The COVID-19 pandemic has caused significant public health concerns as well as economic disruption, uncertainty, and volatility, all of which have impacted our business. While we have taken numerous steps to mitigate the impact of the pandemic on our results of operations, there can be no assurance that these efforts will continue to be successful. While efforts to address the pandemic, including vaccinations, have fostered progress and many restrictions have relaxed, due to numerous uncertainties and factors beyond our control, we are unable to predict the ongoing impact that the pandemic and recovery efforts will have on our business, results of operations, cash flows, and financial condition. These factors and uncertainties include, but are not limited to:
- the ongoing impact of COVID-19, including whether there are further “waves” or other continued increases or spikes in the number of COVID-19 cases in future periods in areas in which we or our suppliers operate, and the potential for longer-term impact as COVID-19 becomes endemic;
- the rapidly changing and fluid circumstances caused by the pandemic and efforts to contain and recover from it and our ability to respond quickly enough or appropriately to those circumstances;
- the duration and degree of governmental, business or other actions in response to the pandemic, including but not limited to quarantine or shut-down measures and other governmental orders, or the termination of those measures; fiscal policy changes; or additional measures that may yet be enacted;
- the health of, and longer-term effect of the pandemic on, our associates and our ability to maintain staffing needs to effectively operate our business;
- changes in labor markets affecting us and our suppliers, including labor shortages and increased employee turnover;
- evolving macroeconomic factors, including general economic uncertainty, unemployment rates, inflation and deflation, rising interest rates, and recessionary pressures, and their ongoing impact on consumer confidence, economic well-being, spending, and shopping behaviors;
- impacts – financial, operational or otherwise – on our supply chain, including on manufacturers or suppliers of our products and logistics or transportation providers, and on our service providers, subcontractors, or other business partners;
- the effects on our internal control environment and data security as a result of the remote and hybrid work environment;
- the impact of regulatory and judicial changes in liability for workers’ compensation;
- potential increases in insurance premiums, medical claims costs, and workers’ compensation claims costs; and
- the impact of litigation or claims from customers, associates, suppliers, regulators or other third parties relating to COVID-19 or our actions in response thereto.
In addition, as the pandemic subsides, customers have shifted more of their spending away from home improvement and back to other areas, compared to the historic levels of home improvement spending we saw during the heights of the pandemic, which may have an adverse impact on our sales.
The above factors and uncertainties, or others of which we are not currently aware, may result in adverse impacts to our business, results of operations, cash flows, and financial condition. In addition to the factors above, the
Fiscal 2022 Form 10-K
Fiscal 2022 Form 10-K
Fiscal 2022 Form 10-K
COVID-19 pandemic has increased a number of other risks to our business, including but not limited to those discussed below and elsewhere in these Risk Factors:
Associate and Customer Safety-Related Risks. The health and safety of our associates and customers are of primary concern to our management team. In response to the COVID-19 pandemic, we took several steps to support our associates, including expanding certain compensation and benefits to help alleviate some of the challenges our associates were facing as a result of COVID-19, and adopted a number of enhanced safety measures in our stores and other facilities. We have transitioned from these temporary pay and benefits programs, as well as many of the enhanced safety measures. However, due to the unpredictable nature of COVID-19 and the consequences of our actions, we may see unexpected outcomes from rolling back safety measures as conditions evolve, particularly if there are further outbreaks. If we do not respond appropriately to any further COVID-19 outbreaks, if our customers or associates do not participate in safety measures, or if rolling back safety measures results in additional outbreaks, the well-being of our associates and customers could be at risk. Furthermore, any failure to appropriately respond, or the perception of an inadequate response, could cause reputational harm to our brand and/or subject us to claims and litigation from associates, customers, suppliers, regulators or other third parties. Additionally, we have faced, and may continue to face, periodic labor shortages at our stores due to COVID-19 and other illnesses like influenza that were less prevalent during the height of the pandemic, which can result in modifications to our operations and negatively impact our business, costs and results of operations.
Additionally, some jurisdictions have taken measures intended to expand the availability of workers’ compensation or to change the presumptions applicable to workers compensation measures. These actions may increase our exposure to workers’ compensation claims and increase our cost of insurance.
Supply Chain-Related Risks. Circumstances related to the COVID-19 pandemic significantly impacted the global supply chain, with restrictions and limitations on business activities and impacts of the COVID-19 pandemic causing cost increases, labor shortages, capacity constraints, disruptions and delays. These issues, which may continue or expand depending on the progression of the pandemic, have placed strain on the domestic and international supply chain, which has affected and may continue to negatively affect the flow or availability of certain products. Even if we are able to find alternate sources for certain products, they may cost more or require us to incur higher transportation costs, which could adversely impact our profitability and financial condition. Similarly, increased demand for online purchases of products impacted our fulfillment operations, as well as those of our third-party carriers, resulting in delays in delivering products to customers. The operation of our distribution and fulfillment centers is crucial to our business operations. We and our suppliers have experienced, and may continue to experience, labor shortages at some of our distribution and fulfillment centers, and any such labor shortages, whether temporary or sustained, may adversely impact the flow or availability of products to our stores and customers. Any of these circumstances could impair our ability to meet customer demand for products and result in lost sales, increased supply chain costs, or damage to our reputation.
To the extent the COVID-19 pandemic and related recovery efforts continue to adversely affect the U.S. and global economy and/or to adversely affect our business, results of operations, cash flows, or financial condition, they may also heighten other risks described in this section and other SEC filings, including but not limited to those related to consumer behavior and expectations, competition, brand and reputation, implementation of strategic initiatives, cybersecurity threats, associate and customer privacy, technology systems disruption, supply chain disruptions, labor availability and cost, litigation, and regulatory requirements.