Pottery Barn 2013 Annual Report Download - page 29

forced us to develop new expertise and face new challenges, risks and uncertainties. For example, we face the
risk that our e-commerce business might cannibalize a significant portion of our retail and catalog businesses,
and we face the risk of catalog circulation cannibalizing our retail sales. While we recognize that our e-commerce
sales cannot be entirely incremental to sales through our retail and catalog channels, we seek to attract as many
new customers as possible to our e-commerce websites. We continually analyze the business results of our
channels and the relationships among the channels in an effort to find opportunities to build incremental sales.
If we are unable to introduce new brands and brand extensions successfully, or to reposition or close existing
brands, our business and operating results may be negatively impacted.
We have in the past and may in the future introduce new brands and brand extensions, reposition brands, close
existing brands, or acquire new brands, especially as we continue to expand globally. Our newest brands and
brand extensions — Williams-Sonoma Home, PBteen and Mark and Graham, as well as our acquired brand,
Rejuvenation — and any other new brands, may not grow as we project and plan for. The work involved with
integrating new brands into our existing systems and operations could be time consuming, require significant
amounts of management time and result in the diversion of substantial operational resources. Further, if we
devote time and resources to new brands, acquired brands, brand extensions or brand repositioning, and those
businesses are not as successful as we planned, then we risk damaging our overall business results or incurring
impairment charges to write off existing goodwill associated with previously acquired brands. Alternatively, if
our new brands, acquired brands, brand extensions or repositioned brands prove to be very successful, we risk
hurting our other existing brands through the potential migration of existing brand customers to the new
businesses. In addition, we may not be able to introduce new brands and brand extensions, integrate newly
acquired brands, reposition existing brands, or expand our brands globally, in a manner that improves our overall
business and operating results and may therefore be forced to close the brands, which may damage our reputation
and negatively impact our operating results.
Fluctuations in our tax obligations and effective tax rate may result in volatility of our operating results and
stock price.
We are subject to income taxes in many U.S. and certain foreign jurisdictions, and our domestic and global tax
liabilities are subject to the allocation of expenses in differing jurisdictions. Our provision for income taxes is
subject to volatility and could be adversely impacted by a number of factors that require significant judgment and
estimation. Although we believe our estimates are reasonable, the final tax outcome of these matters may
materially differ from our estimates and adversely affect our financial condition or operating results. We record
tax expense based on our estimates of future payments, which include reserves for estimates of probable
settlements of foreign and domestic tax audits. At any one time, many tax years are subject to audit by various
taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate
settlement of these issues. As a result, we expect that throughout the year there could be ongoing variability in
our quarterly tax rates as taxable events occur and exposures are evaluated.
In addition, our effective tax rate in a given financial statement period may be materially impacted by changes in
the mix and level of earnings or losses in countries with differing statutory tax rates or by changes to existing
rules or regulations. There could be an adverse impact on our effective tax rate if pending government proposals
in the U.S. for fundamental international tax reform are enacted. Further, other pending tax legislation in the U.S.
and abroad could negatively impact our current or future tax structure and effective tax rates.
Our inability to obtain commercial insurance at acceptable rates 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, cybersecurity breaches 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 or unwilling to fulfill their
15
Form 10-K