Neiman Marcus 2002 Annual Report Download - page 26
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INFLATION AND DEFLATION
The Company believes changes in revenues and net earnings that have resulted from inflation or deflation have not been material
during the periods presented. The Company attempts to offset the effects of inflation, which has occurred in recent years in SG&A,
through price increases and control of expenses, although the Company's ability to increase prices is limited by competitive factors in
its markets. The Company attempts to offset the effects of merchandise deflation, which has occurred on a limited basis in recent
years, through control of expenses. There is no assurance, however, that inflation or deflation will not materially affect the Company
in the future.
SEASONALITY
The Company's business, like that of most retailers, is subject to seasonal influences, with a disproportionately higher level of
revenues and net earnings realized during the fall season, which includes the second quarter holiday selling season. In light of these
patterns, SG&A expenses are typically higher as a percentage of net revenues during the first, third and fourth quarters of each year,
and working capital needs are greater in the first and second quarters of each year. The increases in working capital needs during the
first and second quarters have typically been financed with cash flows from operations, borrowings under the Company's Credit
Agreement and cash provided from the Company's proprietary credit card securitization program.
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