Staples 2006 Annual Report Download - page 81

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We may be unable to continue to open new stores and enter new markets successfully.
An important part of our business plan is to increase our number of stores and enter new geographic markets. We
currently plan to open at least 110 new stores in fiscal 2007. For our growth strategy to be successful, we must identify
and lease favorable store sites, hire and train associates and adapt management and operational systems to meet the
needs of our expanded operations. These tasks may be difficult to accomplish successfully. If we are unable to open new
stores as quickly as planned, our future sales and profits may be adversely affected. Even if we succeed in opening new
stores, these new stores may not achieve the same sales or profit levels as our existing stores. Also, our expansion strategy
includes opening new stores in markets where we already have a presence so we can take advantage of economies of
scale in marketing, distribution and supervision costs. However, these new stores may result in the loss of sales in existing
stores in nearby areas, which could adversely affect our business and financial performance.
Our growth may continue to strain operations, which could adversely affect our business and financial performance.
Our business has grown dramatically over the past several years and continues to grow through organic growth and
strategic acquisitions. Accordingly, sales of our products and services, the number of stores that we operate, the number
of countries in which we conduct business and the number of associates have grown and likely will continue to grow. This
growth places significant demands on management and operational systems. If we are not successful in continuing to
support our operational and financial systems, expanding our management team and increasing and effectively managing
our associate base, this growth is likely to result in operational inefficiencies and ineffective management of the business
and associates, which will in turn adversely affect our business and financial performance. In addition, as we grow, our
business is subject to a wider array of complex state, federal and international regulations, and may be increasingly the
target of private actions alleging violations of such regulations. This increases the cost of doing business and the risk that
our business practices could unknowingly result in liabilities that may adversely affect our business and financial
performance.
Our operating results may be impacted by changes in the economy that impact business and consumer spending.
Our operating results are directly impacted by the health of the North American, European, South American and
Asian economies. Our business and financial performance may be adversely affected by current and future economic
conditions, including unemployment levels, energy costs, interest rates, recession, inflation, the impact of natural
disasters and terrorist activities, and other matters that influence business and consumer spending.
Our business and financial performance is dependent upon our ability to attract and retain qualified associates.
Our performance is dependent on attracting and retaining a large and growing number of quality associates. We
face intense competition for qualified associates, and many of our associates are in entry-level or part-time positions with
historically high rates of turnover. Our ability to meet our labor needs generally while controlling our labor costs is
subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work
force, unemployment levels, prevailing wage rates, changing demographics, health and other insurance costs and changes
in employment legislation. If we are unable to attract and retain qualified associates or our labor costs increase
significantly, our business and financial performance may be adversely affected.
Our stock price may fluctuate based on market expectations.
The public trading of our stock is based in large part on market expectations that our business will continue to grow
and that we will achieve certain levels of net income. If the securities analysts that regularly follow our stock lower their
rating or lower their projections for future growth and financial performance, the market price of our stock is likely to
drop significantly. In addition, if our quarterly financial performance does not meet the expectations of securities
analysts, our stock price would likely decline. The decrease in the stock price may be disproportionate to the shortfall in
our financial performance.
Our quarterly operating results are subject to significant fluctuation.
Our operating results have fluctuated from quarter to quarter in the past, and we expect that they will continue to do
so in the future. Our earnings may not continue to grow at rates similar to the growth rates achieved in recent years and
may fall short of either a prior fiscal period or investors’ expectations. Factors that could cause these quarterly
fluctuations include: the extent to which sales in new stores result in the loss of sales in existing stores; the mix of