LensCrafters 2012 Annual Report Download - page 119

| 33 >MANAGEMENT REPORT
RISKS RELATING TO OUR BUSINESS AND OPERATIONS
e) If we are unable to successfully introduce new products and develop our brands, our
future sales and operating performance may suffer
The mid- and premium price categories of the prescription frame and sunglasses markets
in which we compete are particularly vulnerable to changes in fashion trends and consumer
preferences. Our historical success is attributable, in part, to our introduction of innovative
products which are perceived to represent an improvement over products otherwise
available in the market and our ability to develop our brands, especially our Ray-Ban and
Oakley house brands. Our future success will depend on our continued ability to develop
and introduce such innovative products and continued success in building our brands. If
we are unable to continue to do so, our future sales could decline, inventory levels could
rise, leading to additional costs for storage and potential write-downs relating to the value
of excess inventory, and there could be a negative impact on production costs since fixed
costs would represent a larger portion of total production costs due to the decline in
quantities produced, which could materially adversely affect our results of operations.
f) If we are not successful in completing and integrating strategic acquisitions to expand
or complement our business, our future profitability and growth could be at risk
As part of our growth strategy, we have made, and may continue to make, strategic
business acquisitions to expand or complement our business. Our acquisition activities,
however, can be disrupted by overtures from competitors for the targeted candidates,
governmental regulation and rapid developments in our industry. We may face additional
risks and uncertainties following an acquisition, including (i) difficulty in integrating the
newly acquired business and operations in an efficient and effective manner, (ii) inability to
achieve strategic objectives, cost savings and other benefits from the acquisition, (iii) the
lack of success by the acquired business in its markets, (iv) the loss of key employees of the
acquired business, (v) a decrease in the focus of senior management on our operations, (vi)
difficulty integrating human resources systems, operating systems, inventory management
systems and assortment planning systems of the acquired business with our systems, (vii)
the cultural differences between our organization and that of the acquired business and
(viii) liabilities that were not known at the time of acquisition or the need to address tax or
accounting issues.
If we fail to timely recognize or address these matters or to devote adequate resources to
them, we may fail to achieve our growth strategy or otherwise realize the intended benefits
of any acquisition. Even if we are able to integrate our business operations successfully, the
integration may not result in the realization of the full benefits of synergies, cost savings,
innovation and operational efficiencies that may be possible from the integration or in the
achievement of such benefits within the forecasted period of time.
g) If we are unable to achieve and manage growth, operating margins may be reduced
as a result of decreased efficiency of distribution
In order to achieve and manage our growth effectively, we are required to increase and
streamline production and implement manufacturing efficiencies where possible, while