Item 1A. Risk Factors
Item 1A. Risk Factors
The COVID-19 coronavirus pandemic could have
a material negative effect on our results of operations, cash flows, financial position, and business operations.
The COVID-19 pandemic has created significant
public health concerns as well as economic disruption, uncertainty, and volatility which may negatively affect our business operations.
We are unable to predict the impact that COVID-19
will have on our results of operations, cash flows, financial position, and business operations due to numerous uncertainties. These uncertainties
include, but are not limited to: the severity of the virus; the duration of the pandemic; governmental actions which include restrictions
on our operations up to and including potential closure of our stores and distribution centers; the duration and degree of quarantine
or shelter-in-place measures, including additional measures that may still occur; impacts on our supply chain which include suppliers
of our products and our transportation vendors; the health of our workforce and our ability to maintain staffing needs to operate our
business; how macroeconomic factors evolve including unemployment rates and recessionary pressures; the impact of the crisis on consumer
shopping patterns, both during and after the crisis; volatility in the economy as well as the credit and financial markets during and
after the pandemic; the incremental costs of doing business during the crisis as well as on a long-term basis; potential increases in
insurance premiums, medical claims costs, and workers’ compensation claim costs; unknown consequences on our business performance and
initiatives stemming from the substantial investment of time and other resources to the pandemic response; potential delays in growth
initiatives including the timing of new store openings; potential adverse effects on our internal control environment and information
security as a result of changes to a remote work environment; and the long-term impact of the crisis on our business.
In addition, we cannot predict the impact that
the pandemic will have on our manufacturers and suppliers of our products and other business partners such as service vendors; however,
any material effect on these parties could adversely impact our results of operations and our ability to operate our business effectively.
The COVID-19 coronavirus pandemic could have
a material negative effect on our supply chain.
Circumstances surrounding and related to the COVID-19
pandemic have created unprecedented impacts on the global supply chain. Our business relies on an efficient and effective supply chain,
including the manufacture and transportation of our products as well as the effective functioning of our distribution centers. Impacts
related to the COVID-19 pandemic are placing strain on the domestic and international supply chain that could negatively affect the flow
or availability of our products and result in higher out-of-stock inventory positions due to difficulties in timely obtaining product
from the manufacturers and suppliers of our products as well as transportation of those products to our distribution centers and stores.
Further, we may have to source products from different manufacturers or geographic locations which could result in, among other things,
higher product costs, increased transportation costs, delays in receiving products or lower quality of the products.
Any of these circumstances could adversely affect
our ability to deliver inventory in a timely manner, which could impair our ability to meet customer demand for products and result in
lost sales, increased supply chain costs, or damage to our reputation.
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Actions taken to protect the health and safety
of our team members and customers during the COVID-19 coronavirus pandemic have increased our operating costs and may not be sufficient
to protect against operational or reputational harm to our business.
In response to the COVID-19 pandemic, we have
taken a number of actions across our business to help protect our team members, customers, and others in the communities we serve. These
measures include personal protective equipment for our team members, a requirement to wear masks in our facilities, increased staffing
in order to provide contact-free curbside pickup from stores, expansion of our capabilities to support delivery to customer homes, increased
cleaning and sanitizing measures, and monitoring for “social distancing” directives, as well as additional cleaning materials
in our facilities. Additionally, we have provided appreciation bonuses as well as permanent increases in compensation and benefits for
our team members in our stores and distribution centers to further support them during and after the COVID-19 pandemic. Actions such as
these have resulted in significant incremental costs and we expect that we will continue to incur these costs for the foreseeable future,
which in turn will have an adverse impact on our results of operations.
The health and safety of our team members and
customers are of primary concern to our management team. However, due to the unpredictable nature of this virus and the consequences of
our actions, we may see unexpected outcomes notwithstanding our added safety measures. For instance, if we do not respond appropriately
to the pandemic, or if our customers do not participate in “social distancing” and other safety measures, the well-being of
our team members and customers could be jeopardized. Furthermore, any failure to appropriately respond, or the perception of an inadequate
response, could cause reputational harm to our brand and subject us to claims and litigation from team members, customers and service
providers.
Additionally, an outbreak of confirmed cases of
COVID-19 in our stores or distribution centers could result in temporary or sustained workforce shortages or facility closures which would
negatively impact our underlying business and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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