Lowe's 2014 Annual Report Download - page 19

relating to retailers and other companies' obligation to protect such sensitive data becomes stricter, a material failure on our part
to comply with applicable regulations could subject us to fines or other regulatory sanctions and potentially to lawsuits.
We are subject to payments-related risks that could increase our operating costs, expose us to fraud, subject us to potential
liability and potentially disrupt our business.
We accept payments using a variety of methods, including credit card, debit card, credit accounts, gift cards, direct debit from a
customer’s bank account, consumer invoicing, and physical bank check. These payment options subject us to many
compliance requirements, including, but not limited to, compliance with the Payment Card Industry Data Security Standards,
which represents a common set of industry tools and measurements to help ensure the safe handling of sensitive information.
They also subject us to potential fraud by criminal elements seeking to discover and take advantage of security vulnerabilities
that may exist in some of these payment systems. For certain payment methods, including credit and debit cards, we pay
interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We rely on third
parties to provide payment processing services, including the processing of credit cards, debit cards, electronic checks, gift
cards, and promotional financing, and it could disrupt our business if these companies become unwilling or unable to provide
these services to us. We are also subject to payment card association operating rules, including data security rules, certification
requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or
impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached
or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability
to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of
online payments, and our business and operating results could be adversely affected. We also offer co-branded credit card
programs, which could adversely affect our operating results if terminated.
Our sales are dependent upon the health and stability of the general economy.
Many U.S. and global economic factors may adversely affect our financial performance. These include, but are not limited to,
periods of slow economic growth or recession, volatility and/or lack of liquidity from time to time in U.S. and world financial
markets and the consequent reduced availability and/or higher cost of borrowing to Lowe’s and its customers, slower rates of
growth in real disposable personal income that could affect the rate of growth in consumer spending, high rates of
unemployment, consumer debt levels, fluctuations in fuel and energy costs, inflation or deflation of commodity prices, natural
disasters, and acts of both domestic and international terrorism.
Adverse changes in economic factors specific to the home improvement industry may negatively impact the rate of growth of
our total sales and comparable sales.
Sales of many of our product categories and services are driven by the activity level of home improvement projects. Although
the housing market has been strengthened by favorable interest rates and increasing home prices, the large number of
households that continue to have little available equity, mortgage delinquency and foreclosure rates that remain high, tight
restrictions on the availability of mortgage financing, slow household formation growth rates, and decreases in housing
turnover through existing home sales, have limited, and may continue to limit, consumers’ discretionary spending, particularly
on larger home improvement projects that are important to the growth of our business. Another risk to the continued recovery
of the home improvement industry is that consumer interest rates will rise when the Federal Reserve System begins
withdrawing the extraordinary economic stimulus it has provided in recent years.
If we fail to hire, train, manage and retain qualified sales associates and specialists with expanded skill sets who can work
effectively and collaboratively in an increasingly culturally diverse environment, we could lose sales to our competitors.
Our customers, whether they are homeowners or commercial businesses, expect our sales associates and specialists to be well
trained and knowledgeable about the products we sell and the home improvement services we provide. Increasingly, our sales
associates and specialists must have expanded skill sets, including, in some instances, the ability to do in-home or telephone
sales. In addition, in many of our stores our employees must be able to serve customers whose primary language and cultural
traditions are different from their own. A critical challenge we face is attracting and retaining a sufficiently diverse workforce
that can deliver a relevant, culturally competent and differentiated experience for a wide variety of culturally diverse customers.
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