Home Depot 2010 Annual Report Download - page 13

consumer preferences, expectations and needs. Failure to maintain attractive stores and to timely identify or
effectively respond to changing consumer tastes, preferences, expectations as to service levels, spending patterns
and home improvement needs could adversely affect our relationship with customers, the demand for our
products and services and our market share.
Our success depends upon our ability to attract, train and retain highly qualified associates while also
controlling our labor costs.
Our customers expect a high level of customer service and product knowledge from our associates. To meet the
needs and expectations of our customers, we must attract, train and retain a large number of highly qualified
associates while at the same time controlling labor costs. Our ability to control labor costs is subject to numerous
external factors, including prevailing wage rates, the impact of legislation or regulations governing labor
relations or healthcare benefits, and health and other insurance costs. In addition, we compete with other retail
businesses for many of our associates in hourly positions, and we invest significant resources in training and
motivating them to maintain a high level of job satisfaction. These positions have historically had high turnover
rates, which can lead to increased training and retention costs. There is no assurance that we will be able to
attract or retain highly qualified associates in the future.
The inflation or deflation of commodity prices could affect our prices, demand for our products, our sales and
our profit margins.
Prices of certain commodity products, including lumber and other raw materials, are historically volatile and are
subject to fluctuations arising from changes in domestic and international supply and demand, labor costs,
competition, market speculation, government regulations and periodic delays in delivery. Rapid and significant
changes in commodity prices may affect the demand for our products, our sales and our profit margins.
We rely on third party suppliers. If we fail to identify and develop relationships with a sufficient number of
qualified suppliers, or if our current suppliers experience financial difficulties, our ability to timely and
efficiently access products that meet our high standards for quality could be adversely affected.
We buy our products from suppliers located throughout the world. Our ability to continue to identify and develop
relationships with qualified suppliers who can satisfy our high standards for quality and our need to access
products in a timely and efficient manner is a significant challenge. Our ability to access products also can be
adversely affected by political instability, the financial instability of suppliers (particularly in light of continuing
economic difficulties in various regions of the world), suppliers’ noncompliance with applicable laws, trade
restrictions, tariffs, currency exchange rates, supply disruptions, shipping interruptions or cost, and other factors
beyond our control.
If we are unable to effectively manage and expand our alliances and relationships with selected suppliers of
brand name products, we may be unable to effectively execute our strategy to differentiate ourselves from our
competitors.
As part of our focus on product differentiation, we have formed strategic alliances and exclusive relationships
with selected suppliers to market products under a variety of well-recognized brand names. If we are unable to
manage and expand these alliances and relationships or identify alternative sources for comparable products, we
may not be able to effectively execute product differentiation.
If we do not maintain the security of customer, associate or company information, we could damage our
reputation, incur substantial additional costs and become subject to litigation.
Any significant compromise or breach of customer, associate or company data security could significantly
damage our reputation and result in additional costs, lost sales, fines and lawsuits. The regulatory environment
related to information security and privacy is increasingly rigorous, with new and constantly changing
requirements applicable to our business, and compliance with those requirements could result in additional costs.
There is no guarantee that the procedures that we have implemented to protect against unauthorized access to
secured data are adequate to safeguard against all data security breaches.
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