Whole Foods 2014 Annual Report Download - page 15

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power outages, computer and telecommunications failures, computer viruses, security breaches, including breaches of our
transaction processing or other systems that could result in the compromise of confidential customer data, catastrophic events,
and usage errors by our team members. If our systems are breached, damaged or cease to function properly, we may have to
make significant investments to fix or replace them, suffer interruptions in our operations, and face costly litigation, and our
reputation with our customers may be harmed. Any material interruption in our information systems may have a material adverse
effect on our operating results.
Disruption of significant supplier relationships could negatively affect our business.
United Natural Foods, Inc. (“UNFI”) is our single largest third-party supplier, accounting for approximately 32% of our total
purchases in fiscal year 2014. Due to this concentration of purchases from a single third-party supplier, the cancellation of our
distribution arrangement or the disruption, delay or inability of UNFI to deliver product to our stores may materially and adversely
affect our operating results while we establish alternative distribution channels.
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.
The loss of key management or difficulties recruiting and retaining qualified team members 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.
Perishable foods product losses could materially impact our results of operations.
Our stores offer a significant number of perishable products, accounting for approximately 66.8% of our total sales in fiscal year
2014. 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.
Unions may attempt to organize our team members, which could harm our business.
All of our team members are non-union, and we consider our team member relations to be very strong. From time to time unions
have attempted to organize all or part of our team member base at certain stores and non-retail facilities. Responding to such
organization attempts is distracting to management and team members and may have a negative financial impact on a store,
facility or the Company as a whole.
Market and Other External Risks
Increased competition may adversely affect our revenues and profitability.
Our competitors include but are not limited to local, regional, national and international supermarkets, natural food stores,
warehouse membership clubs, online retailers, small specialty stores, farmers’ markets, and restaurants. Their businesses compete
with us for products, customers and locations. In addition, some are expanding more aggressively in offering a range of natural
and organic foods. Some of these competitors may have been in business longer or may have greater financial or marketing
resources than we do and may be able to devote greater resources to sourcing, promoting and selling their products. As competition
in certain areas intensifies, our operating results may be negatively impacted through a loss of sales, reduction in margin from
competitive price changes, and/or greater operating costs such as marketing.
Economic conditions that adversely impact consumer spending could materially impact our business.
Our operating results may be materially impacted by changes in overall economic conditions that impact consumer confidence
and spending, including discretionary spending. Future economic conditions affecting disposable consumer income such as
employment levels, business conditions, changes in housing market conditions, the availability of credit, interest rates, tax rates,
fuel and energy costs, the impact of natural disasters or acts of terrorism, and other matters could reduce consumer spending or
cause consumers to shift their spending to lower-priced competitors. In addition, there can be no assurance that various
governmental activities to stimulate the economy will restore consumer confidence or change spending habits.