Best Buy 2007 Annual Report Download - page 30

15
PART I
and may cause customer traffic and comparable store sales
performance to decline at those existing stores.
We also intend to open stores in new markets. The risks
associated with entering a new market include difficulties in
attracting customers due to a lack of customer familiarity
with our brand, our lack of familiarity with local customer
preferences and seasonal differences in the market. In
addition, entry into new markets may bring us into
competition with new competitors or with existing
competitors with a large, established market presence.
While we have a strong track record of profitable new-store
growth, we cannot ensure that our new stores will be
profitably deployed; as a result, our future profitability may
be materially adversely affected.
Risks associated with the vendors from whom our
products are sourced could materially adversely affect
our revenue and gross profit.
The products we sell are sourced from a wide variety of
domestic and international vendors. Global sourcing has
become an increasingly important part of our business and
positively affects our financial performance. Our 20 largest
suppliers account for over three-fifths of the merchandise we
purchase. If any of our key vendors fails to supply us with
products, we may not be able to meet the demands of our
customers and revenue could decline. We require all of our
vendors to comply with applicable laws, including labor and
environmental laws, and otherwise be certified as meeting
our required vendor standards of conduct. Our ability to
find qualified vendors who meet our standards and supply
products in a timely and efficient manner is a significant
challenge, especially with respect to goods sourced from
outside the United States. Political or financial instability,
merchandise quality issues, trade restrictions, tariffs, foreign
currency exchange rates, transportation capacity and costs,
inflation, outbreak of pandemics and other factors relating
to foreign trade are beyond our control. These and other
issues affecting our vendors could materially adversely
affect our revenue and gross profit.
We are subject to certain regulatory and legal
developments which could have a material adverse
impact on our business.
Our regulatory and legal environment exposes us to
complex compliance and litigation risks that could
materially affect our operations and financial results. In our
major global markets, we are subject to increasing
regulations, which increase our cost of doing business. The
most significant compliance and litigation risks we face are:
•The difficulty in complying with sometimes
conflicting regulations in local, national or
international jurisdictions and new or changing
regulations that affect how we operate;
•The impact of changes in tax laws (or
interpretations thereof);
•The impact of litigation trends, including class
actions involving consumers and shareholders, and
labor and employment matters; and
•The significant uncertainties of operating globally,
including the costs and difficulties of managing
international operations, foreign currencies,
complex laws, contractual obligations and
intellectual property rights.
We rely heavily on our management information systems
for inventory management, distribution and other
functions. If our systems fail to perform these functions
adequately or if we experience an interruption in their
operation, our business and results of operations could
be materially adversely affected.
The efficient operation of our business is dependent on our
management information systems. We rely heavily on our
management information systems to manage our order
entry, order fulfillment, pricing, point-of-sale and inventory
replenishment processes. The failure of our management
information systems to perform as we anticipate could
disrupt our business and could result in decreased revenue,
increased overhead costs and excess or out-of-stock
inventory levels, causing our business and results of
operations to suffer materially.
A disruption in our relationship with Accenture, who
manages our information technology and human
resources operations, could materially adversely affect
our business and results of operations.
We have engaged Accenture to manage our information
technology and human resources operations. We rely
heavily on our management information systems for
inventory management, distribution and other functions. We
also rely heavily on human resources support to attract,
develop and retain a sufficient number of qualified
employees. Any disruption in our relationship with
Accenture could result in decreased revenue and increased