Costco 2008 Annual Report Download - page 16

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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 and/or
results of operations. These risks 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, expense control, membership
renewal rates, shopping frequency, litigation impact 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 may be other factors that we cannot
anticipate or that are not described in this report, generally because we do not presently 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 warehouse 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 warehouse 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, warehouse clubs, internet-based retailers and catalog businesses.
Such retailers and warehouse club operators compete in a variety of ways, including merchandise
pricing, selection and availability, services offered to members, location, store hours and price. Our
inability 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/or 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, consumer debt
levels, unsettled financial markets, and other economic factors could adversely affect demand for our
products and services or require a change in the mix of products we sell. Prices of certain commodity
products, including gasoline and other food products, are historically volatile and are subject to
fluctuations arising from changes in domestic and international supply and demand, labor costs,
competition, market speculation, government regulations and periodic delays in delivery. Rapid and
significant changes in commodity prices may affect our sales and profit margins. These factors can
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