Lumber Liquidators 2008 Annual Report Download - page 20

comparisons. As a result of these factors, it is possible that we will not achieve our targeted comparable store
sales growth or that the change in comparable store sales could be negative. If this were to happen, sales and
profit growth would be adversely affected.
Failure to manage our growth effectively could harm our business and operating results.
Our plans call for a significant number of new stores, and increased orders from our website, call center and
catalogs. Our existing management information systems, including our store management systems and financial
and management controls, may be unable to support our expansion. Managing our growth effectively will require
us to continue to enhance these systems, procedures and controls and to hire, train and retain regional managers,
store managers and store staff. We may not respond quickly enough to the changing demands that our expansion
will impose on our management, staff and existing infrastructure. Any failure to manage our growth effectively
could harm our business and operating results.
Our ability to produce hardwood flooring, particularly products made of more exotic species, depends on the
continued availability of sufficient suitable hardwood.
Our business strategy depends on offering a wide assortment of hardwood flooring to our customers. We
sell flooring made from species ranging from domestic maple, oak and pine to imported cherry, ebony,
mahogany and teak. Some of these species are scarce, and we cannot be assured of their continued availability,
especially of exotic hardwoods that comprise a significant portion of our more profitable products. Our ability to
obtain an adequate volume and quality of hard-to-find species depends on our suppliers’ ability to furnish those
species, which, in turn, could be affected by many things including events such as forest fires, insect infestation,
tree diseases, prolonged drought and other adverse weather conditions. Government regulations relating to forest
management practices also affect our suppliers’ ability to harvest or export timber, and changes to regulations
and forest management policies, or the implementation of new laws or regulations, could impede their ability to
do so. If our suppliers cannot deliver sufficient hardwood and we cannot find replacement suppliers, we would
need to curtail finishing of the relevant product lines, which could cause our operating results to deteriorate.
Our dependence on certain suppliers makes us vulnerable to the extent we rely on them.
We rely on a concentrated number of suppliers for the majority of our supply needs. In 2008, one of our
suppliers, Sequoia Floorings, accounted for approximately 29% of our purchases. Our top 10 suppliers accounted
for approximately 67% of our purchases in 2008. We generally do not have long-term contracts with our
suppliers, and we typically obtain our hardwood supplies on an order-by-order basis, writing orders for future
deliveries from 90 to 180 days before delivery. Our suppliers may be unable to supply us in the future due to
various factors, which could include political instability in the supplier’s country, a supplier’s financial
instability, inability or refusal to comply with applicable laws, trade restrictions or tariffs, insufficient transport
capacity and other factors beyond our control. If we can no longer obtain merchandise from our major suppliers,
or they refuse to continue to supply us on commercially reasonable terms or at all, and we cannot find
replacement suppliers, we could experience a deterioration in our net sales and operating results.
If we fail to identify and develop relationships with a sufficient number of qualified mills, our ability to obtain
hardwood products that meet our high quality standards could be harmed.
We purchase flooring directly from mills located around the world. We believe that these direct supplier
relationships are relatively unique in our industry. In order to retain the competitive advantage that we believe
results from these relationships, we need to continue to identify, develop and maintain relationships with
qualified mills that can satisfy our high standards for quality and our requirements for hardwood in a timely and
efficient manner. The need to develop new relationships will be particularly important as we seek to expand our
operations in the future. Any inability to do so could reduce our competitiveness, slow our plans for further
expansion and cause our sales and operating results to deteriorate.
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