Family Dollar 2010 Annual Report Download - page 18

countries in which they are located, some or all of which are beyond our control, can negatively impact our
operations, increase costs, and lower our margins. Such events or circumstances include, but are not limited to:
• political and economic instability;
• the financial instability and labor problems of suppliers;
• the availability of raw materials;
• merchandise quality issues;
• changes in currency exchange rates; and
• transportation availability and cost.
In addition, we are currently implementing global sourcing programs and vendor and product quality
requirements that could negatively impact our ability to find qualified suppliers or their ability to provide
merchandise at attractive prices. These and other factors affecting our suppliers and our access to products could
affect our financial performance adversely.
Operational difficulties, including those associated with our ability to develop and operate our stores and
distribution facilities, could impact our business adversely.
Our stores are decentralized and are managed through a network of geographically dispersed management
personnel. Our inability to operate our stores effectively and efficiently, including the ability to control losses
resulting from inventory shrinkage, may negatively impact our sales or profitability.
In addition, we rely upon our distribution and logistics network to provide goods to stores in a timely and
cost-effective manner. Any disruption, unanticipated expense or operational failure related to this process could
impact our store operations negatively. We maintain a network of distribution facilities throughout our
geographic territory and build new facilities to support our growth objectives. Delays in opening distribution
facilities or stores could adversely affect our future operations by slowing the unit growth, which may in turn
reduce revenue growth. Adverse changes in the cost of operating distribution facilities and stores, such as
changes in labor, utility and other operating costs, could have an adverse impact on our financial performance.
Adverse changes in our inventory shrinkage at the store level or in distribution facilities could also impact our
results negatively.
We rely on third-party shippers and carriers whose operations are outside our control, and any failure by them
to deliver products in a timely manner may damage our reputation and could cause us to lose customers.
We rely on arrangements with third-party shippers and carriers such as independent shipping companies for
timely delivery of products to stores and distribution operations throughout the country. As a result, we are
subject to carrier disruptions and increased costs due to factors that are beyond our control, including labor
strikes, inclement weather and increased fuel costs. If the services of any of these third parties become
unsatisfactory, we may experience delays in meeting our customers’ product demands and we may not be able to
find a suitable replacement on a timely basis or on commercially reasonable terms. Any failure to deliver
products in a timely manner may damage our reputation and could cause us to lose customers.
Adverse impacts associated with legal proceedings and claims could affect our business negatively.
We are involved in a number of legal proceedings which include employment, tort, real estate, commercial
and other litigation. Certain of these lawsuits, if decided adversely to us or settled by us, may result in liability
material to our results of operations, financial condition and liquidity. The number of employment-related class
actions filed each year has continued to increase, and recent changes and proposed changes in federal and state
laws may cause claims to rise even more. We are currently a defendant in numerous employment cases
containing class-action allegations in which the plaintiffs have alleged violations of federal and state wage and
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