Dollar General 2015 Annual Report Download - page 84

10-K
unusual expense or operational failure related to this process could affect store operations negatively.
For example, delivery delays or increases in transportation costs (including through increased fuel costs,
increased carrier rates or driver wages as a result of driver shortages, a decrease in transportation
capacity for overseas shipments, or work stoppages or slowdowns) could significantly decrease our
ability to make sales and earn profits. Labor shortages or work stoppages in the transportation industry
or long-term disruptions to the national and international transportation infrastructure that lead to
delays or interruptions of deliveries or which would necessitate our securing alternative labor or
shipping suppliers could also increase our costs or otherwise negatively affect our business.
We maintain a network of distribution facilities and are moving forward with plans to build new
facilities to support our growth objectives. Delays in opening distribution centers could adversely affect
our future financial performance by slowing store growth, which may in turn reduce revenue growth, or
by increasing transportation costs. In addition, distribution-related construction or expansion projects
entail risks that could cause delays and cost overruns, such as: shortages of materials or skilled labor;
work stoppages; unforeseen construction, scheduling, engineering, environmental or geological
problems; weather interference; fires or other casualty losses; and unanticipated cost increases. The
completion date and ultimate cost of these projects could differ significantly from initial expectations
due to construction-related or other reasons. We cannot guarantee that any project will be completed
on time or within established budgets.
Risks associated with or faced by our suppliers could adversely affect our financial performance.
The products we sell are sourced from a wide variety of domestic and international suppliers, and
we are dependent on our vendors to supply merchandise in a timely and efficient manner. In 2015, our
largest and second largest suppliers each accounted for 7% of our purchases. We have not experienced
any difficulty in obtaining sufficient quantities of core merchandise and believe that, if one or more of
our current sources of supply became unavailable, we would generally be able to obtain alternative
sources without experiencing a substantial disruption of our business. However, such alternative sources
could increase our merchandise costs, result in a temporary reduction in store inventory levels, and
reduce the quality of our merchandise, and an inability to obtain alternative sources could adversely
affect our sales. Additionally, if a supplier fails to deliver on its commitments, whether due to financial
difficulties or other reasons, we could experience merchandise out-of-stocks that could lead to lost sales
and damage to our reputation.
We directly imported approximately 6% of our purchases (measured at cost) in 2015, but many of
our domestic vendors directly import their products or components of their products. Changes to the
prices and flow of these goods for any reason, such as political unrest or acts of war, currency
fluctuations, disruptions in maritime lanes, port labor disputes, and economic conditions and instability
in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers’
failure to meet our standards, issues with labor practices of our suppliers or labor problems they may
experience (such as strikes, stoppages or slowdowns, which could also increase labor costs during and
following the disruption), the availability and cost of raw materials to suppliers, increased import duties,
merchandise quality or safety issues, transport availability and cost, increases in wage rates and taxes,
transport security, inflation, and other factors relating to the suppliers and the countries in which they
are located or from which they import, are beyond our control and could adversely affect our
operations and profitability. While we are working to reduce our dependency on goods produced in
China, a substantial amount of our imported merchandise still comes from China, and thus, a change in
the Chinese leadership, economic and market conditions, internal economic stimulus actions, or
currency or other policies, as well as increases in costs of labor and wage taxes, could negatively impact
our merchandise costs. In addition, the United States’ foreign trade policies, tariffs and other
impositions on imported goods, trade sanctions imposed on certain countries, the limitation on the
importation of certain types of goods or of goods containing certain materials from other countries and
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