Whole Foods 2013 Annual Report Download - page 22

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We have significant lease obligations, which may require us to continue paying rent for store locations that we no longer operate.
The majority of our stores, distribution centers, bakehouses and administrative facilities are leased. We are subject to risks
associated with our current and future real estate leases. Our costs could increase because of changes in the real estate markets
and supply or demand for real estate sites. We generally cannot cancel our leases, so if we decide to close a location, we may
nonetheless be committed to perform our obligations under the applicable lease, including paying the base rent for the remaining
lease term. As each lease expires, we may fail to negotiate renewals, either on commercially acceptable terms or any terms at
all. As of September 29, 2013, we had 26 leased properties and adjacent spaces that are not being utilized in current operations.
These properties represent acquired dormant locations, stores closed post-acquisition, and stores closed due to relocation. See
Note 9 to the consolidated financial statements, “Leases,” in Part II, “Item 8. Financial Statements and Supplementary Data,”
of this Report on Form 10-K.
Claims under our self-insurance program may differ from our estimates, which could materially impact our results of operations.
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 team member
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.
Perishable foods product losses could materially impact our results of operations.
Our stores offer a significant number of perishable products, accounting for approximately 66.2% of our total sales in fiscal year
2013. 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.
Actual or perceived food safety concerns may adversely affect our sales.
There is increasing governmental scrutiny of and public awareness regarding food safety. We believe that many customers choose
to shop our stores because of their interest in health, nutrition and food safety. We believe that our customers hold us to a higher
food safety standard than other supermarkets. The real or perceived sale of contaminated food products by us could result in
government enforcement action, private litigation, product recalls and other liabilities, the settlement or outcome of which might
have a material adverse effect on our operating results.
Pending or future legal proceedings could materially impact our results of operations.
From time to time, we are party to legal proceedings, including matters involving personnel and employment issues, personal
injury, intellectual property, product liability, acquisitions, and other proceedings arising in the ordinary course of business. Our
results could be materially impacted by the decisions and expenses related to pending or future proceedings.
The loss of key management could negatively affect our business.
We are dependent upon a number of key management and other team members. If we were to lose the services of a significant
number of key team members within a short period of time, this could have a material adverse effect on our operations. We do
not maintain key person insurance on any team member. Our continued success also is dependent upon our ability to attract and
retain qualified team members to meet our future growth needs. We face intense competition for qualified team members, many
of whom are subject to offers from competing employers. We may not be able to attract and retain necessary team members to
operate our business.
A widespread health epidemic could materially impact our business.
The Company’s business could be severely impacted by a widespread regional, national or global health epidemic. Our stores
are a place where customers come together, interact and learn and at the same time discover the many joys of eating and sharing
food. A widespread health epidemic may cause customers to avoid public gathering places or otherwise change their shopping
behaviors. Additionally, a widespread health epidemic could also adversely impact our business by disrupting production and
delivery of products to our stores and by impacting our ability to appropriately staff our stores.
Our investments in money market funds and certain other securities are subject to market risks, which may result in losses.
As of September 29, 2013, we had approximately $194 million in short-term investments classified as cash and cash equivalents
and approximately $1.0 billion in available-for-sale marketable securities. We have invested these amounts primarily in state
and local municipal obligations, government agency securities, corporate commercial paper, and money market funds meeting
certain criteria. These investments are subject to general credit, liquidity, market and interest rate risks, which, if they materialize,
could have a negative impact on our results of operations.