Best Buy 2013 Annual Report Download - page 14

14
that consumers demand, our revenues and earnings may be materially adversely affected. In addition, the formation or
strengthening of business partnerships between our vendors and our competitors could limit our access to merchandise.
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 U.S. Political or financial instability, merchandise quality issues, product safety concerns, trade restrictions, work
stoppages, tariffs, foreign currency exchange rates, transportation capacity and costs, inflation, civil unrest, natural disasters,
outbreaks 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.
Our exclusive brands products are subject to several additional product, supply chain and legal risks that could affect
our operating results.
Sales of our exclusive brands products, which primarily include Insignia, Dynex, Init, Geek Squad and Rocketfish branded
products, represent an important component of our revenue. Most of these products are manufactured under contract by
vendors based in southeastern Asia. This arrangement exposes us to the following additional potential risks, which could
materially adversely affect our reputation, financial condition and operating results:
• We have greater exposure and responsibility to consumers for warranty replacements and repairs as a result of product
defects, and we generally have no recourse to contracted manufacturers for such warranty liabilities;
• We may be subject to regulatory compliance and/or product liability claims relating to personal injury, death or
property damage caused by exclusive brand products, some of which may require us to take significant actions such as
product recalls;
• We may experience disruptions in manufacturing or logistics due to inconsistent and unanticipated order patterns, our
inability to develop long-term relationships with key factories or unforeseen natural disasters;
• We are subject to developing and often-changing labor and environmental laws for the manufacture of products in
foreign countries, and we may be unable to conform to new rules or interpretations in a timely manner;
• We may be subject to claims by technology owners if we inadvertently infringe upon their patents or other intellectual
property rights, or if we fail to pay royalties owed on our products; and
• We may be unable to obtain or adequately protect patents and other intellectual property rights on our products or
manufacturing processes.
Maintaining consistent quality, availability and competitive pricing of our exclusive brands products helps us build and
maintain customer loyalty, generate sales and achieve acceptable margins. Failure to maintain these factors could have a
significant adverse impact on the demand for exclusive brand products and the margins we are able to generate from them.
We are subject to certain statutory, regulatory and legal developments which could have a material adverse impact on
our business.
Our statutory, regulatory and legal environments expose us to complex compliance and litigation risks that could materially
adversely affect our operations and financial results. The most significant compliance and litigation risks we face are:
• The difficulty of complying with sometimes conflicting statutes and regulations in local, national or international
jurisdictions;
• The impact of new or changing statutes and regulations including, but not limited to, financial reform, environmental
requirements, National Labor Relations Board rule changes, health care reform, corporate governance matters and/or
other as yet unknown legislation, that could affect how we operate and execute our strategies as well as alter our
expense structure;
• The impact of changes in tax laws (or interpretations thereof by courts and taxing authorities) and accounting
standards; and
• The impact of litigation trends, including class action lawsuits involving consumers and shareholders, and labor and
employment matters.
Defending against lawsuits and other proceedings may involve significant expense and divert management's attention and
resources from other matters. Furthermore, regulatory rules regarding requirements to disclose efforts to identify the origin of
“conflict minerals” in certain portions of our supply chain could increase the cost of doing business and restrict our access to
certain products.
Table of Contents