Harris Teeter 2008 Annual Report Download - page 9

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Harris Teeter’s Expansion Plans Are Subject to Risk
Harris Teeter has spent, and intends to continue to spend, significant capital and management resources
on the development and implementation of expansion and renovation plans. Harris Teeter’s new store opening
program has accelerated in recent years and involves expanding the company’s Washington, D.C. metro market
area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware.
The successful implementation of Harris Teeter’s renovation and expansion plans are subject to several factors
including: the availability of new, suitable locations on reasonable commercial terms, or at all; the success of
new stores, including those in new markets; management’s ability to manage expansion, including the effect
on sales at existing stores when a new store is opened nearby; the ability to secure any necessary financing;
change in regional and national economic conditions; and increasing competition or changes in the competitive
environment in Harris Teeter’s markets.
Harris Teeter’s new stores may initially operate at a loss, depending on factors such as prevailing competition
and market position in the surrounding communities and the level of sales and profit margins in existing stores
may not be duplicated in new stores. Pursuing a strategy of growth, renovation and expansion in light of current
highly competitive industry conditions could lead to a near-term decline in earnings as a result of opening and
operating a substantial number of new stores, particularly with respect to stores in markets where Harris Teeter
does not have a significant presence. If Harris Teeter’s expansion and renovation plans are unsuccessful, it could
adversely affect Harris Teeter’s cash flow, business and financial condition due to the significant amount of
capital and management resources invested.
Food Safety Issues Could Result in a Loss of Consumer Confidence and Product Liability Claims
Harris Teeter could be adversely affected if consumers lose confidence in the safety and quality of the food
supply chain. These concerns could cause shoppers to avoid purchasing certain products from Harris Teeter, or
to seek alternative sources of supply for their food needs, even if the basis for the concern is not valid and/or is
outside of the company’s control. Adverse publicity about these types of concerns, whether or not valid, could
discourage consumers from buying our products and any lost confidence on the part of our customers would
be difficult and costly to reestablish. As such, any issue regarding the safety of any food items sold by Harris
Teeter, regardless of the cause, could have a substantial and adverse effect on the company’s operations.
Harris Teeter’s Geographic Concentration May Expose it to Regional or Localized Downturns
Harris Teeter operates primarily in the southeastern United States, with a strong concentration in North
Carolina, Virginia and South Carolina. As a result, Harris Teeter’s business is more susceptible to regional
factors than the operations of more geographically diversified competitors. These factors include, among others,
changes in the economy, weather conditions, demographics and population. Although the southeast region has
experienced economic and demographic growth over the past several years, a significant economic downturn
in the region could have a material adverse effect on Harris Teeter’s business, financial condition or results of
operations.
The Ownership and Development of Real Estate May Subject Harris Teeter to Environmental Liability
Under applicable environmental laws, as an owner or developer of real estate, Harris Teeter may be
responsible for remediation of environmental conditions that may be discovered and may be subject to associated
liabilities (including liabilities resulting from lawsuits brought by private litigants) relating to Harris Teeter
supermarkets and other buildings and the land on which those building are situated, whether the properties are
leased or owned, and whether such environmental conditions, if in existence, were created by Harris Teeter or
by a prior owner or tenant. The discovery of contamination from hazardous or toxic substances, or the failure to
properly remediate such contaminated property, may adversely affect Harris Teeter’s ability to sell or rent real