Family Dollar 2011 Annual Report Download - page 18

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 negatively affect our business.
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
hour laws. We are also a defendant in other types of class action lawsuits. The cost to defend these class-action
lawsuits may be significant. Plaintiffs in these types of cases may seek recovery of very large or indeterminate
amounts, and the magnitude of the potential loss relating to these lawsuits may remain unknown for substantial
periods of time. In addition, certain of these lawsuits, if decided adversely to us or settled by us, may result in
liability material to our financial statements as a whole or may negatively affect our operating results if changes
to our business operations are required. There also may be adverse publicity associated with litigation that could
negatively affect customer perception of our business, regardless of whether the allegations are valid or whether
we are ultimately found liable. As a result, litigation may adversely affect our business, financial condition and
results of operations. See Note 10 to the Consolidated Financial Statements included in this Report for further
details regarding certain of these pending matters.
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
14