While we have continued to serve our customers and operate our business through the ongoing COVID-19 health crisis, there can be no assurance that future events will not have an impact on our business, results of operations or financial condition since the extent and duration of the health crisis remains uncertain.
−Removed: Future adverse developments in connection with the COVID-19 crisis, including additional waves or resurgences of COVID-19 outbreaks, evolving international, federal, state and local restrictions and safety regulations in response to COVID-19 risks, changes in consumer behavior and health concerns, the pace of economic activity in the wake of the COVID-19 crisis, or other similar issues could adversely affect our business, results of operations or financial condition in the future, or our financial results and business performance for the fiscal year ending January 30, 2021 and future time periods.
−Removed: Although the availability of vaccines and various treatments with respect to COVID-19 can be expected to have an overall positive impact on business conditions in the aggregate over time, the exact timing of these positive developments is uncertain and in the meantime reported cases of COVID-19 have surged in the U.S.
−Removed: and Canada from October through December 2020 resulting in various adverse operating restrictions on our physical locations.
−Removed: Volatility in consumer demand and sentiment as the COVID-19 pandemic continues to evolve can also expose us to risks in our operations.
−Removed: In our immediate response to COVID-19, we aggressively scaled back some inventory orders while we assessed the status of our business.
−Removed: While our business strengthened during the second and third fiscal quarters, the lag in inventory receipts together with dislocations in our supply chain has resulted in some delays in our ability to convert business demand into revenues.
−Removed: In addition, our near term decisions regarding the sources and uses of capital in our business will continue to reflect and adapt to changes in market conditions and our business related to the impact of COVID-19.
−Removed: The global scale and scope of COVID-19 is unknown and the duration of the business disruption is uncertain.
−Removed: The extent to which the COVID-19 pandemic impacts our business will depend on future developments that are highly uncertain, including developing information concerning the severity of COVID-19 and the actions taken by governments and private businesses to attempt to contain COVID-19.
−Removed: We may face operational restrictions with respect to some or all of our physical locations for prolonged periods of time due to, among other factors, evolving international, federal, state and local restrictions, standards and safety regulations including recommendations related to “social distancing.” Public health officials and other governmental authorities have adopted numerous mitigation measures to address the spread of the virus, and in particular to discourage people from congregating in public, commercial or private spaces.
−Removed: Federal, state and local authorities in the U.S.
−Removed: and Canada have implemented a number of different directives that may require changes in our business practices.
−Removed: The scope and duration of these directives is evolving and not entirely clear.
−Removed: In response to current or future COVID-19 outbreaks or other concerns, states and municipalities in the U.S.
−Removed: where we operate may implement or reinstate temporary closure requirements with respect to non-essential business operations and the duration of these requirements is unknown.
−Removed: Governmental restrictions applicable to our restaurants have different terms and conditions than those that apply to our Galleries.
−Removed: For example, in most of our retail locations that have reopened, the substantial operational restrictions related to COVID-19 health and safety considerations, such as limits to seating capacity, that were imposed on our hospitality business by various governmental authorities remain in place.
−Removed: Such operational restrictions may cause our hospitality offerings to be less attractive to customers or may lower its margins and profitability.
−Removed: Many of our Galleries are located in malls or otherwise located in proximity to a number of other retail stores.
−Removed: Mall operators and other retailers have imposed, and may continue to impose, additional health and safety practices and procedures and may in the future elect to temporarily cease operations in response to renewed or localized outbreaks.
−Removed: In addition, new regulation or requirements that governmental authorities may impose with respect to the compensation of our employees or the manner or location in which our employees may work, could also have an adverse effect on our business.
−Removed: At various times since the beginning of the pandemic, substantially all of our management personnel, including those in our corporate office in Corte Madera, CA, have been subject to state and local shelter-in-place requirements, which have varied over time and which have resulted in most of our management team being required to work remotely.
−Removed: These working arrangements as well as other related restrictions including severe limitations on travel may have an impact on our operations and management effectiveness.
−Removed: Although we have technology and other resources to support these new work requirements, there can be no assurance that we will not suffer material risks to our business, operations, productivity and results of operations as a result of these restrictions.
−Removed: If a significant percentage of
−Removed: our workforce is unable to work, including because of illness or travel or government restrictions in connection with COVID-19, our operations may be negatively impacted, potentially materially adversely affecting our business, liquidity, financial condition or results of operations.
−Removed: The evolution of the COVID-19 pandemic around the world may continue to have an adverse impact on elements of our supply chain including the manufacture, supply, distribution, transportation and delivery of our products and our inventory levels.
−Removed: There have been substantial disruptions that have already occurred with respect to the global supply chain as a result of the COVID-19 health crisis.
−Removed: Our business depends on the successful operation of a global supply chain.
−Removed: Based on total dollar volume of purchases for fiscal 2019, approximately 70% of our products were sourced from Asia (including a substantial portion from China), 16% from the United States and the remainder from other countries and regions.
−Removed: Although China was at the center of the initial outbreak of COVID-19, the health crisis has spread throughout the world.
−Removed: The presence of the virus and the response to the health crisis in various countries is likely to have a continuing impact on our supply chain, for example by affecting the speed at which the factories that manufacture our products are able to resume normal operations and production levels after initial or subsequent waves of closures, and the extent that the health crisis may abate in particular countries is uncertain.
−Removed: Given the pace at which business conditions are evolving in response to the COVID-19 health crisis, we may adjust our investments in various business initiatives including our capital expenditures through the remainder of fiscal 2020 and over the course of fiscal 2021.
−Removed: If we are not able to access capital at the time and on terms that our business requires, we may encounter difficulty funding our business requirements including debt repayments when due.
−Removed: We may not be able to access liquidity or the terms and conditions of available credit may be substantially more expensive than previously expected due to changes in financial conditions and credit markets.
−Removed: We may require waivers or amendments to our existing credit facilities and these requirements may trigger pricing increases from lenders for available credit.
−Removed: If we are not able to access credit to fund our business requirements for liquidity, or the cost of available credit increases, we may need to curtail our business operations including various business initiatives that require capital investment.
−Removed: We have recently commenced an effort to expand our business internationally by establishing a new retail presence in global markets including Europe and the United Kingdom.
−Removed: The impact of COVID-19 abroad, including travel restrictions imposed by various countries, may continue to affect certain aspects of our planned international expansion and has been a major factor in our decision to delay in the timing of our previous plans to open new international locations in 2021.
−Removed: In addition, we are in the process of developing a number of new Gallery locations in the U.S.
−Removed: Counterparties with respect to some of our Gallery development projects may experience capital or liquidity constraints due to COVID-19 related difficulties, which may impact the timing or scope of some of our development projects.
−Removed: In addition, our RH Guesthouse initiative may be negatively impacted by the disease outbreak as international, federal, state and local governments have restricted travel, conferences, events and gatherings.
−Removed: Any reductions in our liquidity position and the need to use capital for other day-to-day requirements of our business could affect a number of our business initiatives and long-term investments and as a result we may be required to curtail and/or postpone business investments including those related to international expansion, the pace of opening new Galleries in the U.S.
−Removed: as well as other initiatives that require capital investment.
−Removed: Our business also depends on a number of third parties including vendors, landlords, lenders and other suppliers.
−Removed: One or more of these third parties may experience financial distress, staffing shortages or liquidity challenges, file for bankruptcy protection, go out of business, or suffer disruptions in their business due to the COVID-19 pandemic.
−Removed: The health crisis, resulting deterioration in financial markets and overall economic conditions could have a material adverse effect on the financial condition of third parties that are essential to our business operations and we may incur losses and other negative impacts for difficulties experienced by our vendors and other third parties.
−Removed: The magnitude and duration of the negative impact to general economic and market conditions from the COVID-19 pandemic cannot be predicted with certainty, and there can be no assurance that the pace of economic activity in the wake of COVID-19 outbreaks will not have a negative impact on our business.
−Removed: The COVID-19 pandemic and mitigation measures have had an adverse impact on global economic conditions as well as the business climate in our primary consumer markets in the U.S.
−Removed: Our business also depends to some extent on conditions in financial markets.
−Removed: We have determined that our customer purchasing patterns are influenced by economic factors including the health and volatility of the stock market.
−Removed: We have seen that previous downturns in the stock market have been correlated with a reduction in consumer demands for our products.
−Removed: The timing, magnitude and duration of disruptions of financial markets and weakening of overall economic conditions as a result of the COVID-19 pandemic is unknown, and the precise impact of such trends on our business is also unknown.
−Removed: Uncertainties regarding the economic impact of the COVID-19
−Removed: pandemic have resulted in, and are likely to continue to result in, sustained impact on the economy.
−Removed: Our business is particularly sensitive to reductions in discretionary consumer spending, which may be adversely impacted by a recession or fears of a recession, volatility and declines in the stock market and increasingly pessimistic consumer sentiment due to perceived or actual economic and/or health risks.
+Added: OTHER INFORMATION
+Added: 2021 FIRST QUARTER FORM 10-Q | 51
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.