Napa Auto Parts 2010 Annual Report Download - page 11

Table of Contents
Uncertainty and/or deterioration in general macro-economic conditions, including unemployment, inflation or deflation,
high energy costs, uncertain credit markets, or other economic conditions, could have a negative impact on our business,
financial condition, results of operations and cash flows.
Our business and operating results may in the future be adversely affected by uncertain global economic conditions, including
instability in credit markets, declining consumer and business confidence, fluctuating commodity prices, volatile exchange rates, and
other challenges that could affect the global economy. Both our commercial and retail customers may experience deterioration of their
financial resources, which could result in existing or potential customers delaying or canceling plans to purchase our products. Our
vendors could experience similar conditions, which could impact their ability to fulfill their obligations to us. Future weakness in the
global economy could adversely affect our results of operations, financial condition and cash flows in future periods.
We depend on our relationships with our vendors, and a disruption of our vendor relationships or a disruption in our
vendors’ operations could harm our business.
As a distributor of automotive replacement parts, industrial parts, office products and electrical/electronic materials, our business
depends on developing and maintaining close and productive relationships with our vendors. We depend on our vendors to sell us quality
products at favorable prices. Many factors outside our control, including, without limitation, raw material shortages, inadequate
manufacturing capacity, labor disputes, transportation disruptions or weather conditions, could adversely affect our vendors’ ability to
deliver to us quality merchandise at favorable prices in a timely manner. Furthermore, financial or operational difficulties with a
particular vendor could cause that vendor to increase the cost of the products or decrease the quality of the products we purchase from it.
Vendor consolidation could also limit the number of suppliers from which we may purchase products and could materially affect the
prices we pay for these products. In our automotive business, the number of vendors could decrease considerably, and the prices charged
to us by the remaining vendors could increase, to the extent that vehicle production slows due to a decline in consumer spending and,
possibly, the failure of one or more of the large automobile manufacturers. We would suffer an adverse impact if our vendors limit or
cancel the return privileges that currently protect us from inventory obsolescence.
We face substantial competition in the industries in which we do business.
The sale of automotive and industrial parts, office products and electrical materials is highly competitive and impacted by many
factors, including name recognition, product availability, customer service, anticipating changing customer preferences, store location,
and pricing pressures. Because we seek to offer competitive prices, if our competitors reduce their prices, we may be forced to reduce our
prices, which could result in a material decline in our revenues and earnings. Increased competition among distributors of automotive and
industrial parts, office products and electronic materials, including internet-related initiatives, could cause a material adverse effect on our
results of operations. The Company anticipates no decline in competition in any of its four business segments in the foreseeable future.
In particular, the market for replacement automotive parts is highly competitive and subjects us to a wide variety of competitors. We
compete primarily with national and regional auto parts chains, independently owned regional and local automotive parts and accessories
stores, automobile dealers that supply manufacturer replacement parts and accessories, mass merchandisers and wholesale clubs that sell
automotive products and regional and local full service automotive repair shops. Furthermore, the automotive aftermarket has experienced
consolidation in recent years. Consolidation among our competitors could further enhance their financial position, provide them with the
ability to provide more competitive prices to customers for whom we compete, and allow them to achieve increased efficiencies in their
consolidated operations that enable them to more effectively compete for customers. If we are unable to continue to develop successful
competitive strategies or if our competitors develop more effective strategies, we could lose customers and our sales and profits may
decline.
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