Pottery Barn 2008 Annual Report Download - page 29

As a result, we expect that throughout the year there could be on-going variability in our quarterly tax rates as
taxable events occur and exposures are evaluated. Further, our effective tax rate in a given financial statement
period may be materially impacted by changes in the mix and level of earnings or by changes to existing
accounting rules or regulations.
If we fail to attract and retain key personnel, our business and operating results may be harmed.
Our future success depends to a significant degree on the skills, experience and efforts of key personnel in our
senior management, whose vision for our company, knowledge of our business and expertise would be difficult
to replace. If any of our key employees leaves, is seriously injured or is unable to work, and we are unable to find
a qualified replacement, we may be unable to execute our business strategy.
In addition, our main offices are located in the San Francisco Bay Area, where competition for personnel with
retail and technology skills can be intense. If we fail to identify, attract, retain and motivate these skilled
personnel, especially in this challenging economic environment, our business may be harmed. Further, in the
event we need to hire additional personnel, we may experience difficulties in attracting and successfully hiring
such individuals due to competition for highly skilled personnel in our market.
We may be exposed to risks and costs associated with credit card fraud and identity theft that could cause us to
incur unexpected expenditures and loss of revenue.
A significant portion of our customer orders are placed through our website or through our customer care centers.
In addition, a significant portion of sales made through our retail channel require the collection of certain
customer data, such as credit card information. In order for our sales channel to function and develop
successfully, we and other parties involved in processing customer transactions must be able to transmit
confidential information, including credit card information, securely over public networks. Third parties may
have the technology or knowledge to breach the security of customer transaction data. Although we take the
security of our systems and the privacy of our customers’ confidential information seriously, we cannot
guarantee that our security measures will effectively prevent others from obtaining unauthorized access to our
information and our customers’ information. Any person who circumvents our security measures could destroy
or steal valuable information or disrupt our operations. Any security breach could cause consumers to lose
confidence in the security of our website or stores and choose not to purchase from us. Any security breach could
also expose us to risks of data loss, litigation and liability and could seriously disrupt our operations and harm
our reputation, any of which could harm our business.
In addition, states and the federal government are increasingly enacting laws and regulations to protect
consumers against identity theft. We collect personal information from consumers in the course of doing
business. These laws will likely increase the costs of doing business and, if we fail to implement appropriate
safeguards or to detect and provide prompt notice of unauthorized access as required by some of these new laws,
we could be subject to potential claims for damages and other remedies, which could harm our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our gross leased store space, as of February 1, 2009, totaled approximately 6,148,000 square feet for 627 stores
compared to approximately 5,739,000 square feet for 600 stores, as of February 3, 2008. All of the existing stores
are leased by us with original terms ranging generally from 5 to 22 years. Certain leases contain renewal options
for periods of up to 20 years. The rental payment requirements in our store leases are typically structured as
either minimum rent, minimum rent plus additional rent based on a percentage of store sales if a specified store
sales threshold is exceeded, or rent based on a percentage of store sales if a specified store sales threshold or
contractual obligations of the landlord has not been met. Contingent rental payments, including rental payments
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Form 10-K