Dollar General 2011 Annual Report Download - page 110

10-K
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below and the other information contained in this
report and other filings that we make from time to time with the SEC, including our consolidated
financial statements and accompanying notes. Any of the following risks could materially and adversely
affect our business, financial condition, results of operations or liquidity. In addition, the risks described
below are not the only risks we face. Our business, financial condition, results of operations or liquidity
could also be adversely affected by additional factors that apply to all companies generally, as well as
other risks that are not currently known to us or that we currently view to be immaterial. While we
attempt to mitigate known risks to the extent we believe to be practicable and reasonable, we can
provide no assurance, and we make no representation, that our mitigation efforts will be successful.
Current economic conditions and other economic factors may adversely affect our financial performance
and other aspects of our business.
We believe that many of our customers are on fixed or low incomes and generally have limited
discretionary spending dollars. A further slowdown in the economy, or a delayed recovery, or other
economic conditions affecting disposable consumer income, such as increased unemployment or
underemployment levels, inflation, increases in fuel or other energy costs and interest rates, lack of
available credit, consumer debt levels, higher tax rates and other changes in tax laws, and further
erosion in consumer confidence, may adversely affect our business by reducing our customers’ spending
or by causing them to shift their spending to products other than those sold by us or to products sold
by us that are less profitable than other product choices, all of which could result in lower net sales,
decreases in inventory turnover, greater markdowns on inventory, and a reduction in profitability due
to lower margins. Many of those factors, as well as commodity rates, transportation costs (including the
costs of diesel fuel), costs of labor, insurance and healthcare, foreign exchange rate fluctuations, lease
costs, measures that create barriers to or increase the costs associated with international trade, changes
in other laws and regulations and other economic factors, also affect our cost of goods sold and our
selling, general and administrative expenses, which may adversely affect our sales or profitability. We
have limited or no ability to control many of these factors. Product costs began to escalate in our
2010 fourth quarter as a result of increases in the costs of certain commodities (including cotton, sugar,
coffee, groundnuts, resin), and increasing diesel fuel costs. We will be diligent in our efforts to keep
product costs as low as possible in the face of these increases while still working to optimize gross
profit and meet the needs of our customers.
In addition, many of the factors discussed above, along with current global economic conditions
and uncertainties, the potential for additional failures or realignments of financial institutions, and the
related impact on available credit may affect us and our suppliers and other business partners,
landlords and service providers in an adverse manner including, but not limited to, reducing access to
liquid funds or credit, increasing the cost of credit, limiting our ability to manage interest rate risk,
increasing the risk of bankruptcy of our suppliers, landlords or counterparties to, or other financial
institutions involved in, our credit facilities and our derivative and other contracts, increasing the cost
of goods to us, and other adverse consequences which we are unable to fully anticipate or control.
Our plans depend significantly on initiatives designed to increase sales and improve the efficiencies, costs
and effectiveness of our operations, and failure to achieve or sustain these plans could affect our performance
adversely.
We have initiatives (such as those relating to marketing, merchandising, promotions, sourcing,
shrink, private brand, store operations and real estate) in various stages of testing, evaluation, and
implementation, upon which we expect to rely to continue to improve our results of operations and
financial condition and to achieve our financial plans. These initiatives are inherently risky and
uncertain, even when tested successfully, in their application to our business in general. It is possible
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