Neiman Marcus 2005 Annual Report Download - page 5

PART I
ITEM 1. BUSINESS
Business Overview
We are one of the nation's leading luxury retailers, offering distinctive merchandise and excellent customer service that cater
to the needs of the affluent consumer. Since our founding in the early 1900s, we have established ourselves as a leading fashion
authority among luxury consumers and have become a premier U.S. retail channel for many of the world's most exclusive designers.
Currently, we operate 37 Neiman Marcus full-line stores at prime retail locations in major U.S. markets and two Bergdorf Goodman
stores on Fifth Avenue in New York City. We also operate catalogs and e-commerce websites under the brands Neiman Marcus®,
Bergdorf Goodman® and Horchow® and own a majority interest in Kate Spade LLC, which designs and markets high-end
accessories. During fiscal years 2006, 2005 and 2004, we generated revenues of $4,105.6 million, $3,774.8 million and $3,484.0
million, respectively, and operating earnings of $328.1 million, $409.0 million and $343.2 million, respectively.
We operate an integrated, multi-channel retailing model as described below:
Specialty Retail. Our specialty retail store operations (Specialty Retail) consist primarily of our 37 Neiman Marcus stores and
two Bergdorf Goodman stores. We also operate 18 clearance centers to provide an outlet for the sale of end-of-season clearance
merchandise. Over our past five fiscal years, Specialty Retail has achieved a compounded annual growth rate, or CAGR, in revenues of
6.4%. During fiscal years 2006, 2005 and 2004, Specialty Retail accounted for 82.2%, 82.2% and 81.8%, respectively, of our total
revenues.
• Neiman Marcus Stores. Neiman Marcus stores offer distinctive luxury merchandise, including women's couture and
designer apparel, contemporary sportswear, handbags, fashion accessories, shoes, cosmetics, men's clothing and
furnishings, precious and designer jewelry, decorative home accessories, fine china, crystal and silver, children's apparel
and gift items. We locate our Neiman Marcus stores at carefully selected venues that cater to our target customers in major
metropolitan markets across the United States, and design our stores to provide a feeling of residential luxury by blending
art and architectural details from the communities in which they are located. During fiscal years 2006, 2005 and 2004 our
full-line Neiman Marcus stores and clearance centers accounted for 70.9%, 71.3% and 71.4%, respectively, of our total
revenues and 86.3%, 86.8% and 87.2%, respectively, of Specialty Retail revenues.
• Bergdorf Goodman Stores. Bergdorf Goodman is a premier luxury retailer in New York City well known for its couture
merchandise, opulent shopping environment and landmark Fifth Avenue locations. Bergdorf Goodman features high-end
apparel, fashion accessories, shoes, decorative home accessories, precious and designer jewelry, cosmetics and gift items.
During fiscal years 2006, 2005 and 2004, our Bergdorf Goodman stores accounted for 11.3%, 10.9% and 10.4%,
respectively, of our total revenues and 13.7%, 13.2% and 12.8%, respectively, of Specialty Retail revenues.
Direct Marketing. Our upscale direct-to-consumer operation (Direct Marketing) conducts online and catalog sales of fashion
apparel, accessories and home furnishings through the Neiman Marcus brand, online and catalog sales of home furnishings and
accessories through the Horchow brand, and online sales of fashion apparel and accessories through the Bergdorf Goodman brand. In
addition, Direct Marketing currently operates 9 designer websites (3 of which were launched at the beginning of fiscal year 2007). In
connection with the designer websites, Direct Marketing creates and maintains separate e-commerce sites bearing the designers' brand
names. Direct Marketing procures inventory from each designer to be showcased on that designer's website and bears all the
responsibilities related to the fulfillment of goods purchased on the designer website.
Direct Marketing generated revenues of $655.3 million, or 16.0% of our total revenues, in fiscal year 2006, $592.1 million, or
15.7% of our total revenues, in fiscal year 2005 and $570.6 million, or 16.4% of our total revenues in 2004. Over one million customers
made a purchase through one of our catalogs or websites in fiscal year 2006. Our catalog business circulated over 100 million catalogs in
fiscal year 2006. We regularly send e-mails to over 2.3 million e-mail addresses, alerting our customers to our newest merchandise and
the latest fashion trends. Over the last five fiscal years, Direct Marketing has achieved a CAGR in revenues (excluding revenues of our
Chef's Catalog brand sold in November 2004) of 12.9%.
For more information about our reportable segments, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 16 of the Notes to Consolidated Financial Statements in Item 15.
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