Costco 2007 Annual Report Download - page 16

RISK FACTORS
Certain statements contained in this document constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. They include statements that address
activities, events, conditions or developments that we expect or anticipate may occur in the future.
Such forward-looking statements involve risks and uncertainties that may cause actual events, results
or performance to differ materially from those indicated by such statements.
The risks described below could materially and adversely affect our business, financial condition or
results of operations. They could cause our actual results to differ materially from our historical
experience and from results predicted by our forward-looking statements. Those statements may relate
to such matters as sales growth, increases in comparable store sales, impact of cannibalization, price
changes, earnings performance, earnings per share, stock-based compensation expense, warehouse
openings and closures, the effect of adopting certain accounting standards, future financial reporting,
financing, margins, return on invested capital, strategic direction and the demand for our products and
services. You should read these risk factors in conjunction with Management’s Discussion and
Analysis of Financial Condition and Results of Operations in Item 7 of this Report and our consolidated
financial statements and related notes in Item 8 of this Report. There also may be other factors that we
cannot anticipate or that are not described in this report, generally because we do not perceive them to
be material, that could cause results to differ materially from our expectations. Forward-looking
statements speak only as of the date they are made, and we do not undertake to update these
forward-looking statements. You are advised, however, to review any further disclosures we make on
related subjects in our periodic filings with the SEC.
We face strong competition from other retailers and wholesale club operators, which could
negatively affect our financial performance.
The retail business is highly competitive. We compete for members, employees, warehouse sites,
products and services and in other important respects with many other local, regional and national
retailers, both in the United States and in foreign countries. We compete with other wholesale club
operators, discount retailers, retail and wholesale grocers and general merchandise wholesalers and
distributors, as well as electronic commerce retailers, wholesalers and catalog businesses.
Internationally, we compete with retailers who operate department, drug, variety and specialty stores,
supermarkets, supercenter stores, wholesale clubs, internet-based retailers and catalog businesses.
Such retailers and wholesale club operators compete in a variety of ways, including merchandise
selection and availability, services offered to members, location, store hours and price. Our ability to
respond effectively to competitive pressures and changes in the retail markets could negatively affect
our financial performance. Some competitors may have greater financial resources, better access to
merchandise, and greater market penetration than we do.
General economic factors, domestically and internationally, may adversely affect our financial
performance.
Higher interest rates, energy costs, inflation, levels of unemployment, healthcare costs, fluctuations of
certain commodity prices, consumer debt levels, and other economic factors could adversely affect
demand for our products and services or require a change in the mix of products we sell. These factors
can also increase our cost of sales and/or operating, selling, general and administrative expenses, and
otherwise adversely affect our operations and results. General economic conditions can also be
affected by the outbreak of war, acts of terrorism or other significant national or international events.
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