Neiman Marcus 2005 Annual Report Download - page 35

(1) Other includes the operations of Kate Spade, LLC.
(2) Comparable revenues include 1) revenues derived from our retail stores open for more than 52 weeks, including stores that have
been relocated or expanded, 2) revenues from our Direct Marketing operation and 3) revenues from Kate Spade LLC. Comparable
revenues exclude 1) revenues of closed stores, 2) revenues of Gurwitch Products, L.L.C. (sold in July 2006) and 3) revenues of our
previous Chef's Catalog operations (sold in November 2004).
Fiscal Year Ended July 29, 2006 Compared to Fiscal Year Ended July 30, 2005
Revenues. Revenues for fiscal year 2006 of $4,105.6 million increased $330.8 million, or 8.8%, from $3,774.8 million in fiscal
year 2005, reflecting increases in comparable revenues, revenues from new stores and higher internet sales. Revenues increased in fiscal
year 2006 compared to fiscal year 2005 at all our operating companies, except for Kate Spade.
Comparable revenues for fiscal year 2006 were $3,992.2 million compared to $3,740.6 million in fiscal year 2005, representing
an increase of 6.8%. Comparable revenues increased in fiscal year 2006 by 6.1% for Specialty Retail stores, 13.3% for Direct Marketing
and decreased 13.1% for Kate Spade compared to fiscal year 2005.
Comparable revenues in fiscal year 2005 increased by 9.8% as compared to fiscal year 2004. Changes in comparable revenues by fiscal
quarter are as follows:
Fiscal Year 2006 Fiscal Year 2005
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Specialty Retail stores 5.8% 5.7% 4.5% 8.8% 7.4% 6.5% 9.6% 11.1%
Direct Marketing 13.2% 16.5% 13.2% 10.4% 19.5% 16.8% 15.8% 13.1%
Total 6.6% 6.3% 6.3% 8.3% 9.4% 7.9% 10.4% 11.4%
In fiscal year 2006, internet sales by Direct Marketing were $405.7 million, an increase of 33.0% from fiscal year 2005,
excluding Chef's Catalog. Total revenues of Chef's Catalog (prior to its sale in November 2004) of $13.9 million are included in
consolidated revenues for fiscal year 2005.
Cost of goods sold including buying and occupancy costs (excluding depreciation). COGS for fiscal year 2006 and fiscal year
2005 were:
Fiscal year ended
July 29, 2006
Fiscal year ended
July 30, 2005
(Combined) (Predecessor)
(in millions, except percentages) $
% of
revenues $
% of
revenues
COGS, before purchase accounting adjustments $ 2,593.6 63.1% $ 2,390.3 63.3%
Purchase accounting adjustments, primarily non-cash charges
related to step-up in carrying value of acquired inventories 43.8 1.1 — —
COGS, as reported $ 2,637.4 64.2% $ 2,390.3 63.3%
We present the non-GAAP financial measure COGS, before purchase accounting adjustments because we use this measure to
monitor and evaluate the performance of our business and believe the presentation of this measure will enhance investors' ability to
analyze trends in our business and evaluate our performance relative to other companies in our industry.
The increase in COGS as reported under GAAP to 64.2% of revenues from 63.3% of revenues in the prior fiscal year primarily
reflects $43.8 million of purchase accounting adjustments to increase the carrying value of the acquired inventories recorded in
connection with the Transactions. COGS before purchase accounting adjustments was 63.1% of revenues compared to 63.3% of revenues
in the prior year reflecting:
• a decrease in product costs by approximately 0.1% of revenues primarily due to lower net markdowns; and
• a decrease in buying and occupancy costs of approximately 0.1% of revenues primarily due to leveraging payroll and rent
expense on a higher level of revenues in fiscal year 2006.
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