Dick's Sporting Goods 2011 Annual Report Download - page 42

we cannot predict the effect that future changes in economic or political conditions in such foreign
countries may have on our operations. In the event of disruptions or delays in supply due to economic
or political conditions in foreign countries, such disruptions or delays could adversely affect our results
of operations unless and until alternative supply arrangements could be made. In addition, merchandise
purchased from alternative sources may be of lesser quality or more expensive than the merchandise we
currently purchase abroad.
Our private brand offerings expose us to various risks.
In addition to brand name products, we offer our customers private brand products that are not
available in other stores. We expect to continue to grow our exclusive private brand offerings through a
combination of brands that we own and brands that we license from third parties. We have invested in
our development and procurement resources and marketing efforts relating to these private brand
offerings. Although we believe that our private brand products offer value to our customers at each
price point and provide us with higher gross margins than comparable products we sell, the expansion
of our private brand offerings also subjects us to certain additional risks. These include, among others:
risks related to our failure to comply with government and industry safety standards (e.g., those
enforced by the Consumer Product Safety Commission, including the Consumer Product Safety
Improvement Act, and similar state regulatory agencies); potential mandatory or voluntary product
recalls; suits or other claims resulting from injuries associated with the use of our private brand
products; our ability to successfully protect our proprietary rights (e.g., defending against counterfeit,
knock offs, grey-market, infringing or otherwise unauthorized goods); our ability to successfully navigate
and avoid claims related to the proprietary rights of third parties; our ability to successfully administer
and comply with obligations under license agreements that we have with the licensors of brands,
including in some instances certain sales minimums that if not met could cause us to lose the licensing
rights or pay damages; sourcing and manufacturing outside the U.S., including foreign laws and
regulations, political unrest, disruptions or delays in cross-border shipments, changes in economic
conditions in foreign countries, exchange rate fluctuations and conducting activities with third-party
manufacturers; increases in the price of raw materials used in the manufacturing of our private brand
products; and other risks generally encountered by entities that source, sell and market exclusive
branded offerings for retail. An increase in sales of our private brands may also adversely affect sales
of our vendors’ products, which may, in turn, adversely affect our relationship with our vendors. Our
failure to adequately address some or all of these risks could have a material adverse effect on our
business, results of operations and financial condition.
The loss of our key executives, especially Edward W. Stack, our Chairman and Chief Executive Officer, could
have a material adverse effect on our business due to the loss of their experience and industry relationships.
Our success depends on the continued services of our senior management, particularly Edward W.
Stack, our Chairman and Chief Executive Officer. Mr. Stack also holds a majority of the voting power
of our capital stock, and has been operating the Company since 1984. Mr. Stack possesses detailed and
in-depth knowledge of the issues, opportunities and challenges facing the Company and its businesses.
If we were to lose any key senior executive, especially Mr. Stack, our business could be materially
adversely affected.
Our costs may change as a result of currency exchange rate fluctuations.
Many of the goods we purchase are manufactured abroad, and the prices charged by foreign
manufacturers may be affected by the fluctuation of their local currency against the U.S. dollar. We
source goods from various countries, including China, and thus changes in the value of the U.S. dollar
compared to other currencies may affect the costs of goods that we purchase.
20 Dick’s Sporting Goods, Inc. 2011 Annual Report