Sally Beauty Supply 2013 Annual Report Download - page 40

• diversion of management’s attention from our core business, including loss of management focus on
marketplace developments;
• complying with foreign regulatory requirements, including multi-jurisdictional competition rules
and restrictions on trade/imports;
• enforcement of intellectual property rights in foreign countries;
• adverse effects on existing business relationships with suppliers and customers, including the
potential loss of suppliers of the acquired businesses;
• operating inefficiencies and negative impact on profitability;
• entering geographic areas or channels in which we have limited or no prior experience; and
• 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 the expected financial improvements in the acquired businesses.
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 areas. In the U.S. and Canada, the capital requirements to open a Sally
Beauty Supply or BSG store, excluding inventory, average approximately $70,000 and $80,000, respectively,
with the capital requirements for stores in other geographic areas costing less or substantially more
depending upon the marketplace. Despite these relatively low opening costs, 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:
• the inability to identify and acquire suitable sites or to negotiate acceptable leases for such sites;
• proximity to existing stores that may reduce the new store’s sales or the sales of existing stores;
• difficulties in adapting our distribution and other operational and management systems to an
expanded network of stores;
• the level of sales made through our internet channels and the potential that sales through our
internet channels will divert sales from our stores;
• the potential inability to obtain adequate financing to fund expansion because of our high leverage
and limitations on our ability to issue equity under our credit agreements, among other things;
• increased (and sometimes unanticipated) costs associated with opening stores in international
locations;
• difficulties in obtaining any governmental and third-party consents, permits and licenses;
• limitations on capital expenditures which may be included in financing documents that we enter
into; and
• difficulties in adapting existing operational and management systems to the requirements of
national or regional laws and local ordinances.
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