An investment in our common shares involves a high degree of risk. Potential investors should carefully consider the information and particularly the risks described below, before investing in our common shares. Our business, financial condition and results of operations could be adversely affected by any of the risks described below. The price of our common shares could decline due to any of these risks, or any other factors, and investors may lose all or part of their investment. The risks described below are those that we currently believe may adversely affect us. Additional risks not currently known to us, or those currently deemed to be immaterial, may also affect our business, financial condition, results of operations, cash flows and/or the price of our common shares.
a) Risks Relating to our Business
- We may be unable to successfully open new owned stores.
- Most of our owned stores are located in shopping malls frequented by our target customers, and our ability to attract customers relies on maintaining stores in these shopping malls.
- We may not be able to maintain and/or increase the sale of our products in the wholesale channel.
- The properties in which we operate, or may operate, our owned stores are subject to certain municipal and fire department licenses.
- We may not be able to efficiently respond to changes in fashion trends and in our customers’ preferences.
- We depend on our senior management; therefore, if we lose of one or more members of this team, our business may be adversely affected.
- Problems with our information technology systems, or our inability to continuously update them, may adversely affect our activities and inventory control.
- We depend on two distribution centers.
- Dudalina has only one sourcing center for raw materials, supplies and cutting.
- We are subject to delays caused by problems at customs, ports and the Brazilian Internal Revenue Service, as well as logistical failures.
- A substantial percentage of our revenue derives from a limited number of owned stores.
- We may be unable to renew our lease agreements in strategic and high visibility areas.
- If we fail to maintain the value of our brands, our sales could decline.
- We may fail to develop new brands with success, including the recently re launched brand “Rosa Chá.”
- Our brands and products are subject to falsification and copying, and the sale of falsified or copied products in parallel sales channels.
- There are risks associated with past acquisitions or mergers and our strategy of considering acquisition opportunities to complement our business.
- We may face challenges in integrating the operations of acquired or merged companies with our operations.
- The multi brand stores that we sell our products to may decide to stop doing so.
- We may experience losses not covered by insurance.
- We may be unable to find and hire qualified personnel to expand the production capacity of our plants.
- Unfavorable verdicts in administrative or legal proceedings could adversely affect us.
- If we are not able to maintain our current average sales volume and margin in our new owned stores, our financial condition may be adversely affected.
b) Risks Relating to the Specialty Retail Industry in Brazil
- The specialty retail industry in Brazil is characterized by extensive and increasing competition.
- If we are unable to obtain raw materials or finished products, our sales may be negatively affected and our financial condition may be harmed.
- Price volatility for our raw materials could have an adverse effect on us.
- Our suppliers may engage in questionable practices or may fail to operate in compliance with applicable regulations.
- Our results of operations may be affected by the seasonality of apparel sales.
- Continuous weather variations may adversely affect our results of operations.
- The specialty retail industry is sensitive to decrease in consumer spending of middle and upper class customers and to unfavorable economic cycles.
- We are subject to laws and regulation in Brazil with respect to consumer protection and the cosmetics sector.
- We and our suppliers are subject to environmental legislation and/or regulation.
a) Risks Relating to Restoque Common Shares
- We may need additional capital in the future, which may not be available. If we raise capital by means of the issuance of new common shares, your ownership interest in our capital stock may be diluted.
- We may decide not to pay dividends or interest on shareholders’ equity to the titular shareholders of the common shares we issue.