Safeway 2007 Annual Report Download - page 33

SAFEWAY INC. AND SUBSIDIARIES
Opening and Remodeling Stores Our inability to open and remodel stores as planned could have a material adverse
effect on our results. In 2008 we plan to open approximately 20 to 25 new Lifestyle stores and to remodel approximately
250 to 255 stores into the Lifestyle format. If, as a result of labor relations issues, supply issues or environmental and real
estate delays, these capital projects do not stay within the time and financial budgets we have forecasted, our future
financial performance could be materially adversely affected. Furthermore, we cannot ensure that the new or remodeled
stores will achieve anticipated same-store sales or profit levels.
Future Growth of Blackhawk Blackhawk’s business, financial condition, results of operations and prospects are
subject to certain risks and uncertainties. Consequently, actual results could differ materially from Blackhawk’s targeted
earnings growth. There is no assurance that Blackhawk will continue to grow at the same rate as it has in the past. Some
of the specific risks and uncertainties include, but are not limited to, the following:
• Blackhawk faces competition from other companies, that may introduce new products that compete with
products offered by Blackhawk. This could limit Blackhawk’s future growth;
• Blackhawk is substantially dependent on the continuous operation and security of its information technology
applications and infrastructure;
• A significant portion of Blackhawk’s revenues and net earnings is realized during the last several weeks of the
calendar year and is related to consumer gift purchases. A reduction in consumer spending for gifts, operational
issues that result in limitations on gift cards available for sale in Blackhawk’s distribution channels or other
factors that contribute to a shortfall in sales during this period could have an adverse effect on the Company’s
consolidated results of operations and financial condition;
• Blackhawk’s business depends on its ability to negotiate contract renewals with its key partners;
• Blackhawk has begun to expand internationally, and it may find a different business or competitive environment
in markets outside the U.S. that could adversely affect its profitability; and
• Blackhawk’s prospects could be adversely affected as a result of regulatory changes affecting the sale of gift
cards or other products that Blackhawk sells or plans to sell in the future.
Food Safety, Quality and Health Concerns We could be adversely affected if consumers lose confidence in the safety
and quality of certain food products. Adverse publicity about these types of concerns, whether valid or not, may
discourage consumers from buying our products or cause production and delivery disruptions. The real or perceived sale
of contaminated food products by us could result in product liability claims, a loss of consumer confidence and product
recalls, which could have a material adverse effect on our sales and operations.
Economic Conditions that Impact Consumer Spending Our results of operations are sensitive to changes in overall
economic conditions that impact consumer spending, including discretionary spending. Future economic conditions such
as employment levels, business conditions, interest rates, energy and fuel costs and tax rates could reduce consumer
spending or change consumer purchasing habits. A general reduction in the level of consumer spending or our inability to
respond to shifting consumer attitudes regarding products, store location and other factors could adversely affect our
growth and profitability.
Unfavorable Changes in Government Regulation Our stores are subject to various federal, state, local and foreign laws,
regulations and administrative practices that affect our business. We must comply with numerous provisions regulating health
and sanitation standards, food labeling, equal employment opportunity, minimum wages, and licensing for the sale of food,
drugs and alcoholic beverages. We cannot predict the nature of future laws, regulations, interpretations or applications, nor
can we determine what effect either additional government regulations or administrative orders, when and if promulgated, or
disparate federal, state, local and foreign regulatory schemes would have on our future business. They could, however, require
the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be
reformulated, additional record keeping, expanded documentation of the properties of certain products, expanded or
different labeling, and/or scientific substantiation. Any or all of such requirements could have an adverse effect on our results
of operations and financial condition.
Substantial Indebtedness We currently have, and expect to continue to have, a significant amount of debt, which
could adversely affect our financial health. As of December 29, 2007, we had approximately $5.7 billion in total
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