Dick's Sporting Goods 2010 Annual Report Download - page 37

Expansion into new markets could also bring us into direct competition with retailers with whom we have no past experience as
direct competitors. To the extent that we become increasingly reliant on entry into new markets in order to grow, we may face
additional risks and our net income could suffer. To the extent that we are not able to meet these new challenges, our sales could
decrease and our operating costs could increase.
There also can be no assurance that our new stores will generate sales levels necessary to achieve store-level profitability or
profitability comparable to that of existing stores. New stores also may face greater competition and have lower anticipated sales
volumes relative to previously opened stores during their comparable years of operation. We may not be able to advertise cost-
effectively in new or smaller markets in which we have less store density, which could slow sales growth at such stores. We also
cannot guarantee that we will be able to obtain and distribute adequate product supplies to our stores or maintain adequate
warehousing and distribution capability at acceptable costs.
If we are unable to predict or effectively react to changes in consumer demand, we may lose customers and our sales may decline.
Our success depends in part on our ability to anticipate and respond in a timely manner to changing consumer demand and
preferences regarding sporting goods. Our products must appeal to a broad range of consumers whose preferences cannot be
predicted with certainty and are subject to change. We often make commitments to purchase products from our vendors several
months in advance of the proposed delivery. If we misjudge the market for our merchandise our sales may decline significantly.
We may overstock unpopular products and be forced to take significant inventory markdowns or miss opportunities for other
products, both of which could have a negative impact on our profitability. Conversely, shortages of items that prove popular could
reduce our net sales. In addition, a major shift in consumer demand away from sporting goods or sport apparel could also have a
material adverse effect on our business, results of operations and financial condition.
Unauthorized disclosure of sensitive or confidential customer information could harm the Company’s business and standing with our
customers.
The protection of our customer, employee and Company data is critical to us. The Company relies on commercially available
systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential customer
information, such as payment card and personal information. Despite the security measures the Company has in place, its
facilities and systems, and those of its third-party service providers, may be vulnerable to security breaches, acts of vandalism,
computer viruses, misplaced or lost data, programming or human errors, or other similar events. Any security breach involving
the misappropriation, loss or other unauthorized disclosure of confidential information, whether by the Company or its vendors,
could damage our reputation, expose us to risk of litigation and liability, disrupt our operations and harm our business.
We may be subject to claims and our insurance may not be sufficient to cover damages related to those claims.
We may be subject to lawsuits resulting from injuries associated with the use of sporting goods equipment that we sell. In
addition, although we do not sell hand guns, assault weapons or automatic firearms, we do sell hunting rifles and ammunition,
which are products that are associated with an increased risk of injury and related lawsuits. We may also be subject to lawsuits
relating to the design, manufacture or distribution of our private label products. We may incur losses relating to these claims,
including costs associated with defending against them. We may also incur losses due to lawsuits relating to our performance of
background checks on hunting rifle purchasers as mandated by state and federal law or the improper use of hunting rifles and
ammunition sold by us, including lawsuits by municipalities or other organizations attempting to recover costs from hunting rifle
manufacturers and retailers relating to the misuse of hunting rifles and ammunition. In addition, in the future there may be
increased federal, state or local regulation, including taxation, on the sale of hunting rifles and ammunition in our current
markets as well as future markets in which we may operate. Commencement of these lawsuits against us or the establishment
of new regulations could reduce our sales and decrease our profitability. There is a risk that claims or liabilities will exceed our
insurance coverage. In addition, we may be unable to retain adequate liability insurance in the future. Although we have entered
into product liability indemnity agreements with many of our vendors and manufacturers, we cannot assure you that we will be
able to collect payments sufficient to offset product liability losses or, in the case of our private brand products, where almost all
of the manufacturing occurs outside the United States, that we will be able to collect anything at all. In addition, we are subject to
regulation by the Consumer Product Safety Commission, including the Consumer Product Safety Improvement Act, and similar
state regulatory agencies. If we fail to comply with government and industry safety standards, we may be subject to claims,
lawsuits, fines and adverse publicity that could have a material adverse effect on our business, results of operations and financial
condition. In addition, any improper or illegal use by our customers of ammunition or hunting rifles sold by us could have a
negative impact on our reputation and business.
Dick’s Sporting Goods, Inc. ¬2010 Annual Report 17