Family Dollar 2010 Annual Report Download - page 16

We operate in a highly competitive environment and, as a result, we may not be able to compete effectively or
maintain or increase our sales, market share or margins, particularly if the prolonged global economic
conditions intensify.
We operate in the highly competitive discount retail merchandise sector with numerous competitors, some
of which may have greater resources than us. We compete for customers, merchandise, real estate locations and
employees. This competitive environment subjects us to various risks, including the ability to continue our store
and sales growth and to provide attractive merchandise to our customers at competitive prices that allow us to
maintain our profitability. Price reductions by our competitors may result in the reduction of our prices and a
corresponding reduction in our profitability. Consolidation in our retail sector, changes in pricing of
merchandise, or offerings of other services by competitors could have a negative impact on the relative
attractiveness of our stores to consumers. Many of our large box competitors are or may be developing small box
formats, and the opening of smaller stores may produce more competition, particularly in urban markets. Our
ability to provide convenience in a small box retail format while offering attractive, competitively-priced
products could be impacted by various actions of our competitors that are beyond our control. See Item 1 –
“Competition” for further discussion of our competitive position.
We depend heavily on technology systems that support all aspects of our operations; the failure of existing or
new technology to provide anticipated benefits could affect our results of operations adversely.
Our merchandising, finance, human resources, distribution and logistics and store operations functions
depend heavily upon the efficient operation of our technological resources. A failure in our information
technology systems or controls could impact our operations negatively. In addition, we continuously upgrade our
current technology or install new technology. Our inability to implement in a timely manner such upgrades or
installations, to train our employees effectively in the use of our technology, or to obtain the anticipated benefits
of our technology could impact our operations or profitability adversely.
If we are unable to secure our customers’ confidential and credit card information, or other private data relating
to our employees or the Company, we could be subject to negative publicity, costly government enforcement
actions, or private litigation, which could damage our business reputation and adversely affect our profitability.
The protection of our customer, employee, and company data is critical to us. We have procedures and
technology in place to safeguard our customers’ debit and credit card information, our employees’ private data,
and the Company’s records and intellectual property. However, if we experience a data security breach of any
kind, we could be exposed to negative publicity, government enforcement actions, private litigation and costly
response measures. In addition, our reputation within the business community and with our customers may be
affected, which could result in our customers discontinuing the use of debit or credit cards in our stores, or not
shopping in our stores altogether. This could cause us to lose market share to our competitors and have an
adverse effect on our financial results.
New accounting guidance or changes in the interpretation or application of existing accounting guidance could
affect our financial performance adversely.
New accounting guidance may require systems and other changes that could increase our operating costs
and/or change our financial statements. For example, implementing future accounting guidance related to leases,
contingencies, and other areas impacted by the current convergence project between the Financial Accounting
Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) could require us to make
significant changes to our lease management system or other accounting systems, and could result in changes to
our financial statements.
Unanticipated changes in the interpretation or application of existing accounting guidance could result in
material charges or restatements of our financial statements, which may further result in litigation or regulatory
actions which could have an adverse effect on our financial condition and results of operations.
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