Family Dollar 2010 Annual Report Download - page 15

ITEM 1A. RISK FACTORS
The risks described below could materially and adversely affect our business, financial condition and results
of operations. We also may be adversely affected by risks not currently known or risks that we do not currently
consider to be material to our business.
General economic conditions could impact our business adversely in various respects.
A slowdown in the U.S. economy or other economic conditions affecting disposable consumer income, such
as employment levels, inflation, business conditions, fuel and energy costs, consumer debt levels, lack of
available credit, interest rates, and tax rates, may affect our business adversely by reducing overall consumer
spending or by causing customers 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 or a reduction in profitability due to lower margins. The current global economic
uncertainty, the impact of recessions, and the potential for failures or realignments of financial institutions and
the related impact on available credit may impact our suppliers, our landlords, our customers and our operations
in an adverse manner including, but not limited to, our inability to readily access liquid funds or credit, increases
in the cost of credit, bankruptcy of our suppliers or landlords, and other impacts, which we are currently unable
to fully anticipate.
Our profitability is vulnerable to cost increases, inflation and energy prices.
Future increases in our costs, such as the cost of merchandise, shipping rates, freight and fuel costs, and
store occupancy costs, may reduce our profitability. These cost changes may be the result of inflationary
pressures that would further reduce our sales or profitability. Increases in other operating costs, including
changes in energy prices, wage rates and lease and utility costs, may increase our costs of goods or operating
expenses and reduce our profitability. For example, increases in the cost of diesel fuel will likely result in an
increase in transportation costs, which will increase our overall operating costs and possibly lower profitability.
Our growth is dependent upon our ability to increase sales in existing stores and the success of our new store-
opening program, our store renovation program and other operating and infrastructure initiatives.
Our growth is dependent on both increases in sales in existing stores and our ability to open profitable new
stores. Increases in sales in existing stores are dependent on factors such as competition, merchandise selection,
store operations and customer satisfaction. If we fail to realize our goals of successfully managing our store
operations and increasing our customer retention and recruitment levels, our sales may not increase and our
growth may be impacted adversely. Our ability to open profitable new stores depends on many factors, including
our ability to identify suitable markets and sites for new stores, negotiate leases and development agreements
with acceptable terms, gain name recognition in the new markets and successfully compete against local
competition, while managing expenses and costs. Unavailability of attractive store locations, delays in the
acquisition or opening of new stores, delays, disruptions or costs associated with remodeling and renovating
existing stores, delays or costs resulting from a decrease in commercial development due to capital constraints,
difficulties in staffing and operating new store locations, and lack of customer acceptance of stores in new market
areas or our renovated store design all may impact our new store growth negatively and the costs or the
profitability associated with new, remodeled or renovated stores.
In addition, higher costs or any failure to achieve targeted results associated with the implementation of new
programs or initiatives could adversely affect our results of operations. We are undertaking a variety of operating
initiatives and infrastructure initiatives related to, among other things, a comprehensive store renovation
program, private brand expansion, global sourcing initiatives, and store workflow management. These changes
may result in temporary disruptions to our business and negatively impact sales, and the failure to properly
execute any of these initiatives or the failure to obtain the anticipated results of such initiatives could have an
adverse impact on our future operating results.
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