Neiman Marcus 2004 Annual Report Download - page 8

programs, Neiman Marcus produces The Book® approximately eight to nine times each year. The Book is a high-quality publication featuring the latest
fashion trends, is mailed on a targeted basis to our customers and has a yearly printing in excess of 3.3 million. Our other print publications include The Book
for Men, the Bergdorf Goodman Magazine and specific designer mailers. Recently, we added The Addition, which identifies for our younger, aspirational
customers, as well as our core customers, "must have items" for the current season.
We also believe that the print catalog and on-line operations of our Direct Marketing segment promote brand awareness which benefits the operations of
our retail stores.
Loyalty Programs. We maintain loyalty programs designed to cultivate long-term relationships with our customers. The Neiman Marcus loyalty
program is conducted under the InCircle® name and the Bergdorf Goodman loyalty program is conducted under the BG Rewards name. Our loyalty programs
focus on our most active customers. These programs include marketing features, including private in-store events, special magazine issues, as well as the
ability to accumulate points for qualifying purchases. Increased points are periodically offered in connection with in-store promotional and other events. Upon
attaining specified point levels, customers may redeem their points for a variety of gifts ranging from gift cards to designer merchandise and trips to exotic
locations. Approximately 46% of revenues at Neiman Marcus stores in calendar year 2004 were generated by our InCircle members.
Proprietary Credit Card Program. We maintain a proprietary credit card program through which we facilitate the extension of credit to customers
under the "Neiman Marcus" and "Bergdorf Goodman" names.
On July 7, 2005, HSBC Bank Nevada, National Association (HSBC) purchased our approximately three million private label Neiman Marcus and
Bergdorf Goodman credit card accounts and related assets, as well as the outstanding balances associated with such accounts (Credit Card Sale). The total
purchase price was approximately $647 million, consisting of approximately $534 million in net cash proceeds and the assumption of approximately
$113 million of outstanding debt under our revolving credit card securitization facility.
As a part of the Credit Card Sale, we entered into a long-term marketing and servicing alliance with HSBC. Under the terms of this alliance, HSBC
offers credit cards and non-card payment plans bearing our brands and we receive from HSBC ongoing payments related to credit sales and compensation for
marketing and servicing activities (HSBC Program Income). In addition, we continue to handle key customer service functions, initially including new
account processing, most transaction authorization, billing adjustments, collection services and customer inquiries. As part of this transaction, we are
changing, and will continue to change, the terms of credit offered to our customers following the Credit Card Sale. In addition, HSBC will have discretion
over certain policies and arrangements with credit card customers and may change these policies and arrangements in ways that affect our relationship with
these customers. Any such changes in our credit card arrangements may adversely affect our credit card program and ultimately, our business.
Historically, our customers holding a proprietary credit card have tended to shop more frequently and have a higher level of spending than customers
paying with cash or third-party credit cards. In 2005, approximately 54% of our revenues were transacted through our proprietary credit cards.
We utilize data captured through our proprietary credit card program in connection with promotional events and customer relationship programs by
targeting specific customers based upon their past spending patterns for certain brands, merchandise categories and store locations.
Integrated Multi-Channel Model. We offer products through our complementary Direct Marketing and Specialty Retail Stores businesses, which
enables us to maximize our brand recognition and strengthen our customer relationships across all channels. Our well-established catalog and online
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