<PAGE> 1
EXHIBIT 99.1
RISK FACTORS
Competitive Conditions
The retail industry in general, and the home-fashion superstore business,
in particular, are intensely competitive. Generally, our stores will be in
competition with numerous other independent retailers and department stores in
the geographic areas in which our stores operate, as well as with off-price and
discount stores, many of which have greater sales, assets and financial
resources. Each of our stores may be confronted with several national and local
competitors.
Expansion Plans
Our growth is dependent, in large part, upon our ability successfully to
execute our expansion program and to increase the productivity of our existing
store base. Pursuant to the expansion program, we plan to open approximately
seven new stores in 2000 (two of which are already open) and 15 stores in 2001.
Accomplishing the planned expansion will be dependent upon many factors,
including the availability of financing, general economic conditions, the
identification of suitable markets and the availability and negotiation of
leases on acceptable terms. As a result, there can be no assurance that we will
be able to achieve our targets for opening new stores or that the new stores,
when opened, will operate profitably. In addition, we must be able to hire,
train and retain competent managers and personnel, and manage the systems and
operational components of our growth. There can be no assurance that we will be
successful in attracting, training and retaining employees.
Economic Conditions
The domestic merchandise and home furnishings business is dependent upon a
high volume of sales that may be adversely affected by an economic downturn or a
decline in consumer spending. There can be no assurance that a prolonged
recession would not have a material adverse impact on our operations.
Dependence on Key Personnel; Need for Additional Personnel
Our success depends in large part on the efforts and abilities of our
executive officers, particularly our Chief Executive Officer and President,
Gregory K. Johnson. The loss of the services of any of our executive officers
could have a material adverse effect on our results of operations. We have
entered into an employment agreement with Mr. Johnson and other key executives.
Additionally, our success depends on the hiring of store managers who are able
to operate effectively our superstores on a day-to-day basis. The competition
for qualified personnel is intense and there can be no assurance that we will be
able to attract and retain the personnel we require.
Dependence on Key Suppliers
We purchase our inventory from over 2,500 suppliers and have no long-term
purchase commitments or exclusive contracts with any vendor or supplier. No
supplier represents over 5% of our total purchases and we believe that most of
our suppliers could be replaced with minimal impact on our results of
operations. During the fiscal year ending February 26, 2000, approximately 92%
of our merchandise was purchased from domestic suppliers and the remaining 8%
was imported from manufacturers or their agents, principally in the Far East
(Hong Kong, China and Taiwan). Nevertheless, our results of operations could be
adversely affected by a disruption in our purchases from key suppliers. Although
we believe that our relationships with key vendors are very good, because we
have no supply contracts with our vendors, the vendors could discontinue selling
to us at any time.
Currently, our suppliers provide volume purchasing incentives, trade
discounts, cooperative advertising and other purchasing incentives. A decrease
in these incentives could also have a material adverse effect on our results of
operations.
<PAGE> 2
Seasonality and Quarterly Fluctuations
Our business is subject to seasonal and quarterly fluctuations.
Historically, we have realized a significant portion of our net sales and
substantially all of our operating income for the year in the third and fourth
quarters. Management believes this is the general pattern associated with this
segment of the retail industry and expects that this pattern will continue in
the future. If for any reason our sales during the fourth quarter are
substantially below expectations, our annual results will be adversely affected.
Need for Additional Financing
Our business is expected to have substantial expenditure needs. We have
entered into a Revolving Credit Facility that provides us with approximately
$200 million of availability, subject to certain limitations. Management
believes that this facility, together with anticipated revenues from operations
should be sufficient to fund our operating expenses and capital requirements for
at least the next 12 months. We may, from time to time, seek alternative sources
of capital to reduce indebtedness, provide additional working capital and
augment new store growth. No assurances can be given that such alternative
sources will be available on commercially acceptable terms.
Control by Majority Stockholder
The KIA continues to own 51% of our outstanding Common Stock and continues
to retain control over all matters requiring approval by the stockholders,
including the election of directors.
No Dividends Anticipated
Because we intend to apply our earnings, if any, to finance our operations,
and because of restrictions set forth in our Revolving Credit Facility and Term
Loan, we do not anticipate that we will pay cash dividends on our Common Stock
in the foreseeable future.
No Public Market for Common Stock
There is no existing trading market for the Common Stock, nor is it known
whether or when one will develop. There can be no assurance that an active
trading market will develop or, if developed, be sustained in the future. There
can also be no assurance as to the degree of price volatility in any such
market.
