Table of Contents execute any of these activities successfully could result in adverse consequences, including lower sales, product margins, operating income and cash flows. The industry in which we operate is subject to rapidly changing consumer preferences. The continued popularity of our footwear and the development of new lines and styles of footwear with widespread consumer appeal, including consumer acceptance of our footwear, requires us to accurately identify and interpret changing consumer trends and preferences, and to effectively respond in a timely manner. Continuing demand and market acceptance for both existing and new products are uncertain and depend on the following factors: In assessing our response to anticipated changing consumer preferences and trends, we frequently must make decisions about product designs and marketing expenditures several months in advance of the time when actual consumer acceptance can be determined. As a result, we may not be successful in responding to shifting consumer preferences and trends with new products that achieve market acceptance. Because of the ever- changing nature of consumer preferences and market trends, a number of companies in our industry experience periods of rapid growth, followed by declines, in revenue and earnings. If we fail to identify and interpret changing consumer preferences and trends, or are not successful in responding to these changes with the timely development or sourcing of products that achieve market acceptance, we could experience excess inventories and higher than normal markdowns, returns, order cancellations or an inability to profitably sell our products. The majority of our stores are located within shopping malls and depend to varying degrees on consumer traffic in the malls to generate sales. Declines in mall traffic, whether caused by a shift in consumer shopping preferences or by other factors, such as COVID-19, may negatively impact our ability to maintain or grow our sales in existing stores, which could have an adverse effect on our financial condition or results of operations. Our business is seasonal, with a significant portion of our net sales and operating income generated during the fourth quarter, which includes the holiday shopping season. Because of this seasonality, we have limited ability to compensate for shortfalls in fourth quarter sales or earnings by changes in our operations or strategies in other quarters. Our quarterly results of operations also may fluctuate significantly based on such factors as: • the timing of new store openings and renewals; • the amount of net sales contributed by new and existing stores; • the timing of certain holidays and sales events; • changes in quarter end dates due to the 53 week year; • changes in our merchandise mix; • weather conditions that affect consumer spending; and • actions of competitors, including promotional activity. 10 Our results of operations are subject to seasonal and quarterly fluctuations. Our results may be adversely affected by declines in consumer traffic in malls. Our future success also depends on our ability to respond to changing consumer preferences, identify and interpret consumer trends, and successfully market new products. • substantial investment in product innovation, design and development; • commitment to product quality; and • significant and sustained marketing efforts and expenditures, including with respect to the monitoring of consumer trends in footwear specifically and in fashion and lifestyle categories generally.