Neiman Marcus 2008 Annual Report Download - page 13

Table of Contents
Regulation
The credit card operations that are conducted under our arrangements with HSBC are subject to numerous federal and state
laws that impose disclosure and other requirements upon the origination, servicing and enforcement of credit accounts and limitations
on the maximum amount of finance charges that may be charged by a credit provider. In addition to our proprietary credit cards, credit
to our customers is also provided primarily through third parties. Any regulation or change in the regulation of credit arrangements
that would materially limit the availability of credit to our customer base could adversely affect our results of operations or financial
condition.
Our practices, as well as our competitors, are subject to review in the ordinary course of business by the Federal Trade
Commission and are subject to numerous federal and state laws. Additionally, we are subject to certain customs, truth-in-advertising
and other laws, including consumer protection regulations that regulate retailers generally and/or govern the importation, promotion
and sale of merchandise. We undertake to monitor changes in these laws and believe that we are in material compliance with all
applicable state and federal regulations with respect to such practices.
ITEM 1A. RISK FACTORS
Risks Related to Current Economic Conditions
Current economic conditions have adversely affected, and may continue to adversely affect, our business and results of
operations.
The recent deterioration in economic conditions, both in the domestic and global economies, has had a significant adverse
impact on our business. Instability in the financial markets, tightening of consumer credit and other economic conditions and
uncertainties have caused a reduction in consumer spending. These conditions have had a significant negative impact on our
revenues.
The merchandise we sell consists in large part of luxury retail goods. The purchase of these goods by customers is
discretionary, and therefore highly dependent upon the level of consumer spending, particularly among affluent customers.
Accordingly, sales of these products may continue to be adversely affected by a continuation or worsening of current economic
conditions, increases in consumer debt levels, uncertainties regarding future economic prospects or a decline in consumer confidence.
During an actual or perceived economic downturn (as a result of increases in consumer debt levels, increases in interest rates, a
tightening of consumer credit, uncertainties regarding future economic performance and tax rates and policies, or a decline in
consumer confidence, among other factors), fewer customers may shop our stores and websites and those who do shop may limit the
amounts of their purchases. As a result, we could be required to take significant additional markdowns and/or increase our marketing
and promotional expenses in response to the lower than anticipated levels of demand for luxury goods. In addition, promotional and/
or prolonged periods of deep discount pricing by our competitors could have a material adverse effect on our business.
We continue to experience a challenging economic and retail environment and expect these conditions will continue for an
extended period of time. Consistent with the significant declines in overall macroeconomic factors, capital markets and consumer
confidence that have existed during fiscal year 2009, customer demand has been well below our initial expectations and the prior
year. The current softness in customer demand exists across all geographic areas, all distribution channels and all merchandise
categories, particularly the apparel and home décor categories. We expect retail demand and revenues will remain weak for an
extended period of time. We will continue to align our inventory levels and purchases with anticipated lower customer demand. The
prolonged continuation of current market conditions could have a material adverse effect on our business.
Current economic conditions may constrain our ability to obtain credit.
Current economic conditions may constrain our ability to obtain credit. Domestic and global credit and equity markets have
recently undergone significant disruption, making it difficult for many businesses to obtain financing on acceptable terms or at all. As
a result of this disruption, we have experienced an increase in the cost of borrowings necessary to operate our business. If these
conditions continue or become worse, our cost of borrowing could continue to increase. It may also become more difficult to obtain
financing for our operations or to refinance long-term obligations as they become payable. In addition, our borrowing costs can be
affected by independent rating agencies' short and long-term debt ratings which are based largely on our performance as measured by
credit metrics including interest coverage and leverage ratios. A decrease in these ratings would likely also increase our cost of
borrowing and make it more difficult for us to obtain
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