Pottery Barn 2009 Annual Report Download - page 25

strategic alternatives, we concluded that the future potential of the Williams-Sonoma Home brand is limited. As
such, we are working on a plan to restructure the unprofitable segments of the business, including the operations
of our 11 retail stores. As part of this restructuring, it is our intent to market those merchandising categories that
support our bridal registry, expanded flagship and designer assortments through the Williams-Sonoma kitchen
brand. These categories will be available both on-line and in select Williams-Sonoma stores.
Our inability to obtain commercial insurance at acceptable prices or our failure to adequately reserve for self-
insured exposures might increase our expenses and have a negative impact on our business.
We believe that commercial insurance coverage is prudent in certain areas of our business for risk management.
Insurance costs may increase substantially in the future and may be affected by natural catastrophes, fear of
terrorism, financial irregularities and other fraud at publicly-traded companies, intervention by the government
and a decrease in the number of insurance carriers. In addition, the carriers with which we hold our policies may
go out of business, or may be otherwise unable to fulfill their contractual obligations. In addition, for certain
types or levels of risk, such as risks associated with earthquakes, hurricanes or terrorist attacks, we may
determine that we cannot obtain commercial insurance at acceptable prices, if at all. Therefore, we may choose to
forego or limit our purchase of relevant commercial insurance, choosing instead to self-insure one or more types
or levels of risks. We are primarily self-insured for workers’ compensation, employee health benefits and product
and general liability claims. If we suffer a substantial loss that is not covered by commercial insurance or our
self-insurance reserves, the loss and attendant expenses could harm our business and operating results. In
addition, exposures exist for which no insurance may be available and for which we have not reserved.
Our inability or failure to protect our intellectual property would have a negative impact on our brands,
goodwill and operating results.
Our trademarks, service marks, copyrights, trade dress rights, trade secrets, domain names and other intellectual
property are valuable assets that are critical to our success. The unauthorized reproduction or other
misappropriation of our intellectual property could diminish the value of our brands or goodwill and cause a
decline in our sales. Protection of our intellectual property and maintenance of distinct branding are particularly
important as they distinguish our products and services from our competitors who may sell similar products and
services. We may not be able to adequately protect our intellectual property. In addition, the costs of defending
our intellectual property may adversely affect our operating results.
We may be subject to legal proceedings that could be time consuming, result in costly litigation, require
significant amounts of management time and result in the diversion of significant operational resources.
We are involved in lawsuits, claims and proceedings incident to the ordinary course of our business. Litigation is
inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in
costly litigation, require significant amounts of management time and result in the diversion of significant
operational resources. There are a growing number of business method patent infringement lawsuits. There has
also been a rise in lawsuits against companies that collect personal information from customers. In addition, there
has been an increase in employment-related lawsuits. From time to time, we have been subject to these types of
lawsuits. The cost of defending claims against us or the ultimate resolution of such claims may harm our business
and operating results. In addition, the significant deterioration in the global financial markets may create a more
litigious environment and therefore subjects us to increased exposure to shareholder lawsuits.
Our operating results may be harmed by unsuccessful management of our employment, occupancy and other
operating costs, and the operation and growth of our business may be harmed if we are unable to attract
qualified personnel.
To be successful, we need to manage our operating costs and continue to look for opportunities to reduce costs.
We recognize that we may need to increase the number of our employees, especially during peak sales seasons,
and incur other expenses to support new brands and brand extensions, as well as the opening of new stores and
direct-to-customer growth of our existing brands. Alternatively, if we are unable to make substantial adjustments
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Form 10-K