Harris Teeter 2012 Annual Report Download - page 7

The Company’s Expansion Plans Are Subject to Risk.
The Company has spent, and intends to continue to spend, significant capital and management resources on the
development and implementation of expansion and renovation plans. The Company’s new store opening program can vary
depending on the economic conditions of the markets, including the Washington, D.C. metro market area which incorporates
northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. The successful implementation of the
Company’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 less developed 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 the Company’s markets.
The Company’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 the Company does not have a significant presence. If the Company’s expansion and
renovation plans are unsuccessful, it could adversely affect the Company’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.
The Company 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 the Company, 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 the Company, regardless of the cause, could have a substantial and adverse effect on the Company’s
operations.
The Company’s Geographic Concentration May Expose it to Regional or Localized Downturns.
The Company operates primarily in the southeastern and mid-Atlantic United States and the District of Columbia, with
a strong concentration in North Carolina, Virginia and South Carolina. As a result, the Company’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 these regions have experienced economic
and demographic growth in the past, a significant economic downturn in the region could have a material adverse effect on the
Company’s business, financial condition or results of operations.
The Ownership and Development of Real Estate May Subject the Company to Environmental Liability.
Under applicable environmental laws, as an owner or developer of real estate, the Company 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 the Company’s property, whether the properties are leased or
owned, and whether such environmental conditions, if in existence, were created by the Company 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 the Company’s ability to sell or rent real property or to borrow using real property as collateral.
Liabilities or costs resulting from noncompliance with current or future applicable environmental laws or other claims relating
to environmental matters could have a material adverse effect on the Company’s business, financial condition or results of
operations.
The Company’s Information Technology Systems Are Subject to Risk.
The Company’s business is increasingly dependent on information technology systems that are complex and vital to
continuing operations. If the Company were to experience difficulties maintaining existing systems or implementing new
systems, it could incur significant losses due to disruptions in its operations. Additionally, these systems contain valuable
proprietary and financial data, as well as debit and credit card cardholder data, and a breach, including cyber security breaches,
could have an adverse effect on the Company.
3