Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
Except as set forth below, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 30, 2021 and our Quarterly Report on Form 10-Q for the quarter ended May 1, 2021.
The risk factor entitled “Adverse impacts on consumer spending may significantly harm our business” has been updated to read as follows:
Adverse impacts on consumer spending may significantly harm our business. The success of our business depends to a significant extent upon the level of consumer spending. A number of factors may affect the level of consumer spending on merchandise that we offer, including, among other things:
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general economic and industry conditions;
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unemployment trends and salaries and wage rates;
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energy costs, which affect gasoline and home heating prices;
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the level of consumer debt;
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consumer credit availability;
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real estate values and foreclosure rates;
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consumer confidence in future economic conditions;
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interest rates;
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inflation;
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health care costs;
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the timing and level of government stimulus payments;
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tax rates, policies and timing and amounts of tax refunds;
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natural disasters, changing weather patterns and catastrophic events; and
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war, terrorism, civil unrest, other hostilities and security concerns.
The merchandise we sell generally consists of discretionary items. Adverse economic conditions and unemployment rates, and any related decrease in consumer confidence and spending may result in reduced consumer demand for discretionary items. The federal stimulus payments made directly to consumers as a result of the COVID-19 pandemic likely had a positive impact on our net sales, including in the first six months of fiscal 2021. The amount of any future stimulus payments and duration of the impact of such payments is uncertain. Reduced consumer demand could result in reduced traffic in our physical stores and to our e-commerce platform; a limit to the prices we can charge for our merchandise; inventory markdowns; increased selling and promotional expenses; and the need to close underperforming stores, which could result in higher than anticipated closing costs. Any of these impacts could have a material adverse effect on our business, results of operations and financial condition.
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