Dick's Sporting Goods 2011 Annual Report Download - page 40

may not be able to advertise cost-effectively in new or smaller markets in which we have less store
density, which could slow sales growth at such stores.
To the extent that we are not able to meet these various challenges, our sales could decrease, our
operating costs could increase and our profitability could be impacted.
If we are unable to predict or effectively react to changes in consumer demand or shopping patterns, we may
lose customers and our sales may decline.
Our success depends in part on our ability to anticipate and respond in a timely manner to changing
consumer demand and preferences and shopping patterns regarding sporting goods. Our products must
appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are
subject to change. We often make commitments to purchase products from our vendors several months
in advance of the proposed delivery. If we misjudge the market for our merchandise our sales may
decline significantly. We may overstock unpopular products and be forced to take significant inventory
markdowns or miss opportunities for other products, both of which could have a negative impact on
our profitability. Conversely, shortages of items that prove popular could impact our net sales. In
addition, a major shift in consumer demand away from sporting goods could also have a material
adverse effect on our business, results of operations and financial condition.
Unauthorized disclosure of sensitive or confidential customer information could harm the Company’s business
and standing with our customers.
The protection of our customer, employee and Company data is critical to us. The Company relies on
commercially available systems, software, tools and monitoring to provide security for processing,
transmission and storage of confidential customer information, such as payment card and personal
information. Despite the security measures the Company has in place, its facilities and systems, and
those of its third-party service providers, may be vulnerable to security breaches, acts of vandalism,
computer viruses, misplaced or lost data, programming or human errors, or other similar events. Any
security breach involving the misappropriation, loss or other unauthorized disclosure of confidential
information, whether by the Company or its vendors, could damage our reputation, expose us to risk of
litigation and liability, disrupt our operations and harm our business.
We may be subject to various types of litigation and other claims and our insurance may not be sufficient to
cover damages related to those claims.
From time to time the Company or its subsidiaries may be involved in lawsuits or other claims arising
in the course of business, including those related to federal or state wage and hour laws, product
liability, consumer protection, advertising, employment, intellectual property, tort and other matters. In
addition, although we do not sell hand guns, assault weapons or automatic firearms, we do sell hunting
rifles, semi-automatic hunting rifles and ammunition, which are products that are associated with an
increased risk of injury and related lawsuits. We may also be subject to lawsuits relating to the design,
manufacture or distribution of our private brand products. We may incur losses relating to these claims,
including costs associated with defending against them. We may also incur losses due to lawsuits
relating to our performance of background checks on hunting rifle purchasers as mandated by state and
federal law or the improper use of hunting rifles and ammunition sold by us, including lawsuits by
municipalities or other organizations attempting to recover costs from hunting rifle manufacturers and
retailers relating to the misuse of hunting rifles and ammunition. In addition, in the future there may
be increased federal, state or local regulation, including taxation, on the sale of hunting rifles and
ammunition in our current markets as well as future markets in which we may operate.
Commencement of these lawsuits against us or the establishment of new regulations could reduce our
sales and decrease our profitability. There is a risk that claims or liabilities will exceed our insurance
coverage. In addition, we may be unable to retain adequate liability insurance in the future. Although
18 Dick’s Sporting Goods, Inc. 2011 Annual Report