What changed in this filing

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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-24 · 91 added, 62 removed, 276 unchanged (36% of the section changed)

Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic has disrupted the Company's operations and could have a material adverse impact on the Company’s operations and financial results.

The COVID-19 pandemic has negatively affected the global economy, disrupted consumer spending and global supply chains, and significantly increased the volatility and disruption of financial markets both globally and in the U.S.

These conditions following the onset of the pandemic led to a decline in discretionary spending by consumers that had a negative effect on the Company's financial condition and results of operations in 2020.

There can be no assurance that these conditions will not recur, for example, as new variants of the virus emerge, and negatively affect the Company's financial condition and results of operations in future periods.

The extent to which the COVID-19 pandemic impacts the Company’s business, operations and financial results, including the duration and magnitude of such effects, will depend on numerous evolving factors outside of the Company's control that the Company cannot currently fully predict or assess, such as;

the duration and scope of the pandemic and effectiveness of containment efforts;

the negative impact on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates, consumer discretionary spending and levels of consumer confidence;

and actions governments, businesses and individuals may take in response to the pandemic.

The Company’s business has been and could continue to be materially adversely affected by several factors related to the COVID-19 pandemic, including, but not limited to:

• The inability of employees, suppliers and other business providers to carry out tasks at ordinary levels of performance as a result of safety measures taken to limit the spread of COVID-19.

• Future outbreaks requiring the closure of retail stores operated by the Company or the Company's wholesale customers;

• Decreased retail traffic resulting from social distancing measures.

• Negative effects on consumer spending due to general macroeconomic conditions, decreased disposable income and increased unemployment.

• Wholesale and distributor customer order cancellations due to lower consumer demand.

• Decline in the performance or financial condition of the Company’s major wholesale customers as a result of retail store closures, bankruptcy or liquidation.

• Disruption to the operations of the Company’s distribution centers and its third-party manufacturers because of facility closures, reductions in operating hours, labor or material shortages, travel limitations or mass transit disruptions.

• Additional expenses related to mitigating the pandemic’s impact on regular operations.

• Supply chain disruption effecting the Company's ability to receive and distribute goods as well as increases in supply chain costs.

Disruptions in the supply chain have had an adverse effect and may continue to have an adverse effect on the Company's ability to meet consumer demand and financial results.

• Continued volatility in the availability and prices for commodities and raw materials used in the Company's products and related inflationary pressures.

• Increased cyber security risk due to the increase in the number of employees working remotely.

The disruption to the global economy and the Company's business may lead to triggering events indicating that the carrying value of certain assets, such as long-lived assets, intangibles and goodwill, may not be recoverable.

Any required non-cash impairment charges will adversely affect the Company's results of operations.

The COVID-19 pandemic may also affect the Company's operating and financial results in a manner that is not presently known to the Company or that the Company does not currently believe presents significant risks to its operations.

Business and Operational Risks

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The Company’s efforts to maintain and improve its competitive position by monitoring and timely and appropriately responding to changes in consumer preferences, increasing brand awareness and enhancing the style, comfort and perceived value of its products may not be successful.

If the Company is unable to maintain or enhance the images of its brands or if it is unable to timely and appropriately respond to changing consumer preferences and evolving footwear and apparel trends, consumers may consider its brands’ images to be outdated and associate its brands with styles that are no longer popular, which would decrease demand for its products.

Such failures could result in reduced sales, excess inventory, trade name impairments, lower gross margin and other adverse impacts on the Company’s operating results.

Significant capacity constraints, production disruptions, quality issues, price increases and other risks associated with foreign sourcing could increase the Company’s operating costs and adversely impact the Company’s business and reputation.

If the Company is unable to maintain or enhance the images of its brands or if it is unable to timely and appropriately respond to new competition, changing consumer preferences and evolving footwear and apparel trends, consumers may consider its brands’ images to be outdated and associate its brands with styles that are no longer popular, which would decrease demand for its products.

Such failures could result in loss of market share, reduced sales, excess inventory, trade name impairments, lower gross margin and other adverse impacts on the Company’s operating results.

Significant capacity constraints, production disruptions, inventory management, quality issues, price increases and other risks associated with foreign sourcing could increase the Company’s operating costs and adversely impact the Company’s business and reputation.

The Company currently sources a substantial majority of its products from third-party manufacturers in foreign countries, predominantly in the Asia Pacific region.

As is common in the footwear and apparel industry, the Company does not have long-term contracts with its third-party manufacturers.

The Company may experience difficulties with such manufacturers, including reductions in the availability of production capacity, failures to meet production deadlines, failure to make products that meet applicable quality standards, or increases in manufacturing costs.

The Company may experience difficulties with such manufacturers, including reductions in the availability of production capacity, failures to meet production deadlines, inventory management, failure to make products that meet applicable quality standards, or increases in labor and other manufacturing costs.

The Company’s future results depend partly on its ability to maintain its relationships with third-party manufacturers.

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Various factors could significantly interfere with the Company’s ability to source its products, including adverse developments in trade or political relations with China or other countries where it sources its products, or a shift in these countries' manufacturing capacities away from footwear and apparel to other industries.

Other adverse developments, such as the COVID-19 pandemic, could cause significant production and shipping delays.

Other adverse developments, such as pandemics or other health crises, could cause significant production and shipping delays.

Any of these events could have an adverse effect on the Company’s business, results of operations and financial position and, in particular, on the Company’s ability to meet customer demands and produce its products in a cost-effective manner.

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These alternatives may not be available on short notice or could result in higher costs, which could have an adverse impact on the Company’s business and financial condition.

Infectious disease outbreaks that are considered pandemics, such as the COVID-19 pandemic, have had and could continue to have a material adverse effect on the company's business.

The Company's business could be adversely affected by infectious disease outbreaks, such as the COVID-19 pandemic.

These conditions following the onset of the COVID-19 pandemic led to a decline in discretionary spending by consumers that had a negative

effect on the Company's financial condition and results of operations in 2020.

There can be no assurance that these conditions will not recur and negatively affect the Company's financial condition and results of operations in future periods.

The extent to which the COVID-19 pandemic, or other health crises impacts the Company’s business, operations and financial results, including the duration and magnitude of such effects, will depend on numerous factors outside of the Company's control, such as, the duration and scope of the pandemic or other health crisis and effectiveness of containment efforts;

and actions governments, businesses and individuals may take in response to the pandemic or other health crisis.

Potential impacts to the Company’s business can be materially adversely affected by several factors related to the COVID-19 pandemic or another health crisis, including, but not limited to:

• The inability of employees, suppliers and other business providers to carry out tasks at ordinary levels of performance as a result of safety measures taken to limit the spread of infectious disease outbreaks.

• Outbreaks requiring the closure of retail stores operated by the Company or the Company's wholesale customers;

• Decreased retail traffic resulting from social distancing measures, store closures, reduced operating hours, and/or changes in consumer behavior.

• Negative effects on consumer spending due to general macroeconomic conditions, decreased disposable income and increased unemployment.

• Wholesale and distributor customer order cancellations due to lower consumer demand.

• Decline in the performance or financial condition of the Company’s major wholesale customers as a result of retail store closures, bankruptcy or liquidation.

• Consumer demand for our products may be adversely impacted by economic conditions.

• Additional expenses related to mitigating the pandemic’s impact on regular operations.

• Supply chain disruption effecting the Company's ability to receive and distribute goods as well as increases in supply chain costs.

Disruptions in the supply chain related to the COVID-19 pandemic have had an adverse effect and may continue to have an adverse effect on the Company's ability to meet consumer demand and financial results.

• Increased cyber security risk due to the increase in the number of employees working remotely.

• Volatility in the availability and prices for commodities for raw materials used in the Company's products and related inflationary pressures.

The COVID-19 pandemic or another health crisis may also affect the Company's operating and financial results in a manner that is not presently known to the Company or that the Company does not currently believe presents significant risks to its operations.

Labor disruptions could adversely affect the Company’s business.

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Any such disruption may have an adverse effect on the Company’s business by potentially resulting in inventory shortages, delayed or canceled orders by customers and unanticipated inventory accumulation, and may negatively impact the Company’s results of operations and financial position.

A significant reduction in wholesale customer purchases of the Company’s products, wholesale customers seeking more favorable terms or failure of wholesale customers to pay for the Company’s products in a timely manner could adversely affect the Company’s business.

If the Company is unable to hire qualified persons for, or retain and continue to develop, its workforce, its results of operations could be adversely affected.

The future success of the Company also depends on its ability to attract and retain qualified personnel, including in its product, eCommerce, and leadership teams.

Competition for such personnel in the Company's industry is intense.

If the Company fails to attract and retain such employees, it may not be successful in developing and implementing its business strategies.

The Company’s ability to hire and retain qualified personnel may be affected by a number of factors, including:

the ability to attract and motivate employees;

the competition the Company faces from other companies in hiring and retaining qualified personnel;

and the Company’s ability to offer employees remote work opportunities.

If the Company is unable to hire and retain employees capable of performing at a high level, its business, including cash flows, results of operations, employee satisfaction, and reputation, could be adversely affected.

A significant reduction in wholesale customer purchases of the Company’s products, wholesale customers seeking more favorable terms or canceling orders, or the failure of wholesale customers to pay for the Company’s products in a timely manner could adversely affect the Company’s business.

The Company’s financial success depends on its wholesale customers continuing to purchase its products.

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Sales to the Company’s wholesale customers are generally on an order-to-order basis and are subject to rights of cancellation and rescheduling by the wholesale customers.

In fiscal 2022, the Company experienced a higher rate of wholesale customer cancellatinos as retail customers sought to manage higher inventory levels and supply chain disruption.

Failure to fill wholesale customers’ orders in a timely manner could harm the Company’s relationships with its wholesale customers.

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In addition, changes in the channels of distribution, such as the continued growth of eCommerce and related competitive pressures, and the sale of private label products by major retailers, could have an adverse effect on the Company’s results of operations and financial position.

The Company’s consumer-direct operations continue to require substantial investment and commitment of resources and are subject to numerous risks and uncertainties.

The Company’s consumer-direct operations, including its brick and mortar locations as well as its eCommerce and mobile channels, require substantial fixed investment in equipment and leasehold improvements, information systems, inventory and personnel.

The Company’s direct-to-consumer operations continue to require substantial investment and commitment of resources and are subject to numerous risks and uncertainties.

The Company’s direct-to-consumer operations, including its brick and mortar locations as well as its eCommerce and mobile channels, require substantial fixed investment in equipment and leasehold improvements, information systems, cyber-security infrastructure, inventory and personnel.

The Company also has substantial operating lease commitments for retail space.

Due to the high fixed-cost structure associated with the Company’s brick and mortar consumer-direct operations, a decline in sales or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements and employee-related costs.

The success of its consumer-direct operations also depends on the Company’s ability to identify and adapt to changes in consumer spending patterns and retail shopping preferences, including the shift from brick and mortar to eCommerce and mobile channels, reductions in mall traffic and the Company’s ability to effectively develop its eCommerce and mobile channels.

Due to the high fixed-cost structure associated with the Company’s brick and mortar direct-to-consumer operations, a decline in sales or the closure or poor performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and leasehold improvements and employee-related costs.

The success of its direct-to-consumer operations also depends on the Company’s ability to identify and adapt to changes in consumer spending patterns and retail shopping preferences, including the shift from brick and mortar to eCommerce and mobile channels, reductions in mall traffic and the Company’s ability to effectively develop its eCommerce and mobile channels.

The Company has made and will continue to make significant investments in building technologies and digital capabilities.

As omni-channel retailing continues to evolve, the Company’s customers are increasingly more likely to shop across multiple channels that work in tandem to meet their needs.

The Company’s failure to successfully respond to these factors could adversely affect the Company’s consumer-direct business, as well as limit the Company's ability to successfully develop and expand the omni-channel experience for customers, damage its reputation and brands, and have an adverse effect on the Company’s results of operations and financial position.

The Company’s failure to successfully respond to these factors could adversely affect the Company’s direct-to-consumer business, as well as limit the Company's ability to successfully develop and expand the omni-channel experience for customers, damage its reputation and brands, and have an adverse effect on the Company’s results of operations and financial position.

The Company’s reputation and competitive position depend on its third-party manufacturers, distributors, licensees and others complying with applicable laws and ethical standards.

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The misuse of a brand by a licensee could adversely affect the value of such brand.

Disruption of the Company’s information technology systems could adversely affect the Company’s business.

The Company’s information technology systems are critical to the operations of its business.

Disruption of the Company’s eCommerce platform or other information technology systems could adversely affect the Company’s business.

The Company’s information technology systems, including its eCommerce platform, are critical to the operations of its business.

Any future material interruption, unauthorized access, impairment or loss of data integrity or malfunction of these systems could severely impact the Company’s business, including delays in product fulfillment and reduced efficiency in operations.

In addition, costs and potential problems

and interruptions associated with the implementation of new or upgraded systems, or with maintenance or adequate support of existing systems, could disrupt or reduce the efficiency of the Company’s operations.

In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems, or with maintenance or adequate support of existing systems, could disrupt or reduce the efficiency of the Company’s operations.

Disruption to the Company’s information technology systems may be caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, denial-of-service attacks, computer viruses, physical or electronic break-ins, or similar events or disruptions.

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The Company relies on owned or independently operated distribution facilities to transport, warehouse and ship products to its customers.

The Company’s logistics and distribution systems include computer-controlled and automated equipment, which are subject to a number of risks related to security or computer viruses, the proper operation of software and hardware, power interruptions or other system failures.

The Company’s logistics and distribution systems include computer-controlled and automated equipment, which are subject to a number of risks related to computer system upgrades, data accuracy, security or computer viruses, the proper operation of software and hardware, power interruptions or other system failures.

Substantially all of the Company’s products are distributed from a relatively small number of locations.

These operations could be interrupted by earthquakes, floods, fires or other natural disasters near its distribution centers or other events over which the Company has no control, such as the COVID-19 pandemic.

These operations could be interrupted by earthquakes, floods, fires or other natural disasters near its distribution centers or other events over which the Company has no control, such as pandemics.

The Company’s business interruption insurance may not adequately protect the Company from the adverse effects that could be caused by significant disruptions affecting its distribution facilities, such as the long-term loss of customers or an erosion of brand image.

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If the Company encounters problems affecting its distribution system, its results of operations and its ability to meet customer expectations, manage inventory, complete sales and achieve operating efficiencies could be adversely affected.

The Company faces risks associated with its growth strategy and acquiring businesses.

The Company faces risks associated with its growth strategies including acquiring and disposing of businesses.

The Company has expanded its products and markets in part through strategic acquisitions, including the acquisition of the Sweaty Betty ® brand in the third quarter of fiscal 2021, and it may continue to do so in the future, depending on its ability to identify and successfully pursue suitable acquisition candidates.

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The failure to successfully integrate newly acquired businesses or achieve the expected benefits of strategic acquisitions in the future, or consummate a potential acquisition after incurring material costs, could have an adverse effect on the Company’s business, results of operations and financial position.

From time to time, the Company may seek to sell one or more businesses, or sell or license one or more brands.

As part of the Company’s strategy to ensure that it is investing in parts of its business that offer the greatest opportunities to achieve growth, the Company is currently seeking to sell its Wolverine Leathers Division, and the Company on February 7, 2023 closed the sale of the Keds® business.

These transactions may involve challenges and risks.

There can be no assurance that future divestitures will occur, or if a transaction does occur, there can be no assurance as to the potential value created by the transaction.

The process of exploring strategic alternatives or selling a business could cause uncertainty and negatively impact our ability to attract, retain and motivate key employees.

In addition, the Company expends costs and management resources to complete divestitures and manage post-closing arrangements.

Any failures or delays in completing divestitures could have an adverse effect on the Company’s financial results and ability to execute its strategy.

The Company’s international operations may be affected by legal, regulatory, political and economic risks.

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The Company is also subject to general political and economic risks in connection with its international operations, including:

• political instability and terrorist attacks;

• political instability, war and terrorist attacks;

• differences in business culture;

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dollars and sell in local currencies, which impacts the price to foreign consumers and in turn, impacts the amount of royalties paid to the Company in U.S.

When the U.S.

dollar strengthens relative to foreign currencies, the Company's revenues and profits denominated in foreign currencies are reduced when converted into U.S.

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The Company’s quarterly sales and earnings may fluctuate, and the Company or securities analysts may not accurately estimate the Company’s financial results, which may result in volatility in, or a decline in, the Company's stock price.

Decreases in the returns provided to our stockholders may ultimately adversely affect our business, results of operations and financial condition.

The Company’s quarterly sales and earnings can vary due to a number of factors, many of which are beyond the Company’s control, including the following:

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Any shortfall in sales or earnings from the levels expected by investors or securities analysts could cause a decrease in the trading price of the Company’s common stock.

Decreases in the trading price of our stock may adversely affect the returns our stockholders realize from ownership of our stock.

Such adverse effects, as well as other factors, may cause stockholders to take actions to involve themselves in the strategic direction and governance of the Company, including through private engagement, publicity campaigns, stockholder proposals and proxy contests.

Responding to these actions can be costly and time-consuming and could divert the attention of our board and senior management from managing our operations and pursuing our business strategies.

Changes in general economic conditions and other factors affecting consumer spending could adversely affect the Company’s sales, costs, operating results or financial position.

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Customers may defer or cancel purchases of the Company’s products due to uncertainty about global, regional or local economic conditions, and how such conditions may impact them.

Disposable income and consumer spending may decline due to recessionary economic cycles, high interest rates on consumer or business borrowings, restricted credit availability, inflation, high levels of unemployment or consumer debt, high tax rates, declines in consumer confidence or other factors.

A decline in disposable income and consumer

spending could adversely affect demand for the Company’s products, which could adversely affect the Company's results of operations.

Disposable income and consumer spending may decline due to inflation, recessionary economic cycles, high interest rates on consumer or business borrowings, restricted credit availability, high levels of unemployment or consumer debt, high tax rates, declines in consumer confidence or other factors.

A decline in disposable income and consumer spending has adversely affected demand for the Company’s products, and could further adversely affect demand and Company's results of operations.

The Company operates in competitive industries and markets.

The Company competes with a large number of wholesalers, and retailers of footwear and apparel, and consumer-direct footwear and apparel companies.

Many of the Company’s competitors have greater resources and larger customer and consumer bases, are able, or elect, to sell their products at lower prices, or have greater financial, technical or marketing resources than the Company, particularly its competitors in the apparel and consumer-direct businesses.

The Company competes with a large number of wholesalers, and retailers of footwear and apparel, and direct-to-consumer footwear and apparel companies.

The Company’s competitors may own or license brands with greater name recognition;

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brands in international markets, foreign sourcing of products, shipping and transportation, product imports and exports and the sale of products in foreign markets, any of which could adversely affect the Company’s ability to source, manufacture, distribute and sell its products.

In addition, an economic downturn, whether actual or perceived, a further decrease in economic growth rates or an otherwise uncertain economic outlook in China or any other market in which the Company operates could have an adverse effect on the Company.

The Company cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, worldwide, in China or any other market in which the Company operates, or in its industry.

In addition, an economic downturn, whether actual or perceived, a further decrease in economic growth rates or an otherwise uncertain economic outlook in markets in which the Company operates could have an adverse effect on the Company.

The Company cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, worldwide, in markets in which the Company operates, or in its industry.

The Company is also subject to risks related to doing business in developing countries and economically volatile areas.

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Inventory shortages can impede the Company’s ability to meet demand, adversely affect the timing of shipments to customers and, consequently, adversely affect business relationships with retail customers, diminish brand loyalty and decrease sales.

Conversely, excess inventory can result in lower gross margins if the Company lowers prices in order to liquidate it.

Conversely, excess inventory can result in lower gross margins if the Company lowers prices in order to liquidate inventory.

In addition, inventory may become obsolete as a result of changes in consumer preferences over time.

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If the carrying amounts of one or more of these assets are not recoverable based upon discounted cash flow and market-approach analyses, the carrying amounts of such assets are impaired by the estimated difference between the carrying value and estimated fair value.

An impairment charge could adversely affect the Company’s results of operations, such as the impairment recorded associated with the Sperry trade name recorded in fiscal 2020.

An impairment charge could adversely affect the Company’s results of operations, such as the impairments recorded associated with the Sweaty Betty ® trade name and goodwill in fiscal 2022 and the Sperry ® trade name in fiscal 2022 and 2020.

The Company’s current level of indebtedness could adversely affect the Company by decreasing business flexibility and increasing borrowing costs.

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The Company’s ability to comply with any financial covenants could be materially affected by events beyond its control and the Company may be unable to satisfy any such requirements.

If the Company fails to comply with these covenants, it may need to seek waivers or amendments of such covenants, seek alternative or additional sources of financing or reduce its expenditures.

If the Company fails to comply with these covenants, it may need to seek waivers or amendments of such covenants, seek alternative or additional sources of financing or

reduce its expenditures.

The Company may be unable to obtain such waivers, amendments or alternative or additional financing on favorable terms or at all.

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These agreements also expire by their terms and as the agreements expire, the Company may be forced to stop selling the related products.

Expiration or early termination

by the licensor of any of these license agreements could have an adverse effect on the Company’s business, results of operations and financial position.

Expiration or early termination by the licensor of any of these license agreements could have an adverse effect on the Company’s business, results of operations and financial position.

Changes in employment laws and regulations and other related changes may lead to higher employment and pension costs for the Company.

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Increases in the Company’s overall employment and pension costs could have an adverse effect on the Company’s business, results of operations and financial position.

Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance (“ESG”) practices may impose additional costs on the Company or expose it to new or additional risks.

Companies are facing increasing and frequently evolving scrutiny globally from customers, regulators, investors, employees and other stakeholders related to their ESG practices and disclosure.

Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, board and workforce diversity, labor conditions, human rights, and cybersecurity and data privacy.

Third parties have also developed proprietary ratings or analyses of companies based on certain ESG metrics.

Increased ESG-related compliance costs could result in increases to the Company’s overall operational costs.

Failure to adapt to or comply with regulatory requirements or investor or other stakeholder expectations and standards could negatively impact the Company’s reputation, ability to do business with certain partners, and stock price.

New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

The Company’s ESG initiatives and goals may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future.

As we report on our ESG initiatives or goals, we may be subject to heightened reputational and operational risk and compliance costs related to these matters.

Complying with increased regulations could increase the Company’s costs and adversely impact results of operations.

The Company’s inability or failure to meet, or the perceived failure to meet, such stakeholders’ expectations, as well as adverse incidents, could negatively impact the Company’s stock price, results of operations, or reputation and increase the cost of capital.

The Company’s and its vendors’ databases containing personal information and payment card data of the Company’s customers, employees and other third parties could be breached, which could subject the Company to adverse publicity, litigation, fines and expenses.

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This could result in costly investigations and litigation, civil or criminal penalties, operational changes and negative publicity that could adversely affect the Company’s reputation and its results of operations and financial position.

In addition, if the Company is unable to comply with bank and PCI security standards, it may be subject to fines, restrictions and expulsion from card acceptance programs, which could adversely affect the Company’s consumer-direct operations.

The Company’s operations are subject to environmental and workplace safety laws and regulations, and costs or claims related to these requirements could adversely affect the Company’s business.

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For example, regulatory actions, punitive class actions lawsuits and individual lawsuits have been filed against the Company alleging claims relating to property damage, remediation and human health effects, among other claims, arising from the Company’s operations, including its handling, storage, treatment, transportation and/or disposal of waste.

These claims are discussed in more detail in Note 17 to the consolidated financial statements.

These claims are discussed in more detail in Note 17 to the Company's Consolidated Financial Statements.

Due to the inherent uncertainties of litigation and regulatory proceedings, the Company cannot accurately predict the ultimate outcome of any such proceedings.

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In addition, as data privacy and marketing laws change, the Company may incur additional costs to remain in compliance.

If applicable data privacy and marketing laws become more restrictive at the federal or state level, the Company’s compliance costs may increase, the Company’s ability to effectively engage customers via personalized marketing may decrease which could potentially impact growth.

If applicable data privacy and marketing laws become more restrictive at the federal or state level, the Company’s compliance costs may increase, and the Company’s ability to effectively engage customers via personalized marketing may decrease which could potentially impact growth.

Because the Company processes and transmits payment card information, the Company is subject to the Payment Card Industry (“PCI”) Data Security Standard (the “Standard”), and card brand operating rules (“Card Rules”).

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Such activities may reveal that the Company has failed to comply with the Standard.

If an audit, self-assessment or other test determines that the Company needs to take steps to remediate any deficiencies, such remediation efforts may require it to undertake remediation efforts.

If an audit, self-assessment or other test determines that the Company needs to take steps to remediate any deficiencies, the Company may be required to undertake remediation efforts, which may be costly or could result in periods of time during which the Company cannot accept payment cards.

In addition, even if the Company complies with the Standard, there is no assurance that it will be protected from a security breach.

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and international data privacy and cybersecurity laws and regulations, which may impose fines and penalties for noncompliance and may have an adverse effect on the Company's operations.

For example, the General Data Protection Regulation ("GDPR"), which applies in all European Union member states introduced new data protection

requirements in the European Union and substantial fines for breaches of the data protection rules.

For example, the General Data Protection Regulation ("GDPR"), which applies in all European Union member states, introduced new data protection requirements in the European Union and substantial fines for breaches of the data protection rules.

GDPR increases our responsibility and potential liability in relation to personal data that we collect, process and transfer, and we have put in place additional mechanisms designed to ensure compliance with the new data protection rules.

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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