Neiman Marcus 2008 Annual Report Download - page 38

Table of Contents
The IRS is now examining our federal tax returns for fiscal year 2007. We believe our recorded tax liabilities as of August 1,
2009 are sufficient to cover any potential assessments to be made by the IRS upon the completion of their examinations. We will
continue to monitor the progress of the IRS examinations and review our recorded tax liabilities for potential audit assessments. With
respect to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax
audits for fiscal years before 2005. We believe it is reasonably possible that additional adjustments in the amounts of our
unrecognized tax benefits could occur within the next 12 months as a result of settlements with tax authorities or expiration of statutes
of limitation. At this time, we do not believe such adjustments will have a material impact on our consolidated financial statements.
Fiscal Year Ended August 2, 2008 Compared to Fiscal Year Ended July 28, 2007
Revenues. Our revenues for fiscal year 2008 of $4,600.5 million increased $210.4 million, or 4.8%, from $4,390.1 million in
fiscal year 2007. The increase in revenues was due to increases in comparable revenues, revenues from new stores, higher internet
revenues and revenues generated in the 53rd week of fiscal year 2008. Revenues increased in fiscal year 2008 compared to the prior
fiscal year at all our operating companies.
Comparable revenues for the fifty two weeks ended July 26, 2008 were $4,464.4 million compared to $4,390.1 million in
fiscal year 2007, representing an increase of 1.7%. Comparable revenues increased in fiscal year 2008 by 1.3% for Specialty Retail
stores and 3.8% for Direct Marketing compared to fiscal year 2007. New stores generated sales of $86.4 million for the fifty two
weeks ended July 26, 2008 while revenues for the 53rd week were $49.8 million.
Our comparable revenues trends were stronger in the first part of fiscal year 2008. We began to experience a lower level of
customer spending in the second quarter of fiscal year 2008 which continued into the third and fourth quarters of fiscal year 2008.
Changes in comparable revenues by fiscal quarter are as follows:
Fiscal Year 2008 Fiscal Year 2007
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Specialty Retail
stores (1.8)% (3.4)% 3.4% 6.4% 6.6% 5.6% 7.0% 5.4%
Direct Marketing 0.7% 2.0% 5.2% 7.1% 9.0% 8.7% 6.1% 14.7%
Total (1.4)% (2.5)% 3.7% 6.5% 7.0% 6.1% 6.8% 6.8%
The increase in comparable revenues for Direct Marketing was due to higher internet revenues. Internet revenues were
$564.5 million for fiscal year 2008, an increase of 13.1% compared to the prior fiscal year. The increase in internet revenues was
partially offset by decreases in catalog revenues as well as a decrease in revenues from the home décor category, primarily offered by
our Horchow brand.
Cost of goods sold including buying and occupancy costs (excluding depreciation). COGS for fiscal year 2008 was 63.8%
of revenues compared to 62.7% of revenues for fiscal year 2007.
The net increase in COGS as a percentage of revenues in fiscal year 2008 was primarily due to decreased margins generated
by both our Specialty Retail stores and Direct Marketing operation of approximately 1.1% of revenues. The increase in COGS as a
percentage of revenues reflects the lower level of customer demand we experienced in fiscal year 2008. As a result, we generated a
lower level of full-price sales in fiscal year 2008 and incurred higher markdowns and sales promotions costs to liquidate on-hand
inventories held in excess of sales trends. In addition, our Direct Marketing operation realized lower margins on delivery and
processing revenues as a result of discounted and free shipping promotions.
Selling, general and administrative expenses (excluding depreciation). SG&A expenses were 22.7% of revenues in fiscal
year 2008 compared to 23.1% of revenues in the prior fiscal year.
The net decrease in SG&A expenses as a percentage of revenues in fiscal year 2008 of approximately 0.4% of revenues was
primarily due to:
• Lower payroll costs, including estimated annual incentive compensation, of approximately 0.4% of revenues; and
• a decrease in marketing and advertising costs of approximately 0.2% of revenues incurred by Direct Marketing primarily due
to higher internet revenues, which have a lower expense to revenue ratio than catalog revenues.
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