Cabela's 2008 Annual Report Download - page 23

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a private letter ruling from the state in which the store would be located as to whether our Direct business would
have nexus with that state as a result of the store opening. Some states have enacted legislation that requires sales
tax collection by direct marketers with no physical presence in that state. In some instances, the legislation assumes
nexus exists because of the physical presence of an affiliated entity engaged in the same line of business. During the
first quarter of 2008, we received an assessment for unpaid sales taxes on prior Direct business sales from a state
with such legislation. It is also possible that we may receive future assessments from other states for unpaid sales
taxes on prior Direct business sales. We presently intend to vigorously contest the assessment and any future sales
tax assessments, but we may not prevail. If we do not prevail with respect to any assessment, we could be held liable
for sales taxes on prior Direct business sales, which could be substantial.
We must successfully order and manage our inventory to reflect customer demand and anticipate changing
consumer preferences and buying trends or our revenue and profitability will be adversely affected.
Our success depends upon our ability to successfully manage our inventory and to anticipate and respond
to merchandise trends and customer demands in a timely manner. We cannot predict consumer preferences with
certainty and they may change over time. We usually must order merchandise well in advance of the applicable
selling season. The extended lead times for many of our purchases may make it difficult for us to respond rapidly
to new or changing product trends or changes in prices. If we misjudge either the market for our merchandise or
our customers’ purchasing habits, our revenue may decline significantly and we may not have sufficient quantities
of merchandise to satisfy customer demand or we may be required to mark down excess inventory, either of which
would result in lower profit margins. In addition, as we implement our retail store expansion strategy, we will need
to construct additional distribution centers or expand the size of our existing distribution centers to support our
growing number of retail stores. If we are unable to find suitable locations for new distribution centers or to timely
integrate new or expanded distribution centers into our inventory control process, we may not be able to deliver
inventory to our retail stores in a timely manner, which could have an adverse effect on the revenue and cash flows
of our Retail business.
A natural disaster or other disruption at our distribution centers or return facility could cause us to lose
merchandise and be unable to effectively deliver to our direct customers and retail stores.
We currently rely on distribution centers in Sidney, Nebraska; Prairie du Chien, Wisconsin; and Wheeling,
West Virginia, to handle our distribution needs. We operate a return center in Oshkosh, Nebraska; and our Wheeling,
West Virginia, distribution center also processes returns. Any natural disaster or other serious disruption to these
centers due to fire, tornado, or any other calamity could damage a significant portion of our inventory and materially
impair our ability to adequately stock our retail stores, deliver merchandise to customers, and process returns to
vendors and could result in lost revenue, increased costs, and reduced profits.
Our failure to obtain or negotiate economic development packages with local and state governments
could cause us to significantly alter our retail store strategy or format and/or delay the construction of one or
more of our retail stores and could adversely affect our revenue, cash flows, and profitability.
We have received economic development packages from many of the local and state governments where our
retail stores are located. In some locations, we have experienced an increased amount of government and citizen
resistance and critical review of pending and existing economic development packages. This resistance and critical
review may cause local and state government officials in future locations to deny or limit economic development
packages that might otherwise be available to us. The failure to obtain similar economic development packages in
the future for any of these reasons could cause us to significantly alter our retail store strategy or format. As a result,
we could be forced to invest less capital in our stores which could have an adverse effect on our ability to construct
the stores as attractive tourist and entertainment shopping destinations, possibly leading to a decrease in revenue
or revenue growth. In addition, the failure to obtain similar economic development packages for stores built in the
future would have an adverse impact on our cash flows and on the return on investment in these stores.