Pottery Barn 2008 Annual Report Download - page 23

and distribute products, changes in our merchandise mix, competition (including competitive promotional
activity and discount retailers), 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, changes in 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. Comparable store sales have decreased in the past and are expected to continue to
decrease in fiscal 2009. 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.
Catalog mailings are an important component of 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 may continue to fluctuate 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. In addition, if the performance of our catalogs declines
or we misjudge the correlation between our catalog circulation and net sales, or if our catalog circulation
optimization strategy overall is not successful, our results of operations could be negatively impacted.
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,
the sizing and timing of delivery of the catalogs as well as the general retail sales environment and current
domestic and global economic conditions. 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, which may have a negative effect on our sales and our reputation. 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.
If we are unable to effectively manage our Internet business, our reputation and operating results may be harmed.
Our Internet business has been our fastest growing channel over the last several years and continues to be a
significant part of our sales success. 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 consumer privacy concerns. In addition, we must keep up to date with
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Form 10-K