Neiman Marcus 2004 Annual Report Download - page 10

has been an increased focus of Neiman Marcus. Bergdorf Goodman has a fully dedicated men's store in New York. Our primary vendors in this category
include Ermenegildo Zegna, Brioni, Giorgio Armani, and Prada in men's clothing and sportswear; and Ermenegildo Zegna, Prada, Ferragamo and Gucci in
men's furnishings and shoes.
Designer and Precious Jewelry: Our designer and precious jewelry offering includes women's accessories, necklaces, bracelets, rings, brooches and
watches that are selected to complement our apparel merchandise offering. Our primary vendors in this category include David Yurman, Stephen Dweck and
John Hardy in Designer Jewelry, and Henry Dunay and Roberto Coin in Precious Jewelry. We often sell precious jewelry on a consignment basis.
Home Furnishings and Décor: Home furnishings and décor include linens, tabletop, kitchen accessories, furniture, rugs, decoratives (frames,
candlesticks, vases and sculptures) as well as collectables. Merchandise for the home complements our apparel offering in terms of quality and design. Our
primary vendors in this category include Jay Strongwater, Daum, Waterford, Steuben and Baccarat.
Vendor Relationships
Our merchandise assortment consists of a wide selection of luxury goods purchased from both well-known luxury-branded fashion vendors as well as
new and emerging designers. We communicate with our vendors frequently, providing feedback on current demand for their products, suggesting, at times,
changes to specific product categories or items and gaining insight into their future fashion direction. Certain designers sell their merchandise, or certain of
their design collections, exclusively to us and other designers sell to us pursuant to their limited distribution policies. We compete for quality merchandise and
assortment principally based on relationships and purchasing power with designer resources. Our women's and men's apparel and fashion accessories
businesses are especially dependent upon our relationships with these designer resources. We monitor and evaluate the sales and profitability performance of
each vendor and adjust our future purchasing decisions from time to time based upon the results of this analysis. We have no guaranteed supply arrangements
with our principal merchandising sources and, accordingly, there can be no assurance that such sources will continue to meet our needs for quality, style and
volume. In addition, our vendor base is diverse, with no single vendor representing more than 5% of the cost of our total purchases in 2005. The breadth of
our sourcing helps mitigate risks associated with a single brand or designer.
Consistent with industry business practice, we receive allowances from certain of our vendors in support of the merchandise we purchase for resale. We
receive certain allowances to reimburse us for markdowns taken or to support the gross margins that we earn in connection with the sales of the vendor's
merchandise. Other allowances we receive represent reductions to the amounts we pay to acquire the merchandise. We also receive advertising allowances
from certain of our merchandise vendors, substantially all of which represent reimbursements of direct, specified and incremental costs we incurred to
promote the vendors' merchandise. These allowances are recorded as a reduction of our advertising costs when incurred. We also receive allowances from
certain merchandise vendors in conjunction with compensation allowances for employees who sell the vendors' merchandise, which allowances are netted
against the related compensation expenses that we incur. See Note 1 to our audited consolidated financial statements included herein.
We offer certain merchandise, primarily precious jewelry, on a consignment basis in order to expand our product assortment. As of July 30, 2005, we
held consigned inventories with a cost basis of approximately $226.8 million (consigned inventories are not reflected in our consolidated balance sheet as we
do not take title to consigned merchandise). From time to time, we make advances to certain of our vendors. These advances are typically deducted from
amounts paid to vendors at the time we
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