Neiman Marcus 2006 Annual Report Download - page 13

• the renovation and expansion of our main Bergdorf Goodman store in New York City and Neiman Marcus stores in San
Francisco, Newport Beach, Las Vegas, Houston, and Beverly Hills;
• the expansion of our distribution facilities;
• the development and installation of a new point-of-sale system in our retail stores;
• the installation of new warehousing and distribution systems for both Direct Marketing and Specialty Retail stores; and
• a new human capital management system (including the outsourcing of payroll and benefits administration).
In fiscal year 2008, we anticipate capital expenditures for planned new stores in Natick, the greater Los Angeles area and
suburban Seattle and for renovations of our Atlanta and Westchester 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 $24.6 million in fiscal year 2007 and $32.7 million in fiscal
year 2006.
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 financial 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, 2007, we had approximately 17,900 employees. Neiman Marcus stores had approximately 14,700
employees, Bergdorf Goodman stores had approximately 1,300 employees, Direct Marketing had approximately 1,800 employees and
Neiman Marcus Group had approximately 100 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 13% of the
Bergdorf Goodman employees. We believe that our relations with our employees are good.
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