Pottery Barn 2004 Annual Report Download - page 41

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and higher labor costs, which would harm our business and operating results. Further, we incur substantial costs
to warehouse and distribute our inventory. Significant increases in our inventory levels may result in increased
warehousing and distribution costs. Higher than expected costs, particularly if coupled with lower than expected
sales, would negatively impact our business and operating results.
We are planning certain systems changes that might disrupt our supply chain operations.
Our success depends on our ability to source and distribute merchandise efficiently through appropriate systems
and procedures. We are in the process of substantially modifying our information technology systems supporting
the product pipeline, including design, sourcing, merchandise planning, forecasting and purchase order,
inventory, distribution, transportation and price management. Modifications will involve updating or replacing
legacy systems with successor systems during the course of several years. There are inherent risks associated
with replacing our core systems, including supply chain and merchandising systems disruptions that affect our
ability to get the correct products into the appropriate stores and delivered to customers. We may not successfully
launch these new systems, or the launch may result in supply chain and merchandising systems disruptions. Any
such disruptions could negatively impact our business and operating results.
We are implementing changes to our data center information technology infrastructure that might disrupt our
business and cost more than expected.
We have engaged IBM to host and manage certain aspects of our data center information technology
infrastructure. Accordingly, we are subject to the risks associated with IBM’s ability to provide information
technology services to meet our needs. Our operations will depend significantly upon IBM’s and our ability to
make our servers, software applications and websites available and to protect our data from damage or
interruption from human error, computer viruses, intentional acts of vandalism, labor disputes, natural disasters
and similar events. If the cost of IBM hosting and managing certain aspects of our data center information
technology infrastructure is more than expected, or if IBM or we are unable to adequately protect our data and
information is lost or our ability to deliver our services is interrupted, then our business and results of operations
may be negatively impacted.
Our operating and financial performance in any given period might not meet the extensive guidance that we have
provided to the public.
We provide extensive public guidance on our expected operating and financial results for future periods.
Although we believe that this guidance provides investors and analysts with a better understanding of
management’s expectations for the future, and is useful to our shareholders and potential shareholders, such
guidance is comprised of forward-looking statements subject to the risks and uncertainties described in this
report and in our other public filings and public statements. Our guidance may not always be accurate. If in the
future our operating or financial results for a particular period do not meet our guidance or the expectations of
investment analysts or if we reduce our guidance for future periods, the market price of our common stock could
decline.
Our quarterly results of operations might fluctuate due to a variety of factors, including seasonality.
Our quarterly results have fluctuated in the past and may fluctuate in the future, depending upon a variety of
factors, including shifts in the timing of holiday selling seasons, including Valentine’s Day, Easter, Halloween,
Thanksgiving and Christmas, and the strategic importance of fourth quarter results. A significant portion of our
revenues and net earnings have been realized during the period from October through December. In anticipation
of increased holiday sales activity, we incur certain significant incremental expenses, including the hiring of a
substantial number of temporary employees to supplement our existing workforce. If, for any reason, we were to
realize significantly lower-than-expected revenues or net earnings during the October through December selling
season, our business and results of operations would be materially adversely affected.
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