Pottery Barn 2014 Annual Report Download - page 29

If we are unable to successfully manage the complexities associated with a multi-channel and multi-brand
business, we may suffer declines in our existing business and our ability to attract new business.
With the expansion of our e-commerce business, the development of new brands, acquired brands, and brand
extensions, our overall business has become substantially more complex. The changes in our business have
forced us to develop new expertise and face new challenges, risks and uncertainties. For example, we face the
risk that our e-commerce business, including our catalog circulation, might cannibalize a significant portion of
our retail sales. While we recognize that our e-commerce sales cannot be entirely incremental to sales through
our retail channel, 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, and any other new brands, as well
as our acquired brand, Rejuvenation, or our expansion into new lines of business, including commercial furniture,
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, brand repositioning, or new lines of business 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 any existing goodwill associated with previously acquired brands. Alternatively, if our new brands,
acquired brands, brand extensions, repositioned brands or new lines of business 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, develop new lines of business 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
or new lines of business, 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.
We are subject to income taxes in many U.S. and certain foreign 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, actual results 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 examinations. 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
laws or regulations.
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,
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Form 10-K