Pottery Barn 2010 Annual Report Download - page 24

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 the 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 these 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. We
may not be able to open new stores or, if opened, operate those stores profitably. Construction and other delays in
store openings could have a negative impact on our business and operating results. Additionally, in these
economic times, we may not be able to renegotiate the terms of our current leases or close our underperforming
stores, either of which could negatively impact our operating results.
Our business and operating results may be harmed if we are unable to timely and effectively deliver merchandise
to our stores and customers.
The success of our business depends, in part, on our ability to 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 two
carriers for the delivery of our merchandise to our customers. Accordingly, we are subject to risks, including
labor disputes, union organizing activity, inclement weather, natural disasters, the closure of such carriers’
offices or a reduction in operational hours due to an economic slowdown, possible acts of terrorism associated
with such carriers’ ability to provide delivery services to meet our shipping needs and disruptions or increased
fuel costs associated with any regulations to address climate change. Failure to deliver merchandise in a timely
and effective manner could damage our reputation and brands. In addition, fuel costs have been volatile and
airline and other transportation companies continue to struggle to operate profitably, which could lead to
increased fulfillment expenses. Any rise in fulfillment costs could negatively affect our business and operating
results by increasing our transportation costs and 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 and operating results.
Our direct-to-customer business depends, in part, on our ability to maintain efficient and uninterrupted order-
taking and fulfillment operations in our customer care centers and on 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.
Industries that are particularly seasonal, such as the home furnishings business, face a higher risk of harm from
operational disruptions during peak sales seasons. 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 to support our direct-to-customer
operations, or that there will be a disruption in the labor we hire from our third party providers, especially during
our peak season. 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 and harm our operating results.
Our retail stores, corporate offices, distribution centers, infrastructure projects and direct-to-customer operations,
as well as the operations of our vendors from which we receive goods and services, are vulnerable to damage
from earthquakes, tornadoes, 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
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