Dollar General 2009 Annual Report Download - page 26

incomplete execution of a required product recall can result in the imposition of penalties, including
loss of licenses or significant fines or monetary penalties, in addition to reputational damage.
Litigation may adversely affect our business, financial condition and results of operations.
Our business is subject to the risk of litigation by employees, consumers, suppliers, competitors,
shareholders, government agencies or others through private actions, class actions, administrative
proceedings, regulatory actions or other litigation. The number of employment-related class actions
filed each year has continued to increase, and recent changes and proposed changes in Federal and
state laws may cause claims to rise even more. The outcome of litigation, particularly class action
lawsuits, regulatory actions and intellectual property claims, is difficult to assess or quantify. Plaintiffs in
these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of
the potential loss relating to these lawsuits may remain unknown for substantial periods of time. In
addition, certain of these lawsuits, if decided adversely to us or settled by us, may result in liability
material to our financial statements as a whole or may negatively affect our operating results if changes
to our business operation are required. The cost to defend future litigation may be significant. There
also may be adverse publicity associated with litigation that could negatively affect customer perception
of our business, regardless of whether the allegations are valid or whether we are ultimately found
liable. As a result, litigation may adversely affect our business, financial condition and results of
operations. See ‘‘Item 3. Legal Proceedings’’ for further details regarding certain of these pending
matters.
Failure to attract and retain qualified employees, particularly field, store and distribution center
managers, and to control labor costs, as well as other labor issues, could adversely affect our financial
performance.
Our future growth and performance depends on our ability to attract, retain and motivate qualified
employees, many of whom are in positions with historically high rates of turnover such as field
managers and distribution center managers. Our ability to meet our labor needs, while controlling our
labor costs, is subject to many external factors, including competition for and availability of qualified
personnel in a given market, unemployment levels within those markets, prevailing wage rates,
minimum wage laws, health and other insurance costs, and changes in employment and labor laws
(including changes in the process for our employees to join a union) or other workplace regulation
(including changes in entitlement programs such as health insurance and paid leave programs). To the
extent a significant portion of our employee base unionizes, or attempts to unionize, our labor costs
could increase. In addition, we are evaluating the potential future impact of recently enacted
comprehensive healthcare reform legislation, which will likely cause our healthcare costs to increase.
Our ability to pass along labor costs to our customers is constrained by our low price model.
Our profitability may be negatively affected by inventory shrinkage.
We are subject to the risk of inventory loss and theft. We have experienced inventory shrinkage in
the past, and we cannot assure you that incidences of inventory loss and theft will decrease in the
future or that the measures we are taking will effectively address the problem of inventory shrinkage.
Although some level of inventory shrinkage is a necessary and unavoidable cost of doing business, if we
were to experience higher rates of inventory shrinkage or incur increased security costs to combat
inventory theft, our financial condition could be affected adversely.
A significant disruption to our distribution network or to the timely receipt of inventory could adversely
impact sales or increase our transportation costs, which would decrease our profits.
We rely on our ability to replenish depleted inventory in our stores through deliveries to our
distribution centers from vendors and then from the distribution centers or direct ship vendors to our
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