Big Lots 2014 Annual Report Download - page 88

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If we are unable to maintain or upgrade our computer systems or if we are unable to convert to alternate systems in an
efficient and timely manner, our operations may be disrupted or become less efficient.
We depend on a variety of information technology and computer systems for the efficient functioning of our business. We rely
on certain hardware, telecommunications and software vendors to maintain and periodically upgrade many of these systems so
that we can continue to support our business. Various components of our information technology and computer systems,
including hardware, networks, and software, are licensed to us by third party vendors. We rely extensively on our information
technology and computer systems to process transactions, summarize results, and manage our business. Our information
technology and computer systems are subject to damage or interruption from power outages, computer and telecommunications
failures, computer viruses, cyberattack or other security breaches, catastrophic events such as fires, floods, earthquakes,
tornados, hurricanes, acts of war or terrorism, and usage errors by our employees or our contractors. In recent years, we have
begun using hosted solutions for certain of our information technology and computers systems, which are more exposed to
telecommunication failures. If our information technology or computer systems are damaged or cease to function properly, we
may have to make a significant investment to fix or replace them, and we may suffer loss of critical data and interruptions or
delays in our operations as a result. Any material interruption experienced by our information technology or computer systems
could negatively affect our business and results of operations. Costs and potential interruptions associated with the
implementation of new or upgraded systems and technology or with maintenance or adequate support of our existing systems
could disrupt or reduce the efficiency of our business.
Declines in general economic condition, disposable income levels, and other conditions could lead to reduced consumer
demand for our merchandise thereby materially affecting our revenues and gross margin.
Our results of operations can be directly impacted by the health of the U.S. economy. Our business and financial performance
may be adversely impacted by current and future economic conditions, including factors that may restrict or otherwise
negatively impact consumer financing, disposable income levels, unemployment levels, energy costs, interest rates, recession,
inflation, the impact of unseasonable weather, natural disasters or terrorist activities and other matters that influence consumer
spending. Specifically, our Soft Home, Hard Home, Home Decor & Furniture and Seasonal merchandise categories may be
threatened when disposable income levels are negatively impacted by economic conditions. Additionally, the net sales of
cyclical product offerings in our Seasonal category may be threatened when we experience extended periods of unseasonable
weather. In particular, the economic conditions and weather patterns of four states (Ohio, Texas, California, and Florida) are
important as approximately 33% of our current stores operate and 35% of our 2014 net sales occurred in these states.
Changes in federal or state legislation and regulations, including the effects of legislation and regulations on product safety
and hazardous materials, could increase our cost of doing business and adversely affect our operating performance.
We are exposed to the risk that new federal or state legislation, including new product safety and hazardous material laws and
regulations, may negatively impact our operations and adversely affect our operating performance. Additional changes in
product safety legislation or regulations may lead to product recalls and the disposal or write-off of merchandise, as well as
fines or penalties and reputational damage. If our merchandise, including food and consumable products, do not meet
applicable governmental safety standards or our customers’ expectations regarding quality or safety, we could experience lost
sales, increased costs and be exposed to legal and reputational risk. Additionally, if we discard or dispose of our merchandise,
particularly that which is non-salable, in a fashion that is inconsistent with jurisdictional standards, we could expose ourselves
to certain fines and litigation costs related to hazardous material regulations. Our inability to comply on a timely basis with
regulatory requirements, execute product recalls in a timely manner, or consistently implement waste management standards,
could result in fines or penalties which could have a material adverse effect on our financial results. In addition, negative
customer perceptions regarding the safety of the products we sell could cause us to lose market share to our competitors. If this
occurs, it may be difficult for us to regain lost sales.