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Risk Overview Q2, 2026
Risk Distribution
27% Ability to Sell
21% Finance & Corporate
21% Production
12% Tech & Innovation
9% Legal & Regulatory
9% Macro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
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Five Below Risk Factors
New Risk (0)
Risk Changed (0)
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No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q2, 2026
Main Risk Category
Ability to Sell
With 9 Risks
Ability to Sell
With 9 Risks
Number of Disclosed Risks
33
No changes from last report
S&P 500 Average: 31
33
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since May 2026
0Risks added
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Number of Risk Changed
0
-2
From last reportS&P 500 Average: 0
0
-2
From last reportS&P 500 Average: 0
See the risk highlights of Five Below in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 33
Ability to Sell
Total Risks: 9/33 (27%)Above Sector Average
Competition1 | 3.0%
Competition - Risk 1
We operate in a competitive environment and, as a result, we may not be able to compete effectively or maintain or increase our sales, market shares or margins.Demand2 | 6.1%
Demand - Risk 1
Our business is seasonal, and adverse events during the holiday season could have a substantial negative impact on our operating results.Demand - Risk 2
Our sales depend on a volume of traffic to our stores, and a reduction in traffic to, or the closing of, anchor tenants and other destination retailers in the shopping centers in which our stores are located could significantly reduce our sales and leave us with excess inventory.Most of our stores are located in power, community and lifestyle shopping centers that benefit from the ability of "anchor" retail tenants, generally big box stores, and other destination retailers and attractions to generate sufficient levels of consumer traffic in the vicinity of our stores. Any decline in the volume of consumer traffic at shopping centers, whether because of consumer preferences to shop on the internet or at large warehouse stores, recession risks and potential effects, an economic slowdown, a decline in the popularity of shopping centers, the closing of anchor stores or other destination retailers or otherwise, could result in reduced sales at our stores and leave us with excess inventory, which could have a material adverse effect on our financial results or business.
Sales & Marketing6 | 18.2%
Sales & Marketing - Risk 1
Our new store growth is dependent upon our ability to successfully expand our distribution network capacity, and failure to achieve or sustain these plans could affect our performance adversely.Sales & Marketing - Risk 2
Any disruption in our ability to select, obtain, distribute and market merchandise attractive to customers at prices that allow us to profitably sell such merchandise could impact our business negatively.We generally have been able to select and obtain sufficient quantities of attractive merchandise at prices that allow us to be profitable. If we are unable to continue to select products that are attractive to our customers, to obtain such products at costs that allow us to sell such products at a profit, or to market such products effectively to consumers, our sales or profitability could be affected adversely. In addition, the success of our business depends in part on our ability to anticipate, identify and respond promptly to evolving trends in demographics and consumer preferences, expectations and needs. If we are unable to quickly respond to developing trends or if the spending patterns or demographics of these markets change, and we do not timely and appropriately respond to such changes, then the demand for our products, which are discretionary, and our market share could be adversely affected. Failure to maintain attractive stores and to timely identify or effectively respond to changing consumer needs, preferences and spending patterns could adversely affect our relationship with customers, the demand for our products and our market share.
Any disruption in the supply or increase in pricing of our merchandise could negatively impact our ability to achieve anticipated operating results. The products we sell are sourced from a wide variety of domestic and international vendors. We have not experienced any difficulty in obtaining sufficient quantities of core merchandise and believe that, if one or more of our current sources of supply become unavailable, we would generally be able to obtain alternative sources without experiencing a substantial disruption of our business. However, such alternative sources could increase our merchandise costs and reduce the quality of our merchandise, and an inability to obtain alternative sources could affect our sales.
Sales & Marketing - Risk 3
We may not be successful in our continued expansion into online retail and if we are successful, we will face new risks and challenges, which could adversely affect our results of operations.We sell merchandise on the internet, through our fivebelow.com e-commerce website and mobile app. Our ability to successfully execute a further expansion of our e-commerce strategy may suffer if we are unable to sell and fulfill our products in a cost-efficient manner.
In addition, if we are successful, we will encounter risks and difficulties frequently experienced by internet-based businesses, including risks related to our ability to attract and retain customers on a cost-effective basis and our ability to operate, support, expand and develop our internet operations, website and software and other related operational systems. Although we believe that our participation in both e-commerce and physical store sales will be a distinct advantage for us due to synergies, the potential for new customers and increased brand recognition nationwide in markets where we do not yet have stores, supporting product offerings through both of these channels could create issues that have the potential to adversely affect our results of operations. For example, if our e-commerce business successfully grows, it may do so in part by attracting existing customers, rather than new customers, who choose to purchase products from us online rather than from our physical stores, thereby reducing the financial performance of our stores. In addition, selling products through the internet exposes us to the potential for fraud associated with "card-not-present" credit card transactions that does not exist for physical store sales. Criminals are using increasingly sophisticated methods to engage in illegal activities such as unauthorized use of credit or debit cards and bank account information. Requirements relating to consumer authentication and fraud detection are more complex for online sales than for physical store sales. We may be denied the revenues associated with orders resulting from the unauthorized use of a cardholder's card number in an illegal activity even if the associated financial institution approved payment of the orders.
Sales & Marketing - Risk 4
We are subject to customer payment-related risks that could increase operating costs or exposure to fraud or theft, subject us to potential liability and potentially disrupt our business.We accept payments using a variety of methods, including cash, credit and debit cards and gift cards. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. Any inability to comply with such requirements may subject us to increased risk of liability for fraudulent transactions and may adversely affect our business and operating results.
For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt our business. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. As a result, our business and operating results could be adversely affected.
Sales & Marketing - Risk 5
Our growth from existing stores is dependent upon our ability to increase sales and improve the efficiencies, costs and effectiveness of our operations, and failure to achieve or sustain these plans could affect our performance adversely.Increases in sales in existing stores are dependent on factors such as competition, including from online retailers, merchandise selection, store operations and customer satisfaction. If we fail to realize our goals of successfully managing our store operations and increasing our customer retention and recruitment levels, our sales may not increase, and our growth may be impacted adversely.
Sales & Marketing - Risk 6
If we are unable to secure our customers' confidential or credit card information, or other private data relating to our crew or our Company, we could be subject to negative publicity, costly government enforcement actions or private litigation, which could damage our business reputation and adversely affect our financial results.As with other companies, we are periodically subject to cyberattacks. Cyberattacks and other cyber incidents are occurring more frequently including as a result of ongoing military conflicts, certain U.S. foreign relations, and remote work arrangements, are constantly evolving in nature, are becoming more sophisticated and are being made by groups and individuals (including criminal hackers, hacktivists, state-sponsored institutions, terrorist organizations and individuals or groups participating in organized crime) with a wide range of expertise and motives (including monetization of corporate, payment or other internal or personal data, theft of trade secrets and intellectual property for competitive advantage and leverage for political, social, economic and environmental reasons). Such cyberattacks and cyber incidents can take many forms including cyber extortion, denial of service, social engineering, such as impersonation attempts to fraudulently induce crew or others to disclose information or unwittingly provide access to systems or data, introduction of viruses or malware, such as ransomware through phishing emails, website defacement or theft of passwords and other credentials. Although we may incur significant costs in protecting against or remediating cyberattacks or other cyber incidents, no cyberattack or other cyber incident has, to our knowledge, had a material adverse effect on our business, financial condition or results of operations to date.
The protection of our customer, crew and company data is critical to us. The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and constantly changing requirements that affect our business. In addition, customers have a high expectation that we will adequately protect their personal information from cyberattack or other security breaches. We have procedures and technology in place designed to safeguard our customers' debit and credit card and other personal information, our crew's private data and company records, intellectual property and other confidential information, and we continue to devote significant resources to network security, backup and disaster recovery, and other security measures, including training, to protect our systems and data. Nevertheless, these security measures cannot provide absolute security or guarantee that we will be successful in preventing or responding to every such breach or disruption, including through the intentional or negligent actions of our crew, business associates or third parties. As a result, unauthorized parties may obtain access to our data systems and misappropriate customer data and company confidential information.
There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography or other developments will prevent the compromise of our customer transaction processing capabilities and personal data. Furthermore, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If any such compromise of our security or the security of information residing with our business associates or third parties were to occur, we could be exposed to negative publicity, government enforcement actions, card issuer fines and/or penalties, private litigation or costly response measures. In addition, our reputation within the business community and with our customers may be affected, which could result in our customers discontinuing the use of debit or credit cards in our stores, or not shopping in our stores altogether. This could cause us to lose market share to our competitors and could have an adverse effect on our financial results.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveal competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Moreover, our proprietary, confidential, and/or sensitive information could be leaked, disclosed, or revealed as a result of or in connection with the use of generative artificial intelligence technologies.
Even if we are not targeted directly, cyberattacks on the U.S. government, financial markets, financial institutions, or other businesses, including our vendors, software creators, cloud providers, cybersecurity service providers, and other third parties with whom we work, may occur, and such events could disrupt our normal business operations and networks in the future.
Finance & Corporate
Total Risks: 7/33 (21%)Below Sector Average
Share Price & Shareholder Rights4 | 12.1%
Share Price & Shareholder Rights - Risk 1
Our stock price may be volatile or may decline regardless of our operating performance.Share Price & Shareholder Rights - Risk 2
Our business and reputation may be adversely affected by certain corporate responsibility matters.In recent years, investor and regulatory focus has intensified with respect to certain corporate responsibility matters. These matters include, among others, (i) efforts and mitigation of the impact of climate change, (ii) human rights matters, (iii) ethics and compliance with law, (iv) diversity, equity and inclusion, and (v) the role of the Company's board of directors in supervising various sustainability issues. Additionally, in the retail industry, the materials used in the products we sell as well as where we source our products are of particular importance.
In addition, investment in funds that specialize in companies that perform well in corporate responsibility assessments are increasingly popular, and major institutional investors and advisors have publicly emphasized the importance of corporate responsibility measures to their investment decisions and recommendations. Investors who are focused on corporate responsibility matters may seek enhanced disclosures or require implementation of policies that may be adverse to our business, and there can be no assurances that shareholders will not advocate, via proxy contests, media campaigns or other public or private means, for us to take corporate responsibility focused actions on an accelerated timeline.
Additionally, there can be no certainty that we will successfully navigate or manage corporate responsibility issues or that we will successfully meet investors or others' expectations. Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation with governments, customers, crew, other third parties and the communities and industries in which we operate, as well as, on our business, share price, financial condition, access to capital or results of operations.
Share Price & Shareholder Rights - Risk 3
Your percentage ownership in us may be diluted by future equity issuances, which could reduce your influence over matters on which shareholders vote.Our Board of Directors has the authority, without action or vote of our shareholders, to issue all or any part of our authorized but unissued shares of common stock, including shares issuable upon the exercise of options, shares issuable upon the vesting of restricted stock units or performance-based restricted stock units, shares that may be issued to satisfy our obligations under our equity incentive plan or shares of our authorized but unissued preferred stock. As of January 31, 2026, 2.9 million stock options, restricted shares, or restricted stock units were available for grant under our equity incentive plan, and 0.7 million shares of our common stock are issuable upon the vesting of restricted stock units and the vesting of performance-based restricted stock units under that plan. Exercises of these options or issuances of common stock or preferred stock could reduce your influence over matters on which our shareholders vote and, in the case of issuances of preferred stock, likely could result in your interest in us being subject to the prior rights of holders of that preferred stock.
Share Price & Shareholder Rights - Risk 4
Anti-takeover provisions could delay and discourage takeover attempts that shareholders may consider to be favorable.Certain provisions of our amended and restated articles of incorporation and amended and restated bylaws and applicable provisions of Pennsylvania law may make it more difficult or impossible for a third-party to acquire control of us or effect a change in our Board of Directors and management.
In particular, these provisions, among other things:
- provide that only the chair of the Board of Directors, the chief executive officer or a majority of the Board of Directors may call special meetings of the shareholders;- provide for supermajority approval requirements for amending or repealing provisions in our amended and restated articles of incorporation and amended and restated bylaws;- establish certain advance notice procedures for nominations of candidates for election as directors and for shareholder proposals to be considered at shareholders' meetings; and - permit the Board of Directors, without further action of the shareholders, to issue and fix the terms of preferred stock, which may have rights senior to those of the common stock.
In addition, anti-takeover provisions in Pennsylvania law could make it more difficult for a third-party to acquire control of us. These provisions could adversely affect the market price of our common stock and could reduce the amount that shareholders might receive if we are sold. For example, Pennsylvania law may restrict a third-party's ability to obtain control of us and may prevent shareholders from receiving a premium for their shares of our common stock. Pennsylvania law also provides that our shareholders are not entitled by statute to propose amendments to our amended and restated articles of incorporation.
These and other provisions of Pennsylvania law and our amended and restated articles of incorporation and amended and restated bylaws could delay, defer or prevent us from experiencing a change of control or changes in our Board of Directors and management and may adversely affect our shareholders' voting and other rights. Any delay or prevention of a change of control transaction or changes in our Board of Directors and management could deter potential acquirers or prevent the completion of a transaction in which our shareholders could receive a substantial premium over the current market price for their shares of our common stock.
Accounting & Financial Operations1 | 3.0%
Accounting & Financial Operations - Risk 1
We do not expect to pay any cash dividends for the foreseeable future.Debt & Financing1 | 3.0%
Debt & Financing - Risk 1
The terms and availability of our revolving credit facility may restrict our current and future operations, which could adversely affect our ability to respond to changes in our business and to manage our operations.Corporate Activity and Growth1 | 3.0%
Corporate Activity and Growth - Risk 1
We may not be able to successfully implement our growth strategy on a timely basis or at all, which could harm our growth and results of operations.Production
Total Risks: 7/33 (21%)Above Sector Average
Manufacturing1 | 3.0%
Manufacturing - Risk 1
Operational difficulties, including those associated with our ability to either lease or build and operate our shipcenters, could adversely impact our business.Employment / Personnel1 | 3.0%
Employment / Personnel - Risk 1
Our success depends on our executive officers, senior management, district, store, and shipcenter managers, and other key personnel. If we lose our executive officers, senior management, district, store, and shipcenter managers, or any other key personnel, or are unable to hire additional qualified personnel, our business could be harmed.Costs5 | 15.2%
Costs - Risk 1
Our profitability and cash flows from operations may be negatively affected if we are not successful in managing our inventory balances and inventory shrinkage.Costs - Risk 2
Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the leases negotiated in the past.Currently, we lease all of our store locations, as well as our corporate headquarters and distribution facility in Pedricktown, New Jersey (and own our shipcenters in Forsyth, Georgia, Conroe, Texas, Buckeye, Arizona and Indianapolis, Indiana). As a result of the significant expansion of our network of distribution facilities over the last several years, including the opening of our Indianapolis, Indiana shipcenter in June 2022, we ceased operations at our shipcenters in Olive Branch, Mississippi and Cincinnati, Ohio in the first half of fiscal 2022 as well as the e-commerce shipcenter operations in our Pedricktown, New Jersey shipcenter in the first half of fiscal 2023 and in our Buckeye, Arizona shipcenter in the back half of fiscal 2025. Our stores are leased from third parties, with typical initial lease terms of ten years. Many of our lease agreements also have additional five-year renewal options. Historically, we have been able to negotiate terms that fit within our economic model and that we believe are favorable; however, there is no guarantee that we will be able to continue to negotiate such terms. Consolidation in the commercial retail real estate market could affect our ability to successfully negotiate favorable rental terms for our stores in the future. Should significant consolidation occur, a large proportion of our store base could be concentrated with one or a few landlords that would then be in a position to dictate unfavorable terms to us due to their significant negotiating leverage. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. Increases in our occupancy costs and difficulty in identifying economically suitable new store locations could have significant negative consequences, which include:
- requiring that a greater portion of our available cash be applied to pay our rental obligations, thus reducing cash available for other purposes and reducing our profitability;- increasing our vulnerability to general adverse economic and industry conditions; and - limiting our flexibility in planning for, or reacting to changes in, our business or in the industry in which we compete.
We depend on cash flow from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities to fund these expenses and needs and sufficient funds are not otherwise available to us, we may not be able to service our lease expenses, grow our business, respond to competitive challenges or fund our other liquidity and capital needs, which could harm our business. If an existing or future store is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has an early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease. In addition, if we are not able to enter into new leases or renew existing leases on terms acceptable to us, this could have an adverse effect on our results of operations.
Costs - Risk 3
Our current insurance programs may expose us to unexpected costs and negatively affect our financial performance.Our insurance coverage is subject to deductibles, limits of liability and similar provisions that we believe are prudent based on our overall operations. We may incur certain types of losses that we cannot insure or which we believe are not economically reasonable to insure, such as losses due to acts of war, employee and certain other crime, and some natural disasters. If we incur these losses and they are material, our business could suffer. Certain material events may result in sizable losses for the insurance industry and adversely impact the availability of adequate insurance coverage or result in excessive premium increases. To offset negative cost trends in the insurance market, we may elect to self-insure, accept higher deductibles or reduce the amount of coverage in response to these market changes. In addition, because of ongoing changes in healthcare law, among other things, we may experience an increase in participation in our group health insurance programs, which may lead to a greater number of medical claims. If we experience a greater number of these losses than we anticipate, it could have a material adverse effect on our business, financial condition and results of operations.
Costs - Risk 4
We have implemented price increases in an effort to mitigate current and future cost increases. These or future price increases could reduce our unit sales, damage our reputation with our customers as an extreme value retailer, or cause us to become less competitive in the marketplace, each of which could have a material adverse effect on our business, financial condition and results of future operations.We, like many retailers, are and may in the future be subject to increasing operational costs, including escalating product costs, the imposition of tariffs on imported goods, and higher wage and benefits costs in response to legislative requirements and competitive pressures. From time to time, we may implement price increases in an effort to mitigate some or all of the risks of operational cost increases. We can offer no assurances that price increases will be accepted by our customers, or that price increases will be sufficient to offset the impact of future cost increases. In addition, any increase in our prices may cause our unit sales to decline and could undermine our positioning as an extreme value retailer making us less attractive to our customers and less competitive in the marketplace. Accordingly, such factors could have a material adverse effect on our business, financial condition and results of future operations.
Costs - Risk 5
A significant disruption to our distribution network or to the timely receipt of inventory could adversely impact sales or increase our transportation costs, which would decrease our profits.Because most of our products are distributed from our shipcenters, the unexpected loss of any one of our shipcenters, due to natural disaster or otherwise, would materially affect our operations. We also rely upon independent third-party transportation to provide goods to our stores in a timely and cost-effective manner, through deliveries to our shipcenters from vendors and then from the shipcenters or direct ship vendors to our stores. Our use of outside delivery services for shipments is subject to risks outside of our control and any disruption, unanticipated expense or operational failure related to this process could affect store operations negatively. Unexpected delivery delays or increases in transportation costs (including through increased fuel costs or a decrease in transportation capacity for overseas shipments or resulting from labor shortages or work stoppages) could significantly decrease our ability to generate sales and earn profits. If we change shipping companies, we could face logistical difficulties that could adversely impact deliveries, and we would incur costs and expend resources in connection with such change. Moreover, we may not be able to obtain terms as favorable as those received from the independent third-party transportation providers we currently use, which would increase our costs. Additionally, long-term disruptions to the United States and international transportation infrastructure from wars, political unrest, terrorism, natural disasters, governmental budget constraints and other significant events that could lead to delays or interruptions of service could adversely affect our business. As we seek to expand our operation through the implementation of our online retail capabilities, we may face increased or unexpected demands on shipcenter operations, as well as new demands on our distribution network.
Tech & Innovation
Total Risks: 4/33 (12%)Above Sector Average
Trade Secrets1 | 3.0%
Trade Secrets - Risk 1
If we are unable to enforce our intellectual property rights, if we are accused of infringing a third-party's intellectual property rights, or if the merchandise we purchase from brand partners is alleged to have infringed a third-party's intellectual property rights, our business or results of operations may be adversely affected.Technology3 | 9.1%
Technology - Risk 1
Our inability to upgrade or expand our technology systems as a result of external factors, staffing shortages or difficulties in updating our existing technology or developing or implementing new technology could have a material adverse effect on our business or results of operations.Technology - Risk 2
A significant disruption in our information technology systems and our inability to adequately maintain and update those systems could adversely affect our operations and negatively affect our customers.We rely extensively on our information technology systems (which includes certain systems currently outsourced to, or using cloud-based services provided by, third parties) throughout our business. We also rely on continued and unimpeded access to the internet to use our information technology systems. Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, malicious attacks, security breaches, catastrophic events, and implementation errors. If our systems are damaged, disrupted or fail to function properly or reliably, we may incur substantial repair or replacement costs, experience data loss or theft and impediments to our ability to manage inventories or process customer transactions, and encounter lost customer confidence, which could require additional promotional activities to attract customers and otherwise adversely affect our results of operations. We continually invest to maintain and update our information technology systems. Implementing significant system changes increases the risk of system disruption. The potential problems and interruptions associated with implementing technology initiatives, as well as providing training and support for those initiatives, could disrupt or reduce our operational efficiency, and could negatively impact customer experience and customer confidence.
Technology - Risk 3
We use, and may over time increase the usage of, machine learning and other types of artificial intelligence in our business, and challenges with properly managing its use could adversely affect our business.Like many businesses, we utilize machine learning and other types of artificial intelligence (collectively, "AI") and advancements in technology may allow us to expand the use of AI, including generative AI, into key operational and/or administrative aspects of our business with the result that applications of AI may become important in our operations over time. Our competitors or other third parties may incorporate AI into their businesses more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, if the types of information that AI applications assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations may be adversely affected. The rapid evolution of AI, including potential government regulation of AI, may require significant resources to develop, test and maintain our implementations of AI.
Legal & Regulatory
Total Risks: 3/33 (9%)Below Sector Average
Regulation2 | 6.1%
Regulation - Risk 1
Our reliance on merchandise manufactured outside of the United States subjects us to legal, regulatory, political and economic risks. In particular, tariffs imposed by the U.S. government have increased, and could further increase, the cost to us of certain products, which lowers our margins, increases our import related expenses, causes us to increase our prices to consumers, and reduces consumer spending on discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations.Regulation - Risk 2
Product and food safety claims and the effects of legislation and regulations on product safety and quality and food safety and quality could affect our sales and results of operations adversely.We may be subject to product liability claims from customers or actions brought or penalties assessed by government agencies relating to products, including food products or over-the-counter drug products that are recalled, mislabeled, expired, defective or otherwise alleged to be harmful. Such claims may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling and transportation phases. All of our vendors and their products are contractually required to comply with applicable product and food safety laws. We generally seek contractual indemnification and insurance coverage from our vendors. However, if we do not have adequate contractual indemnification and/or insurance available, such claims could have a material adverse effect on our business, financial condition and results of operations. Our ability to obtain indemnification from foreign vendors may be hindered by the manufacturers' lack of understanding of U.S., state-specific or local product liability or other laws, which may make it more likely that we be required to respond to claims or complaints from customers as if we were the manufacturer of the products. Even with adequate insurance and indemnification, such claims could significantly damage our reputation and consumer confidence in our products. Our litigation expenses could increase as well, which also could have a materially negative impact on our results of operations even if a product liability claim is unsuccessful or is not fully pursued. Furthermore, if our vendors are unable or unwilling to recall products failing to meet standards, we may be required to recall those products at a substantial cost to us.
We purchase a portion of our products on a closeout basis. Some of these products are obtained through brokers or intermediaries rather than through manufacturers. The closeout nature of a portion of our products sometimes makes it more difficult for us to investigate all aspects of these products. We attempt to assure compliance and to test products when appropriate, and we seek to obtain indemnification through our vendors or to be listed as an additional insured, but there is no assurance that these efforts will be successful.
Taxation & Government Incentives1 | 3.0%
Taxation & Government Incentives - Risk 1
Changes to federal, state or provincial income tax legislation could have a material adverse effect on our business and results of operations.Macro & Political
Total Risks: 3/33 (9%)Below Sector Average
Economy & Political Environment1 | 3.0%
Economy & Political Environment - Risk 1
Inflation and rising commodity prices could adversely affect our business.Natural and Human Disruptions2 | 6.1%
Natural and Human Disruptions - Risk 1
We are exposed to the risk of natural disasters, adverse weather conditions, pandemic outbreaks, global political events, war and terrorism that could disrupt business and result in lower sales, increased operating costs and capital expenditures.Natural and Human Disruptions - Risk 2
Extreme weather conditions common to areas in which many of our stores are located could negatively affect our business and results of operations, particularly as such extreme conditions occur during what is typically our most profitable quarter.Extreme weather conditions in the areas in which our stores are located could negatively affect our business and results of operations. We have a significant number of stores in the Northeastern and Midwestern regions of the United States, which are prone to inclement weather conditions, as well as severe storms. Such inclement weather could have a significant impact on consumer behavior, travel and store traffic patterns, as well as our ability to operate our stores. For example, frequent or unusually heavy snowfall, ice storms, rainstorms or other extreme weather conditions over a prolonged period could make it difficult for our customers to travel to our stores and thereby reduce our sales and profitability. In addition, we typically generate higher revenues and gross margins during our fourth fiscal quarter, which includes the year-end holiday season. If weather conditions are not favorable during these periods, our operating results and cash flow from operations could be adversely affected.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.