Neiman Marcus 2008 Annual Report Download - page 10

Table of Contents
Men's Apparel and Shoes: Men's apparel and shoes include suits, dress shirts and ties, sport coats, jackets, trousers, casual
wear and eveningwear as well as business and casual footwear. Bergdorf Goodman has a fully dedicated men's store in New York.
Our primary vendors in this category include Ermenegildo Zegna, Brioni, Giorgio Armani, Prada and Loro Piana in men's clothing
and sportswear and Ermenegildo Zegna, Brioni, Prada, Ferragamo, Gucci and Stefano Ricci in men's furnishings and shoes.
Designer and Precious Jewelry: Our designer and precious jewelry offering includes women's necklaces, bracelets, rings,
earrings and watches that are selected to complement our apparel merchandise offering. Our primary vendors in this category include
David Yurman, John Hardy, Ippolita and Konstantino in designer jewelry and Cartier and Roberto Coin in precious jewelry. We often
sell precious jewelry which has been consigned to us from the vendor.
Home Furnishings and Décor: Home furnishings and décor include linens, tabletop, kitchen accessories, furniture, rugs,
decorative items (frames, candlesticks, vases and sculptures) as well as collectables. Merchandise for the home complements our
apparel offering in terms of quality and design. Our primary vendors in this category include Jay Strongwater, Daum, Steuben,
Baccarat, MacKenzie-Childs and Lalique.
Vendor Relationships
Our merchandise assortment consists of a wide selection of luxury goods purchased from both well-known luxury-branded
fashion vendors as well as new and emerging designers. We communicate with our vendors frequently, providing feedback on current
demand for their products, suggesting, at times, changes to specific product categories or items and gaining insight into their future
fashion direction. Certain designers sell their merchandise, or certain of their design collections, exclusively to us and other designers
sell to us pursuant to their limited distribution policies. We compete for quality merchandise and assortment principally based on
relationships and purchasing power with designer resources. Our women's and men's apparel and fashion accessories businesses are
especially dependent upon our relationships with these designer resources. We monitor and evaluate the sales and profitability
performance of each vendor and adjust our future purchasing decisions from time to time based upon the results of this analysis. We
have no guaranteed supply arrangements with our principal merchandising sources and, accordingly, there can be no assurance that
such sources will continue to meet our needs for quality, style and volume. In addition, our vendor base is diverse, with only one
vendor representing slightly more than 5% of the cost of our total purchases in fiscal year 2009. The breadth of our sourcing helps
mitigate risks associated with a single brand or designer.
As a result of current economic conditions, some of our vendors have experienced serious cash flow issues, reductions in
available credit from banks, factors or other financial institutions, or increases in the cost of capital. To counteract their cash flow
problems, our vendors may attempt to increase their prices, pass through increased costs, alter historical credit and payment terms
available to us or seek other relief. Any of these actions could have an adverse impact on our relationship with the vendor or constrain
the amounts or timing of our purchases from the vendor and, ultimately, have an adverse impact on our revenues, profitability and
liquidity.
Consistent with industry business practice, we receive allowances from certain of our vendors in support of the merchandise
we purchase for resale. We receive certain allowances to reimburse us for markdowns taken or to support the gross margins that we
earn in connection with the sales of the vendor's merchandise. Other allowances we receive represent reductions to the amounts we
pay to acquire the merchandise. We also receive advertising allowances from certain of our merchandise vendors, substantially all of
which represent reimbursements of direct, specified and incremental costs we incur to promote the vendors' merchandise. These
allowances are recorded as a reduction of our advertising costs when incurred. In addition, we receive allowances from certain
merchandise vendors in conjunction with compensation allowances for employees who sell the vendors' merchandise, which
allowances are netted against the related compensation expenses that we incur. For more information related to allowances received
from vendors, see Note 1 to our audited consolidated financial statements included herein.
In order to expand our product assortment, we offer certain merchandise, primarily precious jewelry, which has been
consigned to us from the vendor. As of August 1, 2009 and August 2, 2008, we held consigned inventories with a cost basis of
approximately $283.0 million and $388.8 million, respectively (consigned inventories are not reflected in our consolidated balance
sheet as we do not take title to consigned merchandise). From time to time, we make advances to certain of our vendors. These
advances are typically deducted from amounts paid to vendors at the time we receive the merchandise or, in the case of advances
made for consigned goods, at the time we sell the goods. We had net outstanding advances to vendors of approximately $11.6 million
at August 1, 2009 and $22.7 million at August 2, 2008.
7