Costco 2009 Annual Report Download - page 17

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RISK FACTORS
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 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, supermarkets, supercenter stores, retail and wholesale grocers,
department, drug, variety and specialty stores and general merchandise wholesalers and distributors,
as well as internet-based retailers, wholesalers and catalog businesses. Such retailers and warehouse
club operators compete in a variety of ways, including merchandise pricing, selection and availability,
services, location, convenience, 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, weaknesses in housing and real estate markets, reduced consumer
confidence, changes related to government fiscal and tax policies 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 also increase our merchandise costs and/or 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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