Dollar General 2004 Annual Report Download - page 28

26
Management’s Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The฀Company฀is฀dependent฀upon฀the฀smooth฀functioning฀
of฀its฀distribution฀network฀and฀upon฀the฀capacity฀of฀its฀
DCs.฀The Company relies upon the ability to replenish
depleted inventory through deliveries to its DCs from
vendors, and from the DCs to its stores by various means
of transportation, including shipments by air, sea and
truck on the roads and highways of the United States.
Labor shortages in the trucking industry could negatively
impact transportation costs. In addition, long-term disrup-
tions to the national and international transportation
infrastructure that lead to delays or interruptions of
service would adversely affect the Company’s business.
Moreover, to facilitate its expected growth, the Company
will need additional DCs in the coming years. If the
Company were unable to locate sites for the new DCs
or were unable to achieve functionality of the new
DCs in the time frame expected, the Company’s ability
to achieve the expected growth could be inhibited.
Construction and expansion projects relating to the
Company’s DCs entail risks which could cause delays
and cost overruns, such as: shortages of materials;
shortages of skilled labor or work stoppages; unforeseen
construction scheduling, engineering, environmental or
geological problems; weather interference; fires or other
casualty losses; and unanticipated cost increases. The
completion dates and anticipated costs of these projects
could differ significantly from initial expectations for con-
struction-related or other reasons. The Company cannot
guarantee that any project will be completed on time or
within established budgets.
The฀Company’s฀success฀depends฀to฀a฀significant฀extent฀
upon฀the฀abilities฀of฀its฀senior฀management฀team฀and฀
the฀performance฀of฀its฀employees.฀The loss of services
of key members of the Company’s senior management
team or of certain other key employees could negatively
impact the Company’s business. In addition, future per-
formance will depend upon the Company’s ability to
attract, retain and motivate qualified employees to keep
pace with its expansion schedule. The inability to do so
may limit the Company’s ability to effectively penetrate
new market areas.
If฀the฀Company฀cannot฀open฀new฀stores฀on฀schedule,฀
its฀growth฀will฀be฀impeded.฀Delays in store openings
could adversely affect the Company’s future operations
by slowing new store growth, which may in turn reduce
its revenue growth. The Company’s ability to timely open
new stores and to expand into additional states will
depend in part on the following factors: the availability of
attractive store locations; the ability to negotiate favor-
able lease terms; the ability to hire and train new person-
nel, especially store managers; the ability to identify
customer demand in different geographic areas; general
economic conditions; and the availability of sufficient
funds for expansion. Many of these factors are beyond
the Company’s control.
The฀inability฀to฀execute฀operating฀initiatives฀could฀
impact฀the฀Company’s฀operating฀results.฀The Company
is undertaking a significant number of operating initiatives
in 2005 that have the potential to be disruptive in the
short term if they are not implemented effectively.
Ineffective implementation or execution of some or all of
these initiatives could negatively impact the Company’s
operating results.
The฀Company’s฀cost฀of฀doing฀business฀could฀increase฀
as฀a฀result฀of฀changes฀in฀federal,฀state฀or฀local฀regula-
tions.฀Unanticipated changes in the federal or state
minimum wage or living wage requirements or changes
in other wage or workplace regulations could adversely
impact the Company’s ability to meet financial targets.
In addition, changes in these requirements or in federal,
state or local regulations governing the sale of the
Company’s products, particularly “over-the-counter”
medications or health products, would increase the
Company’s cost of doing business and, with respect
to regulations governing the sale of products, could
adversely and materially impact the Company’s
sales results.
Rising฀insurance฀costs฀and฀loss฀experience฀could฀฀
negatively฀impact฀profitability.฀The costs of insurance
(workers’ compensation insurance, general liability
insurance, health insurance, property insurance and
directors’ and officers’ liability insurance) and loss
experience have risen in recent years. If such increases
continue, they could have a negative impact on the
Company’s profitability.