Whole Foods 2007 Annual Report Download - page 26

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Changes in the Availability of Quality Natural and Organic Products Could Impact Our Business
There is no assurance that quality natural and organic products will be available to meet our future needs. If conventional
supermarkets significantly increase their natural and organic product offerings or if new laws require the reformulation of
certain products to meet tougher standards, the supply of these products may be constrained. Any significant disruption in the
supply of quality natural and organic products could have a material impact on our overall sales and cost of goods sold.
Perishable Foods Product Losses Could Materially Impact Our Results
We believe our stores more heavily emphasize perishable products than conventional supermarket stores. Perishable products
accounted for approximately 67% of total retail sales at Whole Foods Market locations in fiscal year 2007. The Company’s
emphasis on perishable products may result in significant product inventory losses in the event of extended power outages,
natural disasters or other catastrophic occurrences.
Our Stock Price Is Volatile
The market price of our common stock could be subject to significant fluctuation in response to various market factors and
events. These market factors and events include variations in our sales and earnings results, changes in earnings estimates by
securities analysts, publicity regarding us, our competitors, the natural products industry generally, new statutes or
regulations or changes in the interpretation of existing statutes or regulations affecting the natural products industry
specifically, sales of substantial amounts of common stock in the public market or the perception that such sales could occur
and other factors. In addition, the stock market in recent years has experienced broad price and volume fluctuations that often
have been unrelated to the operating performance of particular companies. These market fluctuations also may adversely
affect the market price of our common stock.
Changes in the Number of Stock Option Exercises Could Impact Our Cash Flow
Our cash flow from the exercise of team member stock options may be adversely affected in the future by fluctuations in the
market price of our common stock, changes in income tax law, and changes in the number of stock options we grant.
Capital Needed for Expansion May Not Be Available
The construction and opening or acquisition of new stores and the development of new production and distribution facilities,
along with the remodeling and renovation of existing stores, require significant amounts of capital. In the past, our growth
has been funded primarily through proceeds from public offerings, bank debt, private placements of debt, internally
generated cash flow, and proceeds from stock option exercises. These and other sources of capital may not be available to us
in the future. In addition, restrictive covenants that may be imposed by our lenders may restrict our ability to fund our
growth.
We May Not Be Able to Adequately Protect Our Intellectual Property Rights
We rely on a combination of trademark, trade secret and copyright law and internal procedures and nondisclosure
agreements to protect our intellectual property. There can be no assurance that our intellectual property rights can be
successfully asserted in the future or will not be invalidated, circumvented or challenged. In addition, the laws of certain
foreign countries in which our products may be produced or sold do not protect our intellectual property rights to the same
extent as the laws of the United States. Failure to protect our proprietary information could have a material adverse effect on
our business, results of operations and financial condition.
Self-Insurance Plan Claims Could Materially Impact Our Results
The Company uses a combination of insurance and self-insurance plans to provide for the potential liabilities for workers’
compensation, general liability, property insurance, director and officers’ liability insurance, vehicle liability and employee
health care benefits. Liabilities associated with the risks that are retained by the Company are estimated, in part, by
considering historical claims experience, demographic factors, severity factors and other actuarial assumptions. Our results
could be materially impacted by claims and other expenses related to such plans if future occurrences and claims differ from
these assumptions and historical trends.
Changes in Accounting Standards Could Materially Impact Our Results
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and
interpretations for many aspects of our business, such as accounting for insurance and self-insurance, inventories, goodwill
and intangible assets, store closures, leases, income taxes and share-based compensation, are highly complex and involve
subjective judgments. Changes in these rules or their interpretation could significantly change or add significant volatility to
our reported earnings without a comparable underlying change in cash flow from operations.