Overstock.com 2009 Annual Report Download - page 21

Table of Contents
ITEM 1A. RISK FACTORS
Please consider the following risk factors carefully. If any one of the following risks were to occur, our business, financial condition, operating results
and cash flows could be materially adversely affected, and the market price of our securities could decrease. These are not the only risks we face. In addition,
the global economic climate amplifies many of these risks.
Risks Relating to Overstock
General economic factors may adversely affect our financial performance.
General economic conditions may adversely affect our financial performance. In the United States, changes in interest rates, changes in fuel and other
energy costs, weakness in the housing market, inflation or deflation or expectations of either inflation or deflation, higher levels of unemployment,
unavailability or limitations of consumer credit, higher consumer debt levels or efforts by consumers to reduce debt levels, higher tax rates and other changes
in tax laws, overall economic slowdown, changes in consumer desires affecting demand for the products and services we sell and other economic factors
could adversely affect consumer demand for the products and services we sell, change the mix of products we sell to a mix with a lower average gross margin
and result in slower inventory turnover and greater markdowns on inventory. Higher interest rates, transportation costs, inflation, higher costs of labor,
insurance and healthcare, foreign exchange rates fluctuations, higher tax rates and other changes in tax laws, changes in other laws and regulations and other
economic factors in the United States can increase our cost of sales and operating, selling, general and administrative expenses, and otherwise adversely affect
our operations and operating results. These factors affect not only our operations, but also the operations of suppliers from whom we purchase goods, a
condition that can result in an increase in the cost to us of the goods we sell to our customers.
Decreases in discretionary consumer spending may have an adverse effect on us.
A substantial portion of the products and services we offer are products or services that consumers may view as discretionary items rather than
necessities. As a result, our results of operations are sensitive to changes in macro-economic conditions that impact consumer spending, including
discretionary spending. Difficult macro-economic conditions, particularly high levels of unemployment, also impact our customers' ability to obtain consumer
credit. Other factors, including consumer confidence, employment levels, interest rates, tax rates, consumer debt levels, and fuel and energy costs could
reduce consumer spending or change consumer purchasing habits. A continued slowdown in the U.S. or global economy, or an uncertain economic outlook,
could materially adversely affect consumer spending habits and our operating results.
We have a history of significant losses. If we do not maintain profitability, our financial condition and our stock price could suffer.
We have a history of losses and we may incur operating and net losses in the foreseeable future. We incurred a net loss of $11 million for the year ended
December 31, 2008. As of December 31, 2009, our accumulated deficit was $256 million. We need to generate significant revenues to achieve or maintain
profitability, and we may not be able to do so. Although we had a net income attributed to common shares of $7.7 million in 2009, we may not be able to
sustain or increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate or decline, or if our expenses
exceed our expectations, our financial results would be harmed and our business, prospects, operating results and financial condition could fall below the
expectations of public market analysts and investors.
18