Ulta 2015 Annual Report Download - page 20

customers, supporting product offerings through both of these channels could create issues that have the potential to
adversely affect our results of operations. For example, if our e-commerce business successfully grows, it may do so
in part by attracting existing guests, rather than new guests, who choose to purchase products from us online rather
than from our physical stores, thereby reducing the financial performance of our stores. In addition, offering
different products through each channel could cause conflicts and cause some of our current or potential internet
customers to consider competing distributors of beauty products. In addition, offering products through our internet
channel could cause some of our current or potential vendors to consider competing internet offerings of their
products either on their own or through competing distributors. As we continue to grow our e-commerce business,
the impact of attracting existing rather than new guests, of conflicts between product offerings online and through
our stores and of opening up our channels to increased internet competition could have a material adverse effect on
our business, financial condition, profitability and cash flows.
We may not be able to sustain our growth plans and successfully implement our long-range strategic and
financial plans, which could have a material adverse effect on our business, financial condition, profitability
and cash flows. In addition, we intend to continue to open new stores, which could strain our resources and
have a material adverse effect on our business, financial condition, profitability and cash flows.
Our continued and future growth largely depends on our ability to implement our long-range strategic and
financial plans and successfully open and operate new stores on a profitable basis. There can be no assurance that
we will be successful in implementing our growth plans or long-range strategic imperatives, and our failure to do
so could have a material adverse effect on our business, financial condition, profitability and cash flows. We
intend to continue to grow our number of stores for the foreseeable future. Our continued expansion places
increased demands on our financial, managerial, operational, supply-chain and administrative resources. For
example, our planned expansion will require us to increase the number of people we employ, as well as to
monitor and upgrade our management information and other systems and our distribution infrastructure. These
increased demands and operating complexities could cause us to operate our business less efficiently and could
have a material adverse effect on our business, financial condition, profitability and cash flows.
We are subject to risks relating to our information technology systems, and any failure to adequately protect
our critical information technology systems or any material disruption of our information systems could
negatively impact financial results and materially adversely affect our business operations, particularly during
the holiday season.
We are increasingly dependent on a variety of information systems, including management, supply chain and
financial information and various other processes and transactions, to effectively manage our business. We have
also identified the need to expand and upgrade our information systems to support historical and expected future
growth. The failure of our information systems to perform as designed or breaches of security could have an
adverse effect on our business and results of our operations. Any material disruption of our systems could disrupt
our ability to track, record and analyze the merchandise that we sell and could cause delays or cancellation of
customer orders or impede the manufacture or shipment of products, the processing of transactions, our ability to
receive and process e-commerce orders and/or the reporting of financial results.
Our e-commerce operations are increasingly important to our business. The Ulta.com website serves as an
effective extension of Ulta Beauty’s marketing and prospecting strategies (beyond catalogs, newspaper inserts
and national advertising) by exposing potential new customers to the Ulta Beauty brand, product offerings and
enhanced content. As the importance of our website and e-commerce operations to our business grows, we are
increasingly vulnerable to website downtime and other technical failures. Our failure to successfully respond to
these risks could reduce e-commerce sales and damage our brand’s reputation.
Increased costs or interruption in our third-party vendors’ overseas sourcing operations could disrupt
production, shipment or receipt of some of our merchandise, which would result in lost sales and could
increase our costs.
We directly source the majority of our Ulta branded product components and gifts with purchase and other
promotional products through third-party vendors using foreign factories. In addition, many of our vendors use
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