Family Dollar 2012 Annual Report Download - page 20

material to our financial statements as a whole or may negatively affect our operating results if changes to our
business operations are required. 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 Note 11 to the Consolidated Financial Statements included in this
Report for further details regarding certain of these pending matters.
If we are unable to secure our customers’ confidential and credit card information, or other private data relating
to our employees or the Company, we could be subject to negative publicity, costly government enforcement
actions, or private litigation, which could damage our business reputation and adversely affect our profitability.
The protection of our customer, employee, and company data is critical to us. We have procedures and
technology in place to safeguard our customers’ debit and credit card information, our employees’ private data,
and the Company’s records and intellectual property. Despite these measures, we may be vulnerable to data
security breaches, including cyber-security attacks. If we experience a data security breach of any kind, we could
be exposed to negative publicity, government enforcement actions, private litigation, or costly response
measures. In addition, our reputation within the business community and with our customers may be affected,
which could result in our customers discontinuing the use of debit or credit cards in our stores, or not shopping in
our stores altogether. This could cause us to lose market share to our competitors and could have an adverse
effect on our financial results.
Inability to attract and retain qualified employees, particularly field, store and distribution center managers, and
to control labor costs, could adversely affect our business.
Our growth could be adversely impacted by our inability to attract and retain qualified employees at the
store operations level, in distribution facilities, and at the corporate headquarters (the “Store Support Center”)
level, at costs which allow us to profitably conduct our operations. For example, we believe that the retention of
managers at the store level is one factor in reducing inventory shrinkage resulting from employee theft. Various
other factors, such as overall labor availability, wage rates, union organizing activity, regulatory or legislative
impacts, and various benefit costs could all impact our ability to attract and retain employees negatively and may
affect our results of operations adversely.
Our success depends on our executive officers and other key personnel. If we lose key personnel or are unable to
hire additional qualified personnel, our business could be harmed.
Our future success depends to a significant degree on the skills, experience and efforts of our executive
officers and other key personnel. The loss of the services of any of our executive officers could have an adverse
effect on our operations. Our future success will also depend on our ability to attract and retain qualified
personnel, as a failure to attract these key personnel could have an adverse effect on our operations. We do not
currently maintain key person life insurance policies with respect to our executive officers or key personnel.
Our business is slightly seasonal, and adverse events during the holiday season could impact our operating
results negatively.
Our business is slightly seasonal, with the highest percentage of sales (approximately 27% of total annual
sales over the last five fiscal years) occurring during the second fiscal quarter (December, January, and
February). We purchase significant amounts of seasonal inventory in anticipation of the holiday season. Adverse
events, such as deteriorating economic conditions, higher unemployment, higher gas prices, public transportation
disruptions, or unusual weather could result in lower-than-planned sales during the holiday season. This could
lead to lower sales or to unanticipated markdowns, negatively impacting our financial condition and results of
operations.
16