AutoZone 2011 Annual Report Download - page 76

Our business depends upon hiring and retaining qualified employees.
We believe that much of our brand value lies in the quality of the more than 65,000 AutoZoners employed in our
stores, distribution centers, store support centers and ALLDATA. We cannot be assured that we can continue to
hire and retain qualified employees at current wage rates. If we are unable to hire, properly train and/or retain
qualified employees, we could experience higher employment costs, reduced sales, losses of customers and
diminution of our brand, which could adversely affect our earnings. If we do not maintain competitive wages, our
customer service could suffer due to a declining quality of our workforce or, alternatively, our earnings could
decrease if we increase our wage rates.
Inability to acquire and provide quality merchandise could adversely affect our sales and results of
operations.
We are dependent upon our vendors continuing to supply us with quality merchandise. If our merchandise
offerings do not meet our customers' expectations regarding quality and safety, we could experience lost sales,
increased costs and exposure to legal and reputational risk. All of our vendors must comply with applicable
product safety laws, and we are dependent on them to ensure that the products we buy comply with all safety and
quality standards. Events that give rise to actual, potential or perceived product safety concerns could expose us to
government enforcement action or private litigation and result in costly product recalls and other liabilities. In
addition, negative customer perceptions regarding the safety or quality of the products we sell could cause
our customers to seek alternative sources for their needs, resulting in lost sales. In those circumstances, it may be
difficult and costly for us to regain the confidence of our customers. Moreover, if any of our significant vendors
experience financial difficulties or otherwise are unable to deliver merchandise to us on a timely basis, or at all,
we could have product shortages in our stores that could adversely affect customers’ perceptions of us and cause
us to lose customers and sales.
Our largest stockholder, as a result of its voting ownership, may have the ability to exert substantial
influence over actions to be taken or approved by our stockholders.
As of October 17, 2011, ESL Investments, Inc. and certain of its affiliates (together, “ESL”) beneficially owned
approximately 29.3% of our outstanding common stock. As a result, ESL may have the ability to exert substantial
influence over actions to be taken or approved by our stockholders, including the election of directors and
potential change of control transactions. In the future, ESL may acquire or sell shares of common stock and
thereby increase or decrease its ownership stake in us. Significant fluctuations in their level of ownership could
have an impact on our share price.
In June 2008, we entered into an agreement with ESL (the “ESL Agreement”), in which ESL has agreed to vote
shares of our common stock owned by ESL in excess of 37.5% in the same proportion as all non-ESL-owned
shares are voted. Additionally, under the terms of the ESL Agreement, the Company added two directors in
August 2008 that were identified by ESL. William C. Crowley, one of the two directors identified by ESL, is the
President and Chief Operating Officer of ESL Investments, Inc.
Our ability to grow depends in part on new store openings, existing store remodels and expansions and
effective utilization of our existing supply chain and hub network.
Our continued growth and success will depend in part on our ability to open and operate new stores and expand
and remodel existing stores to meet customers’ needs on a timely and profitable basis. Accomplishing our new
and existing store expansion goals will depend upon a number of factors, including the ability to partner with
developers and landlords to obtain suitable sites for new and expanded stores at acceptable costs, the hiring and
training of qualified personnel, particularly at the store management level, and the integration of new stores into
existing operations. There can be no assurance we will be able to achieve our store expansion goals, manage our
growth effectively, successfully integrate the planned new stores into our operations or operate our new,
remodeled and expanded stores profitably.
In addition, we extensively utilize hub stores, our supply chain and logistics management techniques to efficiently
stock our stores. If we fail to effectively utilize our existing hubs and/or supply chains, we could experience
inappropriate inventory levels in our stores, which could adversely affect our sales volume and/or our margins.
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10-K