ABERCROMBIE & FITCH CO /DE/
For the period ended Jan 31, 2026. Filed Mar 26, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Mar 26, 2026
ANF$149.54-5.1%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2025-02-01; filed 2025-03-31.
0001018840-25-000013
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2026-01-31; filed 2026-03-26.
0001018840-26-000012
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 165 previous paragraphs and 159 current paragraphs.
95 unchanged; 47 reworded; 16 added; 21 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
•Effectively identifying, evaluating, and competing on new and emerging digital selling platforms and commerce models, including social commerce platforms and AI‑enabled or agentic shopping experiences;
Current report
Because we primarily serve individual consumers, our business is sensitive to changes in consumer confidence and discretionary spending levels. In addition, as a global business that sources a significant portion of our merchandise from outside the United States and generates revenue across domestic and international markets, we are exposed to macroeconomic conditions, trade policies, and currency fluctuations that may affect costs and demand across regions.
Current report
Our retail stores, corporate offices, distribution centers, and digital operations, as well as the operations of our vendors and manufacturers, are vulnerable to disruption from natural disasters and other adverse weather events; negative climate patterns; public health crises; geopolitical uncertainty or unrest, such as acts of terrorism, war, civil disturbance or disobedience, and other political instability; power interruptions or infrastructure disruptions; and other catastrophic events. In the past, events of this nature, including public health crises and geopolitical conflict, have disrupted commerce, and future occurrences of such events, whether domestic or international, could similarly disrupt commerce and adversely affect our operations.
Current report
Events of this nature may also undermine consumer confidence and consumer spending, and adversely affect our operating results by causing, among other things, loss of customers and revenues due to store closures or an inability to respond to customer demand, increased costs to meet consumer demand (which we may not be able to pass on to customers), reduced consumer demand or confidence, and changes in consumers’ discretionary spending habits. In addition, historically, our operations have been seasonal, and natural disasters, adverse weather conditions, or unseasonable weather patterns occurring , may diminish demand for our seasonal merchandise and influence consumer preferences, fashion trends, consumer traffic, and shopping habits.
Current report
•Reduced consumer demand or customer traffic to our stores in certain regions due to actual or perceived risks arising from geopolitical instability, armed conflict, or other catastrophic events;
Current report
•the substantial investments of time and resources we make to operate in international markets may not achieve acceptable returns, and sustained declines in revenue or profitability in one or more international regions or operating segments could result in store closures, divestitures, restructuring costs, or impairment losses, all of which could adversely impact our business, profitability, and results of operations; for example, in March 2026, we announced that we are conducting a review of strategic alternatives for our APAC region.
Current report
Our reputation also depends on the success of our corporate social responsibility and sustainability initiatives, which require Company-wide coordination and alignment on managing related risks and costs and may ultimately not be successful. Increased focus by governmental and nongovernmental organizations, regulators, investors, employees, and consumers on matters such as climate change, human capital, labor, and risk oversight heightens the risk of negative public reaction, public backlash, or pressure regarding our disclosures, initiatives, products, or practices related to sustainability or social issues, which could adversely affect our reputation, business operations, and financial results. These risks also include increased regulatory and stakeholder pressure to expand disclosures, make commitments, set targets, or establish additional goals and take actions to meet them, which could expose us to business, legal, market, reputational, operational, and execution risks and costs. If we announce such initiatives or goals, we may fail, or be perceived to fail, to appropriately set, timely meet, or report our progress, or act responsibly with respect to such initiatives or goals. In addition, divergent stakeholder perspectives regarding environmental, social, and governance, and other corporate responsibility matters, may result in criticism of the nature, scope, or revision of our initiatives or goals, and we may not be able to satisfy all expectations, potentially leading to negative publicity, consumer backlash (including boycotts), and adverse impacts on our reputation, results of operations, financial condition, and cash flows.
Current report
We have made and expect to continue to make significant investments of capital, time, and management attention to modernize our core systems, and the effectiveness of these investments may be less predictable than others and may fail to deliver the anticipated benefits or returns. As part of these efforts, we began a multi‑year process to upgrade our merchandising ERP system and to implement a new human capital management system. In March 2026, we went live with a new merchandising ERP system. The transition to the new system temporarily impacted operations, including limiting inventory receipts and movement across the business, which is expected to unfavorably affect net sales during the first quarter of Fiscal 2026. We also expect to incur additional implementation‑related costs, which are expected to unfavorably impact our operating margin during the first quarter of Fiscal 2026.
Current report
Additional system upgrades and transformation activities are expected to continue in phases over the next few years. System upgrades and implementations involve inherent risks, including system disruptions, inaccurate system information, changes to internal control processes, increased operating and administrative costs, demands on management time, and challenges with user adoption. Any failure, disruption, or delay in implementing or operating new or upgraded systems, particularly during peak selling periods, could adversely impact our ability to manage our inventory, fulfill customer orders, or it may cause information to be lost or delayed, including data related to customer orders. Such investments may not provide the anticipated benefits or desired rates of returns.
Current report
Use of artificial intelligence technologies by us and our service providers could subject us to operational, technological, and business risks that could adversely affect our business.
Current report
The use of rapidly evolving technologies, such as AI technologies, by us and our third-party service providers presents risks and challenges to our business. Using AI and other machine learning technologies may expose us to unintended outcomes, liability, reputational harm, particularly if such technology produces errors or hallucinations, results in content that is biased, infringes on intellectual property, or otherwise does not function as intended. Moreover, with the use of certain AI and other machine learning technologies, including those licensed from third parties, there may be a lack of transparency regarding how such technologies generate outputs, and we may not be able to fully validate their accuracy or reliability. To the extent that we rely on AI‑enabled tools to support operational processes or decision‑making, limitations in model performance, data quality, or human oversight could adversely affect our operations, customer experience, or financial performance.
Current report
The use of AI and other machine learning technologies, by us or our service providers, in connection with the creation or development of intellectual property may present challenges in asserting ownership over the resulting output. Further, the use of such technologies may increase the risk that confidential information becomes accessible by third parties or results in legal or regulatory exposure. We also rely on third-party service providers that may use AI in their business activities, and failures by one or more of such service providers to meet our expectations may have an adverse effect on our operations or financial condition.
Current report
Recent trade policies and related uncertainty, including tariffs imposed on countries from which we source a significant portion of our merchandise and raw materials, have created a dynamic and unpredictable trade landscape that has adversely affected, and could continue to adversely affect, our business. For example, in 2025, the U.S. imposed, modified, and rescinded certain tariffs, including those pursuant to the International Emergency Economic Powers Act (“IEEPA”). In February 2026, the U.S. Supreme Court held that IEEPA did not authorize the imposition of such tariffs, and subsequently the U.S. administration continued to impose, modify, and propose new tariffs pursuant to various statutes and trade authorities, including the imposition of a 10% global tariff pursuant to Section 122 of the Trade Act of 1974. While certain tariffs have been struck down, modified, or replaced, other tariffs remain in effect, and additional tariff programs may be imposed in the future through various statutes and trade authorities. In addition, there can be no assurance that any duties paid under tariffs that are subsequently struck down, including those imposed pursuant to the IEEPA, will be refunded in whole or in part, or that any such refunds would be received on a timely basis, if at all.
Current report
In addition, certain countries have imposed retaliatory tariffs on U.S. exports, and other U.S. trading partners may take additional retaliatory measures or modify their trade or business policies in response to changes in U.S. trade policy, which could further disrupt global trade flows and adversely affect our business.
Current report
It is likely that tariffs and international trade arrangements will continue to change, potentially without warning and to an extent or duration that is difficult to predict. Changing tariff rates and shifting trade policies have created, and may continue to create, significant uncertainty for suppliers, consumers, and us, and these risks may be heightened if trade tensions between the U.S. and other countries worsen. If tariffs on goods from countries from which we source products are increased or maintained at elevated levels, our merchandise costs would remain higher relative to typical costs, which could negatively impact our margins and consumer demand for our products. In response to increased costs, we may choose to adjust pricing or promotions or take other actions, which could adversely affect customer demand or our competitive position. Moreover, tariff-related cost pressures and supply chain disruptions may lead to reputational harm if we are unable to deliver our products or services on expected timelines.
Current report
Although such changes have implications across the entire industry, we may fail to effectively adapt to and manage the adjustments in strategy that would be necessary in response to these developments. We continue to evaluate and implement measures to mitigate the impact of current and potential tariffs, including managing product costs, considering operating expense reductions, and pursuing average unit retail (“AUR”) growth. However, these mitigation efforts may take time to implement and take effect, may involve additional costs, may not be accepted by consumers, and may not be sufficient to offset the full impact of tariffs.
Removed paragraphs (21)
Previous report
The impact of war, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience could have a material adverse impact on our business.
Previous report
In the past, the impact of war, acts of terrorism, mass casualty events, social unrest, civil disturbance or disobedience and the associated heightened security measures taken in response to these events have disrupted commerce. Further events of this nature, domestic or abroad, including international and domestic unrest, may disrupt commerce and undermine consumer confidence and consumer spending by causing a decline in traffic, store closures and a decrease in digital demand adversely affecting our operating results.
Previous report
Furthermore, the existence or threat of any other unforeseen interruption of commerce, including as a result of geopolitical or armed conflict and the possible interference with international trade, supplier deliveries, freight costs, or tariffs, could negatively impact our business by interfering with the availability of raw materials or our ability to obtain merchandise from foreign manufacturers. With a substantial portion of our merchandise being imported from foreign countries, failure to obtain merchandise from our foreign manufacturers or substitute other manufacturers, at similar costs and in a timely manner, could adversely affect our operating results and financial condition.
Previous report
Our retail stores, corporate offices, distribution centers, infrastructure projects and digital operations, as well as the operations of our vendors and manufacturers, are vulnerable to disruption from natural disasters, such as hurricanes, tornadoes, floods, earthquakes, extreme cold events, unseasonably warm weather, and other adverse weather events; negative climate patterns, such as those in domestic and global water-stressed regions; public health crises, such as pandemics and epidemics; political crises, such as terrorists attacks, war, geopolitical uncertainty, labor, unrest, and other political instability (including, without limitation, the ongoing conflict between Russia and Ukraine and the conflict in the Middle East); significant power interruptions or outages; and other unexpected, catastrophic events. These events could disrupt the operations of our corporate offices, global stores and supply chain and those of our third-party partners, including our vendors and manufacturers. In addition to immediate impacts on global operations, these events could result in a reduction in the availability and quality, and as a result pricing volatility of, raw materials used to manufacture our merchandise, delays in merchandise fulfillment and deliveries, loss of customers and revenues due to store closures and inability to respond to customer demand, increased costs to meet consumer demand (which we may not be able to pass on to customers), reduced consumer confidence or changes in consumers’ discretionary spending habits.
Previous report
•Our ability to attract customers to our stores, given the risks, or perceived risks, of gathering in public places;
Previous report
•Our ability to preserve liquidity to be able to take advantage of market conditions during periods of uncertainty and instability in the global financial markets; and
Previous report
Historically, our operations have been seasonal, and natural disasters or unseasonable weather conditions, may diminish demand for our seasonal merchandise and could also influence consumer preferences and fashion trends, consumer traffic and shopping habits. In addition, to the extent natural disasters cause physical losses to our stores, distribution centers or offices, we may incur costs that exceed our applicable insurance coverage for any necessary repairs to damages or business disruption.
Previous report
•maintaining good labor relations with individual associates and groups of associates;
Previous report
•avoiding work stoppages or other labor-related issues in our European stores, where some associates are represented by workers’ councils and unions;
Previous report
•substantial investments of time and resources in our global operations may not result in achievement of acceptable levels of returns; for example, we have experienced year-over-year declines in revenues from our global operations; and
Previous report
•continued and sustained declines in our global revenues could lead to store closures, restructuring costs, and impairment losses, all of which could adversely impact our business, profitability, and results of operations.
Previous report
Our failure to appropriately address environmental, social, and governance (ESG) topics could have a material adverse impact on our reputation and, as a result, our business.
Previous report
There is increased focus from certain government regulators, investors, customers, associates, business partners and other stakeholders concerning ESG matters.
Previous report
The expectations related to ESG matters continue to rapidly evolve and diverge. The focus by investors and other stakeholders on the ESG practices of publicly traded companies, like us, has included or may in the future include expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, and could expand the nature, scope, and complexity of matters that we are required to control, assess and report. Furthermore, if we announce certain initiatives and goals related to ESG matters we could fail, or be perceived to fail, to accurately set, meet or report our progress on such initiatives and goals and/or we could fail, or be perceived to fail, to act responsibly in our ESG efforts. In addition, we could be criticized for the speed of adoption of such initiatives and goals, or the scope of such initiatives or goals. As a result, we could suffer negative publicity and our reputation could be adversely impacted, which in turn could have a negative impact on investor perception and our products' acceptance by consumers. In addition, in recent years there has been a rise in the prevalence of the anti-ESG movement, and we could be criticized for the scope or nature of our ESG initiatives and goals or for any revisions to our goals. We may not be able to meet the diverging expectations and perspectives on these topics, and we could be subjected to negative responses by consumers (such as boycotts or negative publicity campaigns) that could adversely affect our reputation, results of operations, financial condition and cash flows. This may also impact our ability to attract and retain talent to compete in the marketplace
Previous report
There is also uncertainty regarding the implementation of laws, regulations, and policies related to ESG and global environmental sustainability matters, including disclosure obligations and reporting on such matters, and appropriately responding to potentially competing and/or contradictory regulatory requirements and expectations in the jurisdictions in which we operate. Changes in the legal or regulatory environment affecting ESG disclosure, responsible sourcing, supply chain transparency, or environmental protection, among others, including regulations to limit carbon dioxide and other greenhouse gas emissions, to discourage the use of plastic or to limit or to impose additional costs on commercial water use may result in increased costs for us and our business partners, all of which may negatively impact our results of operations, financial condition and cash flows.
Previous report
We regularly evaluate our information technology systems and requirements to ensure appropriate functionality and use in response to business demands. For example, in 2022, we began the multi-year process of upgrading our ERP system. We are continuing to execute this plan in Fiscal 2025 and currently anticipate implementation in Fiscal 2026. We are aware of the inherent risks associated with replacing and modifying these systems, including system disruptions, inaccurate system information, and user acceptance and understanding. Any material disruption or slowdown of our systems, including a disruption or slowdown caused by our failure to successfully upgrade or replace our systems could impact our ability to effectively manage and maintain our inventory, to ship products to customers on a timely basis, and may cause information to be lost or delayed, including data related to customer orders. Such a loss or delay, especially if the disruption or slowdown occurred during our peak selling seasons, could have a material adverse effect on our results of operations. In addition, the upgrading of our ERP system requires significant financial and operational investments, and such investments may not provide the anticipated benefits or desired rates of returns.
Previous report
In addition, other countries may change their business and trade policies in anticipation of or in response to the U.S.’s increased import tariffs and other changes in U.S. trade policy and regulations already enacted or that may be enacted in the future.
Previous report
If we identify a material weakness in our internal control over financial reporting, fail to remediate a material weakness, or fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
Previous report
The effectiveness of any controls or procedures is subject to certain inherent limitations, and as a result, there can be no assurance that our controls and procedures will prevent or detect misstatements. Even an effective system of internal control over financial reporting will provide only reasonable, not absolute, assurance with respect to financial statement preparation. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Previous report
If we fail to remediate a material weakness, or are otherwise unable to maintain effective internal control over financial reporting, management could be required to expend significant resources. Additionally, we could fail to meet our public reporting requirements on a timely basis, and be subject to fines, penalties, investigations or judgements, all of which could negatively affect investor confidence and adversely impact our stock price.
Previous report
The Organization for Economic Co-operation and Development (“OECD”), along with members of its inclusive framework, have, through the Base Erosion and Profit Shifting project, proposed changes to numerous long-standing tax principles (“Pillar Two Rules”). Although the U.S. effectively withdrew from the OECD global tax agreement in January 2025, other countries where the Company does business, including the U.K. and Germany, have enacted legislation implementing Pillar Two Rules, which are effective from January 1, 2024. The implementation of the Pillar Two Rules in each jurisdiction in which the Company operates did not have a material impact on its effective tax rate for Fiscal 2024, and the Company does not project a material impact on the effective tax rate for Fiscal 2025.
Reworded paragraphs (47)
Previous wording
We are also vulnerable to factors affecting inventory flow and availability of inventory. Impacts may be caused by natural disasters, unanticipated climate patterns and events, or inventory shrinkage due to theft (including by our employees, customers, or through organized retail crime). Such events may significantly impact anticipated customer demand or may impact availability of our inventory. If we are not able to adjust appropriately to such factors, our inventory management may be negatively affected, which could adversely impact our performance and our reputation.
Current wording
We are also vulnerable to factors affecting inventory flow and availability of inventory. Impacts may be caused by natural disasters, unanticipated climate patterns and events, systems disruptions or outages, or inventory shrinkage due to theft (including by our employees, customers, or through organized retail crime). Such events may significantly impact anticipated customer demand or may impact availability of our inventory. If we are not able to adjust appropriately to such factors, our inventory management may be negatively affected, which could adversely impact our performance and our reputation.
Previous wording
The sale of apparel, personal care products and accessories for men, women and kids is a highly competitive business with numerous participants, including individual and chain specialty apparel retailers, local, regional, national and global department stores, discount stores, digitally-native brands, and online-exclusive businesses. Proliferation of the digital channel has encouraged the entry of many new competitors and an increase in competition from established companies. These increases in competition could reduce our ability to retain and grow sales, resulting in an adverse impact to our operating results and business.
Current wording
The sale of apparel, personal care products and accessories for men, women and kids is a highly competitive business with numerous participants, including individual and chain specialty apparel retailers, local, regional, national and global department stores, discount stores, fast-fashion retailers, digitally-native brands, and online-exclusive businesses. Fast fashion, value fashion and off-price retailers have shifted customer expectations of pricing for well-known brands and the proliferation of the digital channel and the rise in popularity of social commerce has encouraged the entry of many new competitors and an increase in competition from established companies. These increases in competition could reduce our ability to retain and grow sales, resulting in an adverse impact to our operating results and business.
Previous wording
•Effectively marketing our products to consumers across varying demographic markets, including through social media platforms which have become increasingly important in order to stay connected to our customers, as our digital sales penetration has increased. Individual country laws and regulations governing the use and availability of these social media platforms continue to evolve, and if we are unable to effectively use social media platforms as marketing tools our ability to retain or acquire customers and our financial condition may suffer;
Current wording
•Effectively marketing our products to consumers across varying demographic markets, including through social media platforms, search engines, and emerging AI-enabled discovery;
Previous wording
•Effectively establishing and maintaining relationships with key brand representatives, influencers, athletes, and other celebrities as part of our marketing strategy to promote our brands and products;
Current wording
•Effectively establishing and maintaining relationships with organizations, key brand representatives, influencers, athletes, and other celebrities as part of our marketing strategy to promote our brands and products;
Previous wording
•Retaining customers, including our loyalty club members, and the resulting increased marketing costs to acquire new customers;
Current wording
•Retaining customers, including our loyalty club members, and the marketing costs to do so and to acquire new customers;
Previous wording
•Identifying and assessing disruptive innovation, by existing or new competitors, that could alter the competitive landscape by: improving the customer experience and heightening customer expectations; transforming supply chain and corporate operations through changes to digital technologies and innovations, including the use of artificial intelligence (“AI”) and machine learning; and enhancing management decision-making through use of data analytics to develop new, consumer insights.
Current wording
•Identifying and assessing disruptive innovation, by existing or new competitors, that could alter the competitive landscape by: improving the customer experience and heightening customer expectations; transforming supply chain and corporate operations through changes to digital technologies and innovations, including the use of AI and machine learning; and enhancing management decision-making through use of data analytics to develop new consumer insights.
Previous wording
In light of the competitive challenges we face, we may not be able to compete successfully in the future.
Current wording
In light of the competitive challenges we face, we may not be able to compete successfully in the future. Additionally, increases in the number or strength of our competitors could reduce our sales, which in turn could have a material adverse effect on our results of operations and financial condition.
Previous wording
Uncertainty as to, and the state of, the global economy and global financial condition could have an adverse effect on our operating results and business. Our business is subject to factors that are impacted by worldwide economic conditions, including heightened inflation levels (which has occurred), unemployment levels, consumer credit availability, consumer debt levels, reductions in consumer net worth based on declines in the financial, residential real estate and mortgage markets, bank failures, sales and personal income tax rates, fuel and energy prices, global food supplies, rising or uncertain interest rates, new increased tariffs, trade disputes, consumer confidence in future economic and political conditions, consumer perceptions of personal well-being and security, the value of the U.S. dollar versus foreign currencies, geopolitical conflicts, and other macroeconomic factors. Changes in global economic and financial conditions could impact our ability to fund growth and our ability to access external financing in the credit and capital markets.
Current wording
Uncertainty as to, and the state of, the global economy and global financial condition could have an adverse effect on our operating results and business. Our business is subject to factors that are impacted by worldwide economic conditions, including heightened inflation levels (which has occurred), unemployment levels, consumer credit availability, consumer debt levels, reductions in consumer net worth based on declines in the financial, residential real estate and mortgage markets, bank failures, sales and personal income tax rates, fuel and energy prices, global food supplies, rising or uncertain interest rates, new or increased tariffs, trade disputes, consumer confidence in future economic and political conditions, consumer perceptions of personal well-being and security, the value of the U.S. dollar versus foreign currencies, geopolitical conflicts, and other macroeconomic factors. For example, during Fiscal 2025, the U.S. announced a universal baseline tariff on all U.S. imports, plus additional country-specific tariffs for select countries, including the countries from which we source a predominant portion of our merchandise. As a result, we incurred approximately $90 million of net tariff expense, or 170 basis points as a percent of net sales for Fiscal 2025, which negatively impacted our operating profit in Fiscal 2025. See “Changes in tariff policy regarding merchandise produced in, and raw materials sourced from, certain countries have and could continue to adversely affect our business” Other changes in global economic and financial conditions could impact our ability to fund growth and our ability to access external financing in the credit and capital markets.
Previous wording
Our stores are primarily located in shopping malls and other shopping centers. Our sales at these stores are partially dependent upon the volume of traffic in those shopping centers and the surrounding area which, for some centers, has been in decline. Our stores may benefit from the ability of a shopping center’s other tenants and area attractions to generate consumer traffic in the vicinity of our stores and the continuing popularity of the shopping center. We cannot control the loss of a significant tenant in a shopping mall or area attraction, the development of new shopping malls in the U.S. or around the world, the availability or cost of appropriate locations, the success of individual shopping malls, or the increasing impact of digital channels on shopping mall traffic and there is competition with other retailers for prominent locations.
Current wording
Our stores are primarily located in shopping malls and other shopping centers. Our sales at these stores are partially dependent upon the volume of traffic in those shopping centers and the surrounding area which, for some centers, has been in decline. Our stores may benefit from the ability of a shopping center’s other tenants and area attractions to generate consumer traffic in the vicinity of our stores and the continuing popularity of the shopping center. We cannot control the loss of an “anchor” tenant or other significant tenant in a shopping mall or area attraction, the development of new shopping malls in the U.S. or internationally, the availability or cost of appropriate locations, the success of individual shopping malls, or the increasing impact of digital channels on shopping mall traffic. Additionally, we face competition with other retailers for prominent locations.
Previous wording
The impact of natural disasters, negative climate patterns, public health crises, political crises and other unexpected and catastrophic events could result in interruptions to our operations, as well as to the operations of our third-party partners, and have a material adverse impact on our business.
Current wording
The impact of natural disasters, negative climate patterns, public health crises, geopolitical tension, armed conflict, acts of terrorism, social unrest, civil disturbance or disobedience, political crises, and other unexpected and catastrophic events could result in interruptions to our operations, as well as to the operations of our third-party partners, and have a material adverse impact on our business.
Previous wording
•Supply chain delays due to closed or reduced capacity for trade routes and factories, reduced workforces, or scarcity of raw materials;
Current wording
These events could disrupt the operations of our corporate offices, global stores, and supply chain and those of our third-party partners, including our vendors and manufacturers. In addition to impacts on global operations, events of this nature could result in a reduction in the availability and quality, and as a result pricing volatility of, raw materials used to manufacture our merchandise, delays in merchandise fulfillment and deliveries, supply chain delays due to closed or reduced-capacity for trade routes and factories, reduced workforces, or scarcity of raw materials, as well as increased fuel and energy costs, which could further increase transportation and freight expenses. With a substantial portion of our merchandise being imported from foreign countries, any failure to obtain merchandise from our foreign manufacturers, or to do so at similar costs and in a timely manner, or to identify suitable substitute manufacturers, could adversely affect our operating results and financial condition.
Previous wording
Other factors that would negatively impact our ability to successfully operate due to the impact of natural disasters, negative climate patterns, public health crises, political crises, significant power interruptions or outages, and other unexpected, catastrophic events and other unexpected and other catastrophic events include, but are not limited to:
Current wording
Other factors that would negatively impact our ability to successfully operate due to the impact of these types of events include, but are not limited to:
Previous wording
•Physical losses to our stores, distribution centers or offices that may incur costs that exceed our applicable insurance coverage for any necessary repairs to damages or business disruptions caused by natural disasters or other unexpected and catastrophic events;
Current wording
•Physical losses to our stores, distribution centers, or offices that may incur costs that exceed our applicable insurance coverage for any necessary repairs to damages or business disruptions;
Previous wording
•Our ability to keep our stores open if there are severe weather or climate conditions, stay-at-home orders, social distancing requirement, travel restrictions, or other concerns related to physical safety;
Current wording
•Temporary or prolonged store closures, including in situations of severe weather or climate conditions, stay-at-home orders, travel restrictions, impacts of armed conflict, or other concerns related to physical safety.
Previous wording
•Difficulty accessing debt and equity capital on attractive terms, or at all, during periods of uncertainty and instability in the global financial markets, or a deterioration in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities.
Current wording
•Constraints on our liquidity and our ability to access debt or equity capital on attractive terms, or at all, during periods of uncertainty and instability in the global financial markets, which may affect our ability to fund business operations or address maturing liabilities.
Previous wording
While we have successfully executed certain goals in our Always Forward Plan, our continued ability to effectively execute on and maintain the results of our Always Forward Plan is subject to various risks and uncertainties as described herein. In addition, we may modify or adjust future long-term strategies to meet changes in our business environment.
Current wording
While we have successfully executed long-term initiatives, our continued ability to effectively execute on and maintain the results of our long-term business strategy is subject to various risks and uncertainties as described herein. In addition, we may modify or adjust future long-term strategies to meet changes in our business environment.
Previous wording
While we believe that our successful execution and ability to attain certain established goals and targets of our Always Forward Plan led to long-term revenue growth and profitability, there is no assurance regarding the extent to which we will realize the anticipated objectives or sustain the financial objectives, if at all, or regarding the timing of such anticipated benefits. Our failure to realize the anticipated objectives or sustain the financial objectives established in our long-term strategic plans, which may be due to our inability to execute established long-term target or goals, changes in consumer demand, competition, macroeconomic conditions (including inflation or tariffs), retention of key talent, and other risks described herein, could have a material adverse effect on our business.
Current wording
While we believe that our successful execution and ability to attain certain established goals and targets have contributed to long-term revenue growth and profitability, there is no assurance regarding the extent to which we will realize the anticipated objectives or sustain the financial objectives, if at all, or regarding the timing of such anticipated benefits. Our failure to realize the anticipated objectives or sustain financial objectives established in our long-term strategic plans, which may be due to our inability to execute established long-term target or goals, changes in consumer demand, competition, macroeconomic conditions (including inflation or tariffs), retention of key talent, and other risks described herein, could have a material adverse effect on our business.
Previous wording
In order to compete in this highly competitive and constantly evolving industry, at times, we may enter into new strategic partnerships with third parties to expand our global brand reach, or we may launch new concepts or brands to expand our portfolio. Such strategic partnerships may include wholesale, franchise, or licensing arrangements in which we license our brands and intellectual property for use on products produced, marketed and/or sold by third parties, and licensing arrangements in which we license intellectual property from third parties. Such arrangements are subject to additional risks, including our ability to comply with obligations under license agreements that we have with third-party licensors, the abrupt termination of such arrangements, or actions taken by third-party wholesale, franchise, or licensee partners that may materially diminish the value of our intellectual property or our brands’ reputations.
Current wording
In order to compete in this highly competitive and constantly evolving industry, at times, we have entered into and plan to continue to enter into new strategic partnerships with third parties to expand our global brand reach, and we may launch new concepts or brands to expand our portfolio. Such strategic partnerships may include sponsorship, wholesale, franchise, or licensing arrangements in which we license our brands and intellectual property for use on products produced, marketed and/or sold by third parties, and licensing arrangements in which we license intellectual property from third parties. Such arrangements are subject to additional risks, including our ability to comply with obligations under the agreements that we have with third parties, the abrupt termination of such arrangements, or actions taken by third-party wholesale, franchise, licensees, or other partners that may materially diminish the value of our intellectual property or our brands’ reputations.
Previous wording
Our inability to effectively conduct business in global markets, including as a result of legal, tax, regulatory, political and economic risks could have a material adverse impact on our business.
Current wording
Our inability to effectively conduct business in international markets, including as a result of operational, legal, tax, regulatory, political, and economic risks could have a material adverse impact on our business.
Previous wording
We operate on a global basis and are subject to risks associated with operating in different global markets that could have a material adverse effect on our reputation, business and results of operations if we fail to address them.
Current wording
We operate on a global basis and are subject to risks associated with operating in international markets that could have a material adverse impact on our business. Such risks include, but are not limited to, the following:
Previous wording
•supporting global growth by successfully implementing local customer and product-facing teams and certain corporate support functions at our regional headquarters located in Shanghai, China and London, United Kingdom;
Current wording
•supporting global growth by successfully executing our commercial strategy through local customer- and product-facing teams and certain corporate support functions at our regional headquarters located in Shanghai, China and London, United Kingdom;
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•hiring, training and retaining qualified personnel;
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•hiring, training, and retaining qualified personnel and maintaining effective labor relations, including in regions where associates are represented by workers’ councils and unions;
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•political, civil and social unrest, such as the conflict between Russia and Ukraine or conflict in the Middle East;
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•political, civil and social unrest, and instability;
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•managing foreign currency exchange rate risks effectively;
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•managing foreign currency exchange rate risks effectively; and
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We are subject to domestic laws related to global operations, including the Foreign Corrupt Practices Act, in addition to the laws of the foreign countries in which we operate. If any of our overseas operations, or our associates or agents, violate such laws, we could become subject to sanctions or other penalties that could negatively affect our reputation, business and operating results.
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We are subject to U.S. laws related to global operations, including the Foreign Corrupt Practices Act, as well as the laws of the foreign countries in which we operate. Violation of such laws by our overseas operations, associates, or agents, could result in sanctions, penalties, or reputational harm, which could adversely affect our business and operating results.
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Our failure to realize the anticipated benefits of our recent transition to a regional-based organizational model could have a negative impact on our business.
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Our failure to realize the anticipated benefits of our transition to a regional-based organizational model could have a negative impact on our business.
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During the second quarter of Fiscal 2023, to drive ongoing brand growth and leverage the knowledge and experience of its regional teams, the Company reorganized its structure and now primarily manages its business on a geographic basis, consisting of three reportable segments: Americas; Europe; the Middle East and Africa (EMEA) and Asia-Pacific (APAC). As a result of our regional-based organizational model, we have decentralized execution of our commercial strategy in each international region from our global home office to our regional headquarters located in Shanghai, China and London, United Kingdom. Failure to realize the anticipated benefits of our recent transition to a regional-based organizational model could have a negative impact on our business. In addition, realization of the anticipated benefits of this new regional-based organizational model is dependent on the effectiveness of this new operating structure.
Current wording
During Fiscal 2023, to drive ongoing brand growth and leverage the knowledge and experience of its regional teams, the Company reorganized its structure and now primarily manages its business on a geographic basis, consisting of three reportable segments: Americas; EMEA, and APAC. As a result of our regional-based organizational model, we have decentralized execution of our commercial strategy in each international region from our global home office to our regional headquarters located in Shanghai, China and London, United Kingdom. Failure to realize the anticipated benefits of our recent transition to a regional-based organizational model could have a negative impact on our business. In addition, realization of the anticipated benefits of this new regional-based organizational model is dependent on the effectiveness of this new operating structure.
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•Our position or perceived lack of position on ESG topics, public policy or other similar issues and any perceived lack of transparency about those matters.
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•Our position or perceived lack of position on corporate social responsibility topics, public policy or other similar issues and any perceived lack of transparency about those matters.
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In addition, in recent years there has been an increase in media platforms, particularly, social media and our use of social media platforms is an important element of our omnichannel marketing efforts. For example, we maintain various social media accounts for our brands, including Instagram, TikTok, Facebook, X (f/k/a Twitter), SnapChat, and Pinterest accounts. Negative publicity or actions taken by individuals that we partner with, such as brand representatives, influencers or our associates, that fail to represent our brands in a manner consistent with our brand image or act in a way that harms their reputation, whether through our social media accounts or their own, could harm our brand reputation and materially impact our business. Social media also allows for anyone to provide public feedback, which could influence perceptions of our brands and reduce demand for our merchandise.
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In addition, in recent years there has been an increase in media platforms, particularly, social media and our use of social media platforms is an important element of our omnichannel marketing efforts. As social media continues to be an important channel for customer engagement, our brands’ interactions may be subject to heightened public scrutiny. Given the unpredictable nature of consumer reactions to social media messaging, our efforts may not resonate as intended and could result in negative public attention or reputational harm. For example, we maintain various social media accounts for our brands, including Instagram, TikTok, Facebook, X (f/k/a Twitter), SnapChat, and Pinterest accounts. Negative publicity or actions taken by individuals that we partner with, such as brand representatives, influencers or our associates, that fail to represent our brands in a manner consistent with our brand image or act in a way that harms their reputation, whether through our social media accounts or their own, could harm our brand reputation and materially impact our business. Social media also allows for anyone to provide public feedback, which could influence perceptions of our brands and reduce demand for our merchandise.
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If our information technology systems are disrupted or cease to operate effectively, it could have a material adverse impact on our business.
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If our information technology systems are disrupted or fail to operate effectively, or if we are unable to successfully implement new technology, including significant system upgrades, our business and results of operations could be adversely affected.
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We rely heavily on our own information technology systems and on third-party information technology systems in both our customer-facing and corporate operations to: operate our websites and mobile apps; record and process transactions; respond to customer inquiries; manage inventory; purchase, sell and ship merchandise on a timely basis; maintain cost-efficient operations; create a customer relationship management database through our loyalty programs; and complete other customer-facing and business objectives. Given the significant number of transactions that are completed annually, it is vital to maintain constant operation of our computer hardware, telecommunication systems and software systems, and maintain data security. Despite efforts to prevent such an occurrence, our information technology systems may be vulnerable, from time to time, to damage or interruption from computer viruses, power interruptions or outages or other system failures, third-party intrusions, inadvertent or intentional breaches by our associates, third-party service providers or business partners, or threat actors, and other technical malfunctions. Further, the sophistication, availability and use of AI by threat actors present an increased level of risk. If our systems are damaged, fail to function properly, or are outdated in comparison to those of our competition, we may have to make monetary investments to repairs or replace the systems and we could endure delays in our operations. We have made and expect to continue to make significant monetary investments and devote significant attention to modernizing our core systems, and the effectiveness of these investments can be less predictable than others and may fail to provide the expected benefits. Additionally, we rely on services provided by third-party vendors and platforms for certain information technology processes, including point-of-sale, digital operations, inventory management, supply chain, planning, sourcing, merchandising, payroll, scheduling, financial reporting, and managing third-party relationships, including our brand representatives and influencer network, and our wholesale, franchise licensing, or marketplace partners. This reliance on third parties makes our operations vulnerable to a failure by any one of these parties to perform adequately or maintain effective internal controls.
Current wording
We rely heavily on our own information technology systems and on third-party systems in both our customer-facing and corporate operations to operate our websites and mobile apps; process transactions; respond to customer inquiries; manage inventory; purchase, sell, and ship merchandise; maintain our loyalty programs; manage our workforce; and support other customer-facing and business objectives. Given the significant number of transactions completed annually, the effective and secure operation of our computer hardware, telecommunications, and software systems is critical. Despite efforts to prevent such occurrences, our systems may be vulnerable from time to time to damage or interruption resulting from computer viruses, power interruptions or outages, system failures, third-party intrusions, inadvertent or intentional breaches by our associates, third-party service providers or business partners, or threat actors, and other technical malfunctions. The increasing sophistication, availability, and use of AI by threat actors further elevates these risks. If our systems are damaged, fail to function properly, or become outdated relative to those of our competitors, we may be required to make significant investments to repair or replace such systems and could experience operational delays or disruptions.
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In the standard course of business, we receive and maintain confidential information about customers, associates and other third parties. In addition, third parties also receive and maintain certain confidential information. The protection of this information is critical to our business and subjects us to numerous laws, rules and regulations domestically and in foreign jurisdictions. The retail industry in particular has been the target of many cyber-attacks and it is possible that an individual or group could defeat our security measures, or those of a third-party service provider or business partner, and access confidential information about our business, customers and associates. Further, like other companies in the retail industry, during the ordinary course of business, we and our vendors have in the past experienced, and we expect to continue to experience, cyber-attacks of varying degrees and types, including phishing, and other attempts to breach, or gain unauthorized access to, our systems. To date, cyber-attacks have not had a material impact on our operations, but we cannot provide assurance that cyber-attacks will not have a material impact in the future.
Current wording
In the standard course of business, we receive and maintain confidential information about customers, associates and other third parties. In addition, third parties also receive and maintain certain confidential information. Protection of this information is critical to our business and may subject us to laws, rules and regulations domestically and in foreign jurisdictions. The retail industry in particular has been the target of many cyber-attacks and it is possible that an individual or group could defeat our security measures, or those of a third-party service provider or business partner, and access confidential information about our business, customers and associates. Further, like other companies in the retail industry, during the ordinary course of business, we and our vendors have in the past experienced, and we expect to continue to experience, cyber-attacks of varying degrees and types, including phishing, and other attempts to breach, or gain unauthorized access to, our and our vendors’ systems. To date, cyber-attacks have not had a material impact on our operations, but we cannot provide assurance that cyber-attacks will not have a material impact in the future.
Previous wording
We have experienced, and expect to continue to experience, increased costs associated with protecting confidential information through the implementation of security technologies, processes and procedures, including training programs for associates to raise awareness about phishing, malware and other cyber risks, especially as we implement new technologies, such as new payment capabilities or updates to our mobile apps and websites. Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems change frequently and increase in complexity and are often not recognized until such attacks are launched or have been in place for a period of time. We (or the third parties on which we rely) may not have the resources or technical sophistication to sufficiently anticipate, prevent, or immediately identify and remediate cyber-attacks.
Current wording
We have experienced, and expect to continue to experience, increased costs associated with protecting confidential information through the implementation of security technologies, processes and procedures, including training programs for associates to raise awareness about phishing, malware and other cyber risks, especially as we implement new technologies, such as new payment capabilities or updates to our mobile apps and websites. Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems change frequently and increase in complexity and are often not recognized until such attacks are launched or have been in place for a period of time. For example, as AI continues to evolve, cyber-attackers could also use AI to develop or hone their attacks. We (or the third parties on which we rely) may not have the resources or technical sophistication to sufficiently anticipate, prevent, or immediately identify and remediate cyber-attacks.
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Furthermore, the global regulatory environment is increasingly complex and demanding with frequent new and changing requirements surrounding information security and privacy, including new regulations applicable to public companies in the United States, China’s Cybersecurity Law, the California Consumer Privacy Act, and the European Union’s General Data Protection Regulation. We may incur significant costs related to compliance with these laws and failure to comply with these regulatory standards, and others, could have a material adverse impact on our business.
Current wording
Furthermore, the global regulatory environment is increasingly complex and demanding with frequent new and changing requirements surrounding information security and privacy, including new regulations potentially applicable to public companies in the United States, China’s Cybersecurity Law, the California Consumer Privacy Act, and the European Union’s General Data Protection Regulation. We may incur significant costs related to compliance with these laws and failure to comply with these regulatory standards, and others, could have a material adverse impact on our business.
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•damage to the Company’s competitiveness, stock price, and long-term shareholder value.
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•damage to the Company’s competitiveness, stock price, and long-term stockholder value.
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Fluctuations in the cost of transportation could also have a material adverse effect on our cost of sales and ability to meet customer demand. We primarily use six contract carriers to ship merchandise and related materials to our North American customers, and several contract carriers for our global customers. If the shipping operations of these third parties were disrupted, and we are unable to respond in a quick and efficient manner, our ability to replace inventory in our stores and process digital and third-party orders could be interrupted, potentially resulting in adverse impacts to sales or increased costs. Furthermore, we are susceptible to increases in fuel costs which may increase the cost of distribution. If we are not able to pass this cost on to our customers, our financial condition and results of operations could be adversely affected.
Current wording
Fluctuations in the cost of transportation could also have a material adverse effect on our cost of sales and ability to meet customer demand. We primarily use 7 contract carriers to ship merchandise and related materials to our North American customers, and several contract carriers for our global customers. If the shipping operations of these third parties were disrupted, and we are unable to respond in a quick and efficient manner, our ability to replace inventory in our stores and process digital and third-party orders could be interrupted, potentially resulting in adverse impacts to sales or increased costs. Furthermore, we are susceptible to increases in fuel costs which may increase the cost of distribution. If we are not able to pass this cost on to our customers, our financial condition and results of operations could be adversely affected.
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We depend on third parties for the manufacture and delivery of our merchandise. As a result, the continued success of our operations is tied to our timely receipt of quality merchandise from third-party manufacturers. We source the majority of our merchandise outside of the U.S. through arrangements with approximately 150 vendors, primarily located in southeast Asia. Political, social or economic instability in the regions in which our manufacturers are located could cause disruptions in trade, including exports to the U.S. and EMEA. In addition, the inability of vendors to access liquidity, or the insolvency of vendors, could lead to their failure to deliver merchandise to us. A manufacturer’s inability to ship orders in a timely manner or meet our quality standards could cause delays in responding to consumer demand and negatively affect consumer confidence or negatively impact our competitive position, any of which could have a material adverse effect on our financial condition and results of operations.
Current wording
We depend on third parties for the manufacture and delivery of our merchandise. As a result, the continued success of our operations is tied to our timely receipt of quality merchandise from third-party manufacturers. We source the majority of our merchandise outside of the U.S. through arrangements with approximately 124 vendors, primarily located in southeast Asia. Political, social or economic instability in the regions in which our manufacturers are located could cause disruptions in trade, including exports to the U.S. and EMEA. In addition, the inability of vendors to access liquidity, or the insolvency of vendors, could lead to their failure to deliver merchandise to us. A manufacturer’s inability to ship orders in a timely manner or meet our quality standards could cause delays in responding to consumer demand and negatively affect consumer confidence or negatively impact our competitive position, any of which could have a material adverse effect on our financial condition and results of operations.
Previous wording
For example, the attacks on cargo vessels in the Red Sea have resulted in delayed deliveries and increased freight costs, and a prolonged or escalating armed conflict may result in additional costs, including any impact from using air freight instead of ocean freight to mitigate inventory delays. It is possible that the adverse impact of these and future attacks, including additional costs associated with mitigation efforts, could materially adversely affect our business and results of operation.
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For example, armed conflicts in the Middle East have contributed to elevated freight rates and longer transit times compared to historical levels, and prolonged or escalating conflicts could result in additional supply chain disruption, including higher transportation costs (such as a result of increased fuel costs), shipping delays, or increased costs from using air freight instead of ocean freight to mitigate inventory delays. It is possible that the adverse impact of these and future attacks, including additional costs associated with mitigation efforts, could materially adversely affect our business and results of operation.
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Changes in tax or tariff policy regarding merchandise produced in, and raw materials sourced from, certain countries could adversely affect our business.
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Changes in tariff policy regarding merchandise produced in, and raw materials sourced from, certain countries have and could continue to adversely affect our business.
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A predominant portion of the merchandise we sell is originally manufactured in countries other than the United States. Refer to Note 6, “INVENTORIES,” of the Notes to Consolidated Financial Statements included in“ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual Report on Form 10-K for a summary of inventory sourced based on vendor location during Fiscal 2024. Additionally, many of the raw materials used to manufacture our apparel is sourced internationally. International trade disputes that result in tariffs and other protectionist measures could adversely affect our business, including disruption and cost increases in our established patterns for sourcing raw materials and our merchandise and increased uncertainties in planning our sourcing strategies and forecasting our margins. For example, the United States has imposed significant new tariffs on China related to the importation of certain product categories. It is also possible that additional tariffs may be imposed on imports from other countries, including the foreign countries where our apparel is predominantly manufactured. The imposition of any such tariffs would likely increase the cost of our merchandise and negatively impact our operating results. Although such changes would have implications across the entire industry, we may fail to effectively adapt to and manage the adjustments in strategy that would be necessary in response to those changes. We are working with our current suppliers to mitigate our exposure to current or potential tariffs and seeking opportunities to engage other suppliers, but there can be no assurance that we will be able to offset any increased costs or secure other suppliers.
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A predominant portion of the merchandise we sell is manufactured in countries other than the United States. Refer to Note 7, “INVENTORIES,” of the Notes to Consolidated Financial Statements included in“ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual Report on Form 10-K for a summary of inventory sourced based on vendor location during Fiscal 2025. In addition, many of the raw materials used to manufacture our apparel are sourced internationally.
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Current report — wording carried from elsewhere
Additionally, we rely on third-party vendors and platforms for certain information technology processes, including point-of-sale, digital operations, inventory management, supply chain, planning, sourcing, merchandising, payroll, scheduling, financial reporting, and managing third-party relationships, including our brand representatives and influencer network, and our wholesale, franchise licensing, or marketplace partners. This reliance increases our exposure to failures by such third parties to perform adequately or maintain effective internal controls, which could disrupt our operations or adversely affect our business.
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Previous report — wording carried elsewhere
Such risks include, but are not limited to, the following:
Previous report — wording carried elsewhere
•supporting global growth by decentralizing execution of our commercial strategy authority from our global home office to our regional headquarters located in Shanghai, China and London, United Kingdom;