## If we are unable to generate interest in and demand for our interactive retail experience, including being able to identify and respond to consumer preferences in a timely manner, our financial condition and profitability could be adversely affected. 

We believe that our success depends in large part upon our ability to continue to attract guests with our interactive shopping experience and our ability to anticipate, gauge and respond in a timely manner to changing consumer preferences and fashion trends. We cannot assure you that there will continue to be a demand for our “make- your-own stuffed animal” interactive experience, or for our stuffed animals, animal apparel and accessories. A decline in demand for our interactive shopping experience, our animals, animal apparel or accessories, or a misjudgment of consumer preferences or fashion trends, could have a negative impact on our business, financial condition and results of operations. In addition, if we miscalculate the market for our merchandise or the purchasing preferences of our guests, we may be required to sell a significant amount of our inventory at discounted prices or even below costs, thereby adversely affecting our financial condition and profitability. 

## Our future growth and profitability could be adversely affected if our marketing and online initiatives are not effective in generating sufficient levels of brand awareness and guest traffic or if consumer preferences change significantly. 

We continue to update and evaluate our marketing initiatives, focusing on brand awareness, new product news, timely promotions and rapidly changing consumer preferences. Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing and advertising programs and future marketing and advertising efforts that we undertake, including our ability to: 

• create greater awareness of our brand, interactive shopping experience and products; 

• identify the most effective and efficient level of spending in each market; 

• determine the appropriate creative message and media mix for marketing expenditures; 

• effectively manage marketing costs (including creative and media) in order to maintain acceptable operating margins and return on marketing investment; 

• select the right geographic areas in which to market; and 

• convert consumer awareness into actual store visits and product purchases. 

Our planned marketing expenditures may not result in increased total or comparable store sales or generate sufficient levels of product and brand awareness which could have a material adverse effect on our financial condition and profitability. 

## If we are unable to increase our comparable store sales trends, our results of operations and financial condition could be adversely affected. 

Our consolidated comparable store sales increased by 5.1% in 2013 following a multi-year decline. We believe the principal factors that will affect comparable store results include the following: 

• the continuing appeal of our concept; 

• the effectiveness of our marketing efforts to attract new and repeat guests; 

• consumer confidence and general economic conditions; 

• the impact of changes in governmental policies on consumer sentiment and discretionary spending levels; 

• the impact of store closures, relocations and openings in existing markets; 

• the impact of our new store design; 

• our ability to anticipate and to respond, in a timely manner, to consumer trends; 

• the continued introduction and expansion of our merchandise offerings; 

• mall traffic; 

• competition for product offerings including in the online space; 

• the timing and frequency of national media appearances and other public relations events; and 

• weather conditions. 

As a result of these and other factors, we may not be able to generate or achieve comparable stores sales growth in the future. If we are unable to do so, our results of operations could be significantly harmed and we may be required to record significant impairment charges. 

## We are subject to a number of risks related to disruptions, failures or security breaches of our information technology infrastructure. If we improperly obtain, or are unable to protect, our data or violate privacy or security laws or expectations, we could be subject to liability and damage to our reputation. 

Information technology is a critically important part of our business operations. We depend on information systems to process transactions, manage inventory, operate our Web sites, purchase, sell and ship goods on a timely basis, and maintain cost-efficient operations. There is a risk that we could experience a business interruption, theft of information, or reputational damage as a result of a cyber-attack, such as an infiltration of a data center, or data leakage of confidential information either internally or at our third-party providers. We may experience operational problems with our information systems as a result of system failures, system implementation issues, viruses, malicious hackers, sabotage, or other causes. 

