Neiman Marcus 2005 Annual Report Download - page 13

In fiscal year 2007, we anticipate capital expenditures for planned new stores in Charlotte, Austin, suburban Boston, Long
Island, the greater Los Angeles area and suburban Seattle and for renovations of our Atlanta store and San Diego stores, as well as the
main Bergdorf Goodman store. We also expect to make technology related expenditures to enhance existing systems and reporting
capabilities in a number of areas, including our warehousing systems at Direct Marketing.
We receive allowances from developers related to the construction of our stores thereby reducing our cash investment in these
stores. We record these allowances as deferred real estate credits which are recognized as a reduction of rent expense on a straight-line
basis over the lease term. We received construction allowances aggregating $32.0 million in fiscal year 2006 and $25.6 million in fiscal
year 2005.
Competition
The specialty retail industry is highly competitive and fragmented. We compete for customers with specialty retailers, traditional
and high-end department stores, national apparel chains, vendor-owned proprietary boutiques, individual specialty apparel stores and
direct marketing firms. We compete for customers principally on the basis of quality and fashion, customer service, value, assortment and
presentation of merchandise, marketing and customer loyalty programs and, in the case of Neiman Marcus and Bergdorf Goodman, store
ambiance. Retailers that compete with us for distribution of luxury fashion brands include Saks Fifth Avenue, Nordstrom, Barney's New
York and other national, regional and local retailers. Many of these competitors have greater resources than we do. In addition, following
consummation of the Transactions many of those competitors are significantly less leveraged than we are, and therefore may have greater
flexibility to respond to changes in our industry.
We believe we are differentiated from other national retailers by our distinctive merchandise assortment, which we believe is
more upscale than other high-end department stores, excellent customer service, prime real estate locations and elegant shopping
environment. We believe we differentiate ourselves from regional and local high-end luxury retailers through our diverse product
selection, strong national brand, loyalty programs, customer service, prime shopping locations and strong vendor relationships that allow
us to offer the top merchandise from each vendor. Vendor-owned proprietary boutiques and specialty stores carry a much smaller
selection of brands and merchandise, lack the overall shopping experience we provide and have a limited number of retail locations.
Employees
As of September 1, 2006, we had approximately 17,200 employees. Neiman Marcus stores had approximately 14,200
employees, Bergdorf Goodman stores had approximately 1,200 employees, Direct Marketing had approximately 1,700 employees and
Neiman Marcus Group had approximately 90 employees. Our staffing requirements fluctuate during the year as a result of the seasonality
of the retail industry. We hire additional temporary associates and increase the hours of part-time employees during seasonal peak selling
periods. None of our employees is subject to a collective bargaining agreement, except for approximately 14% of the Bergdorf Goodman
employees. We believe that our relations with our employees are good.
Seasonality
Our business, like that of most retailers, is affected by seasonal fluctuations in customer demand, product offerings and working
capital expenditures. For additional information on seasonality, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations—Executive Overview—Seasonality."
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