Staples 2012 Annual Report Download - page 80

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have increased their presence in our markets in recent years by expanding their assortment of office products and services, opening
new stores near our existing stores, and offering direct delivery of office products. Intense competitive pressures from one or
more of our competitors could affect prices or demand for our products and services. If we are unable appropriately respond to
these competitive pressures, or offer the appropriate mix of products and services at competitive prices, our financial performance
and market share could be adversely affected.
If the products and services that we offer fail to meet our customer needs, our performance could be adversely affected.
We believe that the strategic plan we announced in September 2012 will help us to accelerate our growth and achieve
our vision: every product your business needs to succeed. One of our top priorities is to significantly expand our product offering
beyond core office supplies. Over the past few years we have had success driving growth in adjacent product categories, such as
facilities and breakroom supplies. These positive results have reinforced our strategy and we are now continuing to broaden our
offering, focusing on categories including technology products, medical supplies, safety supplies, packaging and shipping supplies,
and office decor. Our success is contingent on providing our customers the selection of products, as well as services, at competitive
prices that meet customers' changing needs and purchasing habits. If we misjudge either the demand for products and services
we sell or our customers' purchasing habits and tastes, we may be faced with excess inventories of some products or missed
opportunities for products and services we do not offer. Failure to provide the products and services preferred by our customers
could have a material adverse affect on our revenue, results of operations and ability to attract and retain customers.
We may be unable to continue to enter new markets successfully.
An important part of our business plan is to increase our presence in new markets, which includes accelerating growth
in our online businesses and providing new products and service offerings. We may have limited experience in newer markets,
and any such offerings may present new and difficult challenges. For example, when entering a new geographic or product market,
customers may not be familiar with our brand or our competitors may have a larger, more established market presence. Our sales
or profit levels in newer activities thus may not be successful enough to recoup our investments in them and may reduce our overall
profitability. In addition, for our strategy to be successful, we must hire and train qualified associates and adapt management and
operational systems to meet the needs of our expanded operations. If we are unable to enter new markets as efficiently as we
planned, our future sales and profits may be adversely affected.
Our international operations expose us to risks inherent in foreign operations.
We currently operate in 25 countries outside the United States. In certain international market segments, we may not
benefit from any first-to-market advantages or otherwise succeed. Cultural differences abroad and local practices of conducting
business may conflict with our own business practices and ethics standards. Ensuring compliance with foreign and U.S. laws and
our own policies may require that we implement new operational systems and financial controls, conduct audits or internal
investigations, train our associates and third parties on our existing compliance methods, and take other actions, all of which may
be expensive, divert management's time and impact our operations. There are also different employee/employer relationships and
in some cases the existence of workers' councils that may delay or impact the implementation of some of these operational systems.
In addition, differences in business practices in our international markets may cause customers to be less receptive to our business
model than we expect.
Risks inherent in international operations also include, among others, the costs and difficulties of managing international
operations, adverse tax consequences and greater difficulty in enforcing intellectual property rights. Other factors that may also
have an adverse impact on our international operations include limitations on the repatriation and investment of funds, foreign
currency exchange restrictions, complex import and export schemes, increased local competition, our lack of familiarity with local
customer preferences, unfavorable foreign trade policies, unstable political or economic conditions, and geopolitical events,
including war and terrorism.
Our effective tax rate may fluctuate.
We are a multi-national, multi-channel provider of office products and services. As a result, our effective tax rate is derived
from a combination of applicable tax rates in the various countries, states and other jurisdictions in which we operate. Our effective
tax rate may be lower or higher than our tax rates have been in the past due to numerous factors, including the sources of our
income, any agreements we may have with taxing authorities in various jurisdictions, changes in the laws and the tax filing positions
we take in various jurisdictions. In addition, our effective tax rate may fluctuate quarterly, and the resulting tax rate may be negative
or unusually high as a result of significant charges in a quarter that are not tax deductible, such as those charges associated with
goodwill and long-lived asset impairment and our restructuring activities that we recorded in 2012. We base our estimate of an
effective tax rate at any given point in time upon a calculated mix of the tax rates applicable to our company and to estimates of