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Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with
respect to cybersecurity and environmental, social and governance matters, that could expose us to numerous risks.
We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations,
including the SEC, the New York Stock Exchange and the Financial Accounting Standards Board. These rules and regulations continue
to evolve in scope and complexity, and many new requirements have been created in response to laws enacted by Congress, making
compliance more difficult and uncertain. In addition, increasingly regulators, customers, investors, employees and other stakeholders
are focusing on cybersecurity and environmental, social and governance (“ESG”) matters and related disclosures. These changing
rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and
administrative expenses and increased management time and attention spent complying with or meeting such regulations and
expectations. For example, developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-
related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the
SEC’s recently proposed climate-related reporting requirements, and similar proposals by other international regulatory bodies. We may
also communicate certain initiatives and goals, regarding environmental matters, diversity, responsible sourcing and social investments
and other ESG-related matters, in our SEC filings or in other public disclosures. These initiatives and goals within the scope of ESG
could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not
advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure. Further,
statements about our ESG-related initiatives and goals, and progress against those 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. In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals. If
our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals
within the scope of ESG on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely
affected.
Our international activities are subject to many of the same risks as described above, as well as to risks associated with the
legislative, judicial, regulatory, political, economic and cultural factors specific to the countries or regions in which we
operate.
We operate retail locations in Canada, Current Health operates in the UK, and most of our exclusive brands products are manufactured
by contract manufacturers based in southeast Asia. We also have wholly-owned legal entities registered in various other foreign
countries, including Bermuda, China, Hong Kong, Luxembourg, the Republic of Mauritius and the UK. During fiscal 2023, our
International segment’s operations generated approximately 8% of our revenue. In general, the risk factors identified above also have
relevance to our International operations. In addition, our International operations also expose us to other risks, including those related
to, for example:
• political conditions and geopolitical events, including war and terrorism;
• economic conditions, including monetary and fiscal policies and tax rules, as well as foreign exchange rate risk;
• rules governing international trade and potential changes to trade policies or trade agreements and ownership of foreign
entities;
• government-imposed travel restrictions or warnings, whether in response to the COVID-19 pandemic or otherwise, and
differing responses of governmental authorities to pandemics and other global events;
• cultural differences that we may be unable to anticipate or respond to appropriately;
• different rules or practices regarding employee relations, including the existence of works councils or unions;
• difficulties in enforcing intellectual property rights; and
• difficulties encountered in exerting appropriate management oversight to operations in remote locations.
These factors could significantly disrupt our International operations and have a material adverse effect on our revenue and profitability
and could lead us to incur material impairments and other exit costs.
Financial and Market Risks
Failure to effectively manage our costs could have a material adverse effect on our profitability.
As discussed above, our revenues are susceptible to volatility from various sources, which can lead to periods of flat or declining
revenues. However, some of our operating costs are fixed and/or are subject to multi-year contracts. Some elements of our costs may
be higher than our competitors’ because of, for example, our extended retail footprint and structure, our hourly pay structure, our
differentiated service offerings or our levels of customer service. Accordingly, our ongoing drive to reduce costs and increase efficiency
represents a strategic imperative. Failure to successfully manage our costs could have a material adverse impact on our profitability
and curtail our ability to fund our growth or other critical initiatives.
We are highly dependent on the cash flows and net earnings we generate during our fiscal fourth quarter, which includes the
majority of the holiday shopping season.
A large proportion of our revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday
shopping season. In addition, the holiday shopping season also incorporates many other unpredictable factors, such as the level of
competitive promotional activity, new product release activity and customer buying patterns, which makes it difficult to forecast and
react to these factors quickly. Unexpected events or developments, such as pandemics, natural or man-made disasters, changes in
consumer demand, economic factors, product sourcing issues, cyber-attacks, failure or interruption of management information
systems, or disruptions in services or systems provided or managed by third-party vendors could significantly disrupt our operations. As
a result of these factors, our fiscal fourth quarter and annual results could be adversely affected.