Lowe's 2014 Annual Report Download - page 20

Also, as our employees become increasingly culturally diverse, our managers and sales associates must be able to manage and
work collaboratively with employees whose primary language and cultural traditions are different from their own.
We have many competitors who could take sales and market share from us if we fail to execute our merchandising, marketing
and distribution strategies effectively, or if they develop a substantially more effective or lower cost means of meeting customer
needs.
We operate in a highly competitive market for home improvement products and services and have numerous large and small,
direct and indirect competitors. The principal competitive factors in our industry include convenience, customer service,
quality and price of merchandise and services, in-stock levels, and merchandise assortment and presentation. Our failure to
respond effectively to competitive pressures and changes in the markets for home improvement products and services could
affect our financial performance. Moreover, changes in the promotional pricing and other practices of our competitors,
including the effects of competitor liquidation activities, may impact our results.
Our inability to effectively manage our relationships with selected suppliers of brand name products could negatively impact
our business plan and financial results.
We form strategic relationships with selected suppliers to market and develop products under a variety of recognized and
respected national brand names. The inability to effectively and efficiently manage and maintain the relationships with these
suppliers could negatively impact our business plan and financial results.
Failure of a key vendor or service provider that we cannot quickly replace could disrupt our operations and negatively impact
our business.
No single vendor of the products we sell accounts for more than 6% of our total purchases, but we rely upon a number of
vendors as the sole or primary source of some of the products we sell. We also rely upon many independent service providers
for technology solutions and other services that are important to many aspects of our business. If these vendors or service
providers fail or are unable to perform as expected and we are unable to replace them quickly, our business could be adversely
affected, at least temporarily, until we are able to do so and potentially, in some cases, permanently.
If the domestic or international supply chain for our products is disrupted for any reason, our sales and gross margin would be
adversely impacted.
We source, stock, and sell products from over 7,000 domestic and international vendors and their ability to reliably and
efficiently fulfill our orders is critical to our business success. We source a large number of those products from foreign
manufacturers with China continuing to be the dominant import source. Financial instability among key vendors, political
instability and labor unrest in source countries or elsewhere in our supply chain, port labor disputes, retaliatory trade
restrictions imposed by either the United States or a major source country, tariffs, currency exchange rates and transport
availability, capacity and costs are beyond our control and could negatively impact our business if they seriously disrupted the
movement of products through our supply chain or increased their costs.
Failure to effectively manage our third party installers could result in increased operational and legal risks.
We use third party installers to provide installation services to our customers, and as the general contractor, are subject to
regulatory requirements and risks, applicable to general contractors, including the management of the permitting, licensing and
quality of our third party installers. Our failure to effectively manage such requirements and risks could result in lost sales,
fines and lawsuits, as well as damage to our reputation, which could negatively affect our business.
Failure to achieve and maintain a high level of product and service quality could damage our image with customers and
negatively impact our sales, profitability, cash flows and financial condition.
Product and service quality issues could result in a negative impact on customer confidence in Lowe’s and the Company’s
brand image. As a result, Lowe’s reputation as a retailer of high quality products and services, including both national and
Lowe’s private brands, could suffer and impact customer loyalty. Additionally, a decline in product and service quality could
result in product recalls, product liability and warranty claims.
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