Neiman Marcus 2008 Annual Report Download - page 102

Table of Contents
Selling, General and Administrative Expenses (excluding depreciation). Selling, general and administrative expenses are
comprised principally of the costs related to employee compensation and benefits in the selling and administrative support areas,
preopening expenses, advertising and catalog costs and insurance expense.
We receive allowances from certain merchandise vendors in conjunction with compensation programs for employees who
sell the vendors' merchandise. These allowances are netted against the related compensation expense that we incur. Amounts received
from vendors related to compensation programs were $65.8 million in fiscal year 2009, $71.6 million in fiscal year 2008 and $65.4
million in fiscal year 2007.
We incur costs to advertise and promote the merchandise assortment offered by both Specialty Retail stores and Direct
Marketing. Advertising costs incurred by our Specialty Retail stores consist primarily of print media costs related to promotional
materials mailed to our customers. These costs are expensed at the time of mailing to the customer. Advertising costs incurred by
Direct Marketing relate to the production, printing and distribution of our print catalogs and the production of the photographic
content on our websites. We amortize the costs of print catalogs during the periods we expect to generate revenues from such catalogs,
generally three to six months. We expense the costs incurred to produce the photographic content on our websites at the time the
images are first loaded onto the website. We expense website design and web marketing costs as incurred.
Deferred catalog costs included in other current assets in the consolidated balance sheets were $4.0 million as of August 1,
2009 and $7.5 million as of August 2, 2008. Net advertising expenses were $81.1 million in fiscal year 2009, $102.8 million in fiscal
year 2008 and $100.2 million in fiscal year 2007.
Consistent with industry practice, we receive advertising allowances from certain of our merchandise vendors. Substantially
all the advertising allowances we receive represent reimbursements of direct, specific and incremental costs that we incur to promote
the vendor's merchandise in connection with our various advertising programs, primarily catalogs and other print media. As a result,
advertising allowances are recorded as a reduction of our advertising costs when earned. Advertising allowances aggregated
approximately $65.7 million in fiscal year 2009, $75.7 million in fiscal year 2008 and $63.4 million in fiscal year 2007.
Preopening expenses primarily consist of payroll and related media costs incurred in connection with store openings and
major renovations and are expensed when incurred. We incurred preopening expenses of $5.1 million in fiscal year 2009, $7.7 million
in fiscal year 2008 and $8.8 million in fiscal year 2007.
Income from credit card program, net. Pursuant to a long-term marketing and servicing alliance with HSBC Bank Nevada,
N.A. and HSBC Private Label Corporation (formerly known as Household Corporation) (collectively referred to as HSBC), HSBC
offers credit card and non-card payment plans bearing our brands and we receive 1) ongoing payments from HSBC based on net credit
card sales, 2) compensation for marketing and servicing activities, 3) our allocable share of certain income generated from the credit
card program and 4) our allocable share of certain credit card losses generated from the credit card portfolio (HSBC Program Income).
We recognize HSBC Program Income when earned. In the future, the HSBC Program Income may be:
• increased or decreased based upon the level of utilization of our proprietary credit cards by our customers;
• increased or decreased based upon future changes to our historical credit card program related to, among other things,
the interest rates applied to unpaid balances, the assessment of late fees and the level of usage of promotional no-interest
credit programs;
• decreased based upon the level of future services we provide to HSBC;
• increased for our allocable share of certain income, if any, generated from the credit card program as provided pursuant
to our contractual agreement with HSBC, or any subsequent amendment thereto; and
• decreased for our allocable share of certain credit card losses generated from the credit card portfolio as provided
pursuant to our contractual agreement with HSBC, or any subsequent amendment thereto.
Gift Cards. We sell gift cards at our Specialty Retail stores and through our Direct Marketing operation. Unredeemed gift
cards aggregated $30.4 million at August 1, 2009 and $34.1 million at August 2, 2008. The gift cards sold to our customers have no
stated expiration dates and are subject to actual and/or potential escheatment rights in various of the jurisdictions in which we operate.
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