Cabela's 2006 Annual Report Download - page 18

14
• shipping companies, such as United Parcel Service, the U.S. Postal Service and common carriers, for
timely delivery of our catalogs, shipment of merchandise to our customers and delivery of merchandise
from our vendors to us and from our distribution centers to our destination retail stores;
• telephone companies to provide telephone service to our in-house customer care centers;
• communications providers to provide our Internet users with access to our website and a website hosting
service provider to host and manage our website; and
• software providers to provide software and related services to run our operating systems for our direct
and retail businesses.
Any disruption in these services could have a negative impact on our ability to market and sell our products,
and serve our customers. Our ten largest vendors collectively represented 17.1% of our total purchases in fiscal
2006. If we are unable to acquire suitable merchandise or lose one or more key vendors, we may not be able to offer
products that are important to our merchandise assortment. We also are subject to risks, such as the unavailability
of raw materials, labor disputes, union organizing activity, strikes, inclement weather, natural disasters, war and
terrorism, and adverse general economic and political conditions that might limit our vendors’ ability to provide us
with quality merchandise on a timely basis. We have no contractual arrangements providing for continued supply
from our key vendors and our vendors may discontinue selling to us at any time. We may not be able to develop
relationships with new vendors, and products from alternative sources, if any, may be of a lesser quality and more
expensive than those we currently purchase. Any delay or failure in offering products to our customers could have an
adverse impact on our revenue and profitability. In addition, if the cost of fuel rises, the cost to deliver merchandise to
the customers of our direct business and from our distribution centers to our destination retail stores may rise which
could have an adverse impact on our profitability.
Political and economic uncertainty and unrest in foreign countries where our vendors are located could
adversely affect our operating results.
In fiscal 2006, approximately 58.2% of our merchandise was obtained directly from vendors located in foreign
countries, with approximately 41.9% of our merchandise being obtained from vendors located in China, Mexico,
Taiwan, Japan and Viet Nam. In addition, we believe that a significant portion of our other vendors obtain their
products from foreign countries that may also be subject to political and economic uncertainty. We are subject to
risks and uncertainties associated with changing economic and political conditions in foreign countries where our
vendors are located, such as:
• increased import duties, tariffs, trade restrictions and quotas;
• work stoppages;
• economic uncertainties (including inflation);
• adverse foreign government regulations;
• wars, fears of war and terrorist attacks and organizing activities;
• adverse fluctuations of foreign currencies; and
• political unrest.
We cannot predict when, or the extent to which, the countries in which our products are manufactured will
experience any of the above events. Any event causing a disruption or delay of imports from foreign locations would
likely increase the cost or reduce the supply of merchandise available to us and would adversely affect our operating
results, particularly if imports of our Cabela’s branded merchandise were adversely affected as our margins are
higher on our Cabela’s branded merchandise.
Our ability to source our merchandise profitably or at all could be hurt if new trade restrictions are
imposed or existing trade restrictions become more burdensome.
Trade restrictions, including increased tariffs, safeguards or quotas, on apparel and accessories could increase
the cost or reduce the supply of merchandise available to us. Under the World Trade Organization (“WTO”)
Agreement, effective January 1, 2005, the United States and other WTO member countries removed quotas on