Sally Beauty Supply 2007 Annual Report Download - page 29

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enforcement of intellectual property rights in some foreign countries;
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adverse effects on existing business relationships with suppliers and customers, including the potential loss of suppliers of the acquired
businesses;
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operating inefficiencies and negative impact on profitability;
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entering markets in which we have limited or no prior experience; and
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those related to general economic and political conditions, including legal and other barriers to cross-border investment in general, or by
U.S. companies in particular.
In addition, during the acquisition process, we may fail or be unable to discover some of the liabilities of businesses that we acquire. These liabilities may result
from a prior owner's noncompliance with applicable laws and regulations. Acquired businesses may also not perform as we expect or we may not be able to
obtain financial improvements in acquired businesses that we may expect.
If we are unable to profitably open and operate new stores, our business, financial condition and results of operations may be adversely affected.
Our future growth strategy depends in part on our ability to open and profitably operate new stores in existing and additional geographic markets. The capital
requirements to open a U.S. based Sally Beauty Supply or BSG store, excluding inventory, average approximately $60,000 and $75,000, respectively. However,
we may not be able to open all of the new stores we plan to open and any new stores we open may not be profitable, either of which could have a material
adverse impact on our financial condition or results of operations. There are several factors that could affect our ability to open and profitably operate new stores,
including:
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the inability to identify and acquire suitable sites or to negotiate acceptable leases for such sites;
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proximity to existing stores that may reduce new stores' sales or the sales of existing stores;
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difficulties in adapting our distribution and other operational and management systems to an expanded network of stores;
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the potential inability to obtain adequate financing to fund expansion because of our high leverage and limitations on our ability to issue
equity for at least two years following the Separation Transactions, among other things;
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increased (and sometimes unanticipated) costs associated with opening stores in new international markets;
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difficulties in obtaining any needed governmental and third-party consents, permits and licenses needed to operate additional stores; and
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potential limitations on capital, expenditures which may be included in financing documents that we enter into.
We are not certain that our ongoing cost control plans will continue to be successful.
Our business strategy depends, to a substantial degree, on continuing to control or reduce operating expenses. In furtherance of this strategy, we have engaged in
ongoing activities to reduce or control costs. These activities include right-sizing the BSG business (including some targeted reductions-in-force) and maximizing
the efficiency of our structure, including through the implementation of a two-year, $19.0 million capital spending program in fiscal years 2007 and 2008 to
consolidate BSG warehouses and reduce administrative expenses related to BSG's distribution network optimization program. We cannot assure you that our
efforts will result in the increased profitability, cost savings or other benefits that we expect.
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Source: Sally Beauty Holding, 10-K, November 29, 2007