Neiman Marcus 2009 Annual Report Download - page 11

Table of Contents
are processed in the receiving area and immediately "cross docked" to the shipping dock for delivery to the stores. Certain processing
areas are staffed with personnel equipped with hand-held radio frequency terminals that can scan a vendor's bar code and transmit the
necessary information to a computer to record merchandise on hand. We utilize third-party carriers to distribute our merchandise to
individual stores.
With respect to the Specialty Retail stores, the majority of the merchandise is held in our retail stores. We primarily operate
on a pre-distribution model through which we allocate merchandise on our initial purchase orders to each store. This merchandise is
shipped from our vendors to our distribution facilities for delivery to designated stores. We closely monitor the inventory levels and
assortments in our retail stores to facilitate reorder and replenishment decisions, satisfy customer demand and maximize sales.
Transfers of goods between stores are made primarily at the direction of merchandising personnel and, to a lesser extent, by store
management primarily to fulfill customer requests.
We also maintain certain inventories at the Longview distribution facility. The goods held at the Longview distribution
facility consist primarily of goods held in limited assortment or quantity by our stores and replenishment goods available to stores
achieving high initial sales levels. With our "locker stock" inventory management program, we maintain a portion of our most in-
demand and high fashion merchandise at our distribution facilities. For products stored in locker stock, we can ship replenishment
merchandise to the stores that demonstrate the highest customer demand. In addition, our sales associates can use the program to ship
items directly to our customers, thereby improving customer service and increasing productivity. This program also helps us to
restock inventory at individual stores more efficiently, to maximize the opportunity for full-price selling and to minimize the potential
risks related to excess inventories.
Capital Investments
We make capital investments annually to support our long-term business goals and objectives. We invest capital in new and
existing stores, distribution and support facilities as well as information technology. We have gradually increased the number of our
stores over the past ten years, growing our full-line Neiman Marcus and Bergdorf Goodman store base from 31 stores at the beginning
of fiscal year 2000 to our current 43 stores.
We invest capital in the development and construction of new stores in both existing and new markets. We conduct
extensive demographic, marketing and lifestyle research to identify attractive retail markets with a high concentration of our target
customers prior to our decision to construct a new store. We compete with other retailers for real estate opportunities principally on
the basis of our ability to attract customers. In addition to the construction of new stores, we also invest in the on-going maintenance
of our stores to ensure an elegant shopping experience for our customers. Capital expenditures for existing stores range from minor
renovations of certain areas within the store to major remodels and renovations and store expansions. We are focused on operating
only in attractive markets that can profitably support our stores as well as maintaining the quality of our stores and, consequently, our
brand. With respect to our major remodels, we only expand after extensive analysis of our projected returns on capital. We generally
experience an increase in both total sales and sales per square foot at stores that undergo a remodel or expansion.
We also believe capital investments for information technology in our stores, distribution facilities and support functions are
necessary to support our business strategies. As a result, we are continually upgrading our information systems to improve efficiency
and productivity.
In the past three fiscal years, we have made capital expenditures aggregating $343.7 million related primarily to:
• the construction of new stores in Natick (suburban Boston), Topanga (greater Los Angeles area) and Bellevue (suburban
Seattle);
• the renovation and expansion of our main Bergdorf Goodman store in New York City and Neiman Marcus stores in
Atlanta and Westchester; and
• enhancements to merchandising and store systems.
In fiscal year 2011, we anticipate capital expenditures for our planned new store in Walnut Creek, California (scheduled to
open in March 2012).
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
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