Lumber Liquidators 2008 Annual Report Download - page 23

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consumers in the hardwood flooring market expect to have sales associates serving them who are knowledgeable
about the entire assortment of products offered by the retailer and the process of choosing and installing
hardwood flooring. As a result, competition for qualified store managers and sales associates among flooring
retailers is intense. We may not succeed in attracting and retaining the personnel we require to conduct our
current operations and support our potential future growth. In addition, as we expand into new markets, we may
find it more difficult to hire, motivate and retain qualified employees.
Increased competition could cause price declines, decrease demand for our products and decrease our market
share.
We operate in the hardwood flooring industry, which is highly fragmented and competitive. We face
significant competition from multinational home improvement chains, national and regional flooring specialty
chains, Internet-based companies and privately-owned single-site enterprises. We compete on the basis of price,
customer service, store location and range, quality and availability of hardwood flooring we offer our customers.
Our competitive position is also influenced by the availability, quality and cost of merchandise, labor costs,
finishing, distribution and sales efficiencies and our productivity compared to that of our competitors. As we
expand into new and unfamiliar markets, we may experience different competitive conditions than in the past.
Some of our competitors are larger organizations, have existed longer, are more diversified in the products
they offer and have a more established market presence with substantially greater financial, marketing, personnel
and other resources than we have. In addition, our competitors may forecast market developments more
accurately than we do, develop products that are superior to ours or produce similar products at a lower cost, or
adapt more quickly to new technologies or evolving customer requirements than we do. Intense competitive
pressures from one or more of our competitors could cause price declines, decrease demand for our products and
decrease our market share.
Hardwood flooring may become less popular as compared to other types of floor coverings in the future. For
example, our products are made using various hardwood species, including rare exotic hardwood species
harvested from rainforests, and concern over the environmental impact of tree harvesting could shift consumer
preference towards synthetic or inorganic flooring. In addition, hardwood flooring competes against carpet, vinyl
sheet, vinyl tile, ceramic tile, natural stone and other types of floor coverings. If consumer preferences shift
towards types of floor coverings other than hardwood flooring, we may experience decreased demand for our
products.
All of these competitive factors may harm us and reduce our sales and profits.
Damage, destruction or disruption of our Toano facility could significantly impede our ability to finish and
distribute our products.
We currently finish approximately 80% of all Bellawood products at our Toano facility. In 2008, Bellawood
flooring accounted for approximately one-quarter of our net sales. We also finish small quantities of certain of
our other products there. In addition, the Toano facility serves as our distribution center, and approximately 90%
of our merchandise passes through this facility before we move it to our stores. The Toano facility also houses
our primary computer systems, which control our management information and inventory management systems,
and our corporate headquarters. We do not have any other finishing or distribution facilities. If the Toano facility
or our inventory held there were damaged or destroyed by fire, wood infestation or other causes, our entire
finishing and distribution processes would be disrupted, which could cause significant lost production and delays
in delivery. This could impede our ability to stock our stores and deliver products to our customers, and cause
our sales and operating results to deteriorate.
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