Pottery Barn 2014 Annual Report Download - page 28

We have historically experienced fluctuations in our customers’ 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 size of our mailings, timing of delivery of our mailings, 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 and mail 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 and may be impacted in the future by changes in the services provided by the
post office. Any delays in the timing of catalog delivery could cause customers to forego or defer purchases,
negatively impacting our business and operating results.
Declines in our comparable brand revenues may harm our operating results and cause a decline in the market
price of our common stock.
Various factors affect comparable brand revenues, including the number, size and location of stores we open,
close, remodel or expand in any period, the overall economic and general retail sales environment, consumer
preferences and buying trends, changes in sales mix among distribution channels, our ability to efficiently source
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 and in our e-commerce business and fluctuations in
foreign exchange rates. Among other things, weather conditions have affected, and may continue to affect,
comparable brand revenues by limiting our ability to deliver our products to our stores, altering consumer
behavior, or requiring us to close certain stores temporarily and thus reducing 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 brand revenue results to differ materially from prior periods and from earnings
guidance we have provided. For example, the overall economic and general retail sales environment, as well as
local and global economic conditions, has caused a significant decline in our comparable brand revenue results in
the past.
Our comparable brand revenues have fluctuated significantly in the past on an annual, quarterly and monthly
basis, and we expect that comparable brand revenues will continue to fluctuate in the future. In addition, past
comparable brand revenues are not necessarily an indication of future results and comparable brand revenues
may decrease in the future. Our ability to improve our comparable brand revenue results depends, in large part,
on maintaining and improving our forecasting of customer demand and buying trends, selecting effective
marketing techniques, effectively driving traffic to our stores, e-commerce websites and direct-mail catalogs
through marketing and various promotional events, providing an appropriate mix of merchandise for our broad
and diverse customer base and using effective pricing strategies. Any failure to meet the comparable brand
revenue 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 anticipate merchandise returns might have a negative impact on our business.
We record a reserve for merchandise returns based on historical return trends together with current product sales
performance in each reporting period. If actual returns are greater than those projected and reserved for by
management, additional sales returns might be recorded in the future. In addition, to the extent that returned
merchandise is damaged, we often do not receive full retail value from the resale or liquidation of the
merchandise. Further, the introduction of new merchandise, changes in merchandise mix, changes in consumer
confidence, or other competitive and general economic conditions may cause actual returns to differ from
merchandise return reserves. Any significant increase in merchandise returns that exceeds our reserves could
harm our business and operating results.
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