Pottery Barn 2006 Annual Report Download - page 21

Many of these factors are beyond our control. For example, for the purpose of identifying suitable store locations,
we rely, in part, on demographic surveys regarding location of consumers in our target market segments. While
we believe that the surveys and other relevant information are helpful indicators of suitable store locations, we
recognize that the information sources cannot predict future consumer preferences and buying trends with
complete accuracy. In addition, changes in demographics, in the types of merchandise that we sell and in the
pricing of our products may reduce the number of suitable store locations. Further, time frames for lease
negotiations and store development vary from location to location and can be subject to unforeseen delays.
Construction and other delays in store openings could have a negative impact on our business and operating
results. We may not be able to open new stores or, if opened, operate those stores profitably.
We must timely and effectively deliver merchandise to our stores and customers.
We cannot control all of the various factors that might affect our fulfillment rates in direct-to-customer sales and
timely and effective merchandise delivery to our stores. We rely upon third party carriers for our merchandise
shipments and reliable data regarding the timing of those shipments, including shipments to our customers and to
and from all of our stores. In addition, we are heavily dependent upon three carriers for the delivery of our
merchandise to our customers. Accordingly, we are subject to the risks, including labor disputes, union
organizing activity, inclement weather, natural disasters and possible acts of terrorism associated with such
carriers’ ability to provide delivery services to meet our shipping needs. Failure to deliver merchandise in a
timely and effective manner could damage our reputation and brands. In addition, fuel costs have increased
substantially and airline companies struggle to operate profitably, which could lead to increased fulfillment
expenses. The increased fulfillment costs could negatively affect our business and operating results by increasing
our transportation costs and, therefore, decreasing the efficiency of our shipments.
Our failure to successfully manage our order-taking and fulfillment operations could have a negative impact on
our business.
Our direct-to-customer business depends on our ability to maintain efficient and uninterrupted order-taking and
fulfillment operations and our e-commerce websites. Disruptions or slowdowns in these areas could result from
disruptions in telephone service or power outages, inadequate system capacity, system issues, computer viruses,
security breaches, human error, changes in programming, union organizing activity, disruptions in our third party
labor contracts, natural disasters or adverse weather conditions. These problems could result in a reduction in
sales as well as increased selling, general and administrative expenses.
In addition, we face the risk that we cannot hire enough qualified employees, or that there will be a disruption in
the labor we hire from our third party providers, especially during our peak season, to support our
direct-to-customer operations, due to circumstances that reduce the relevant workforce. The need to operate with
fewer employees could negatively impact our customer service levels and our operations.
Our facilities and systems, as well as those of our vendors, are vulnerable to natural disasters and other
unexpected events, any of which could result in an interruption in our business.
Our retail stores, corporate offices, distribution centers, infrastructure projects and direct-to-customer operations,
as well as the operations of vendors from which we receive goods and services, are vulnerable to damage from
earthquakes, hurricanes, fires, floods, power losses, telecommunications failures, hardware and software failures,
computer viruses and similar events. If any of these events result in damage to our facilities or systems, or those
of our vendors, we may experience interruptions in our business until the damage is repaired, resulting in the
potential loss of customers and revenues. In addition, we may incur costs in repairing any damage beyond our
applicable insurance coverage.
We experience fluctuations in our comparable store sales.
Our success depends, in part, upon our ability to increase sales at our existing stores. Various factors affect
comparable store sales, including the number, size and location of stores we open, close, remodel or expand in
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Form 10-K