Pottery Barn 2007 Annual Report Download - page 20

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
any period, the general retail sales environment, consumer preferences and buying trends, changes in sales mix
among distribution channels, our ability to efficiently source and distribute products, changes in our merchandise
mix, competition (including competitive promotional activity), current local and global economic conditions, the
timing of our releases of new merchandise and promotional events, the success of marketing programs, the
cannibalization of existing store sales by our new stores, increased catalog circulation, continued strength in our
Internet business and fluctuation in foreign exchange rates. Among other things, weather conditions can affect
comparable store sales because inclement weather can alter consumer behavior or require us to close certain
stores temporarily and thus reduce store traffic. Even if stores are not closed, many customers may decide to
avoid going to stores in bad weather. These factors have caused and may continue to cause our comparable store
sales results to differ materially from prior periods and from earnings guidance we have provided.
Our comparable store sales have fluctuated significantly in the past on an annual, quarterly and monthly basis,
and we expect that comparable store sales will continue to fluctuate in the future. Past comparable store sales are
no indication of future results, and comparable store sales may decrease in the future. Our ability to maintain and
improve our comparable store sales results depends, in large part, on maintaining and improving our forecasting
of customer demand and buying trends, selecting effective marketing techniques, providing an appropriate mix of
merchandise for our broad and diverse customer base and using effective pricing strategies. Any failure to meet
the comparable store sales expectations of investors and securities analysts in one or more future periods could
significantly reduce the market price of our common stock.
Our failure to successfully manage the costs and performance of our catalog mailings might have a negative
impact on our business.
Postal rate increases, paper costs, printing costs and other catalog distribution costs affect the cost of our catalog
mailings. We rely on discounts from the basic postal rate structure, which could be changed or discontinued at
any time. Our cost of paper has fluctuated significantly during the past three fiscal years, and our paper costs are
expected to increase in the future. Future increases in postal rates, paper costs or printing costs would have a
negative impact on our operating results to the extent that we are unable to offset such increases by raising prices
or by implementing more efficient printing, mailing, delivery and order fulfillment systems.
We have historically experienced fluctuations in customer response to our catalogs. Customer response to our
catalogs is substantially dependent on merchandise assortment, merchandise availability and creative
presentation, as well as the selection of customers to whom the catalogs are mailed, changes in mailing strategies,
and the sizing and timing of delivery of the catalogs. In addition, environmental organizations and other
consumer advocacy groups may attempt to create an unfavorable impression of our paper use in catalogs and our
distribution of catalogs generally. In addition, we depend upon external vendors to print our catalogs. The failure
to effectively produce or distribute our catalogs could affect the timing of catalog delivery. The timing of catalog
delivery has been and can be affected by postal service delays. Any delays in the timing of catalog delivery could
cause customers to forego or defer purchases.
We must successfully manage our Internet business.
The success of our Internet business depends, in part, on factors over which we have limited control. We must
successfully respond to changing consumer preferences and buying trends relating to Internet usage. We are also
vulnerable to certain additional risks and uncertainties associated with the Internet, including changes in required
technology interfaces, website downtime and other technical failures, costs and technical issues as we upgrade
our website software, computer viruses, changes in applicable federal and state regulation, security breaches and
10