Neiman Marcus 2009 Annual Report Download - page 17

Table of Contents
As a result of recent 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.
Moreover, nearly all of the brands of our top designers are sold by competing retailers, and many of our top designers also
have their own dedicated retail stores. If one or more of our top designers were to cease providing us with adequate supplies of
merchandise for purchase or, conversely, were to 1) increase sales of merchandise through their own stores, 2) increase the sales of
merchandise to our competitors or 3) alter the form in which their goods were made available to us for resale, our business could be
adversely affected. In addition, any decline in the popularity or quality of any of our designer brands could adversely affect our
business.
If we significantly overestimate our future sales, our profitability may be adversely affected.
We make decisions regarding the purchase of our merchandise well in advance of the season in which it will be sold. For
example, women's apparel, men's apparel, shoes and handbags are typically ordered six to nine months in advance of the products
being offered for sale while jewelry and other categories are typically ordered three to six months in advance. If our sales during any
season, particularly a peak season, are significantly lower than we expect for any reason, we may not be able to adjust our
expenditures for inventory and other expenses in a timely fashion and may be left with a substantial amount of unsold inventory. If
that occurs, we may be forced to rely on markdowns or promotional sales to dispose of excess inventory. This could have an adverse
effect on our margins and operating income. At the same time, if we fail to purchase a sufficient quantity of merchandise, we may not
have an adequate supply of products to meet consumer demand. This may cause us to lose sales or harm our customer relationships.
Our failure to identify changes in consumer preferences or fashion trends may adversely affect our performance.
Our success depends in large part on our ability to identify fashion trends as well as to anticipate, gauge and react to changing
consumer demands in a timely manner. If we fail to adequately match our product mix to prevailing customer tastes, we may be
required to sell our merchandise at higher average markdown levels and lower average margins. Furthermore, the products we sell
often require long lead times to order and must appeal to consumers whose preferences cannot be predicted with certainty and often
change rapidly. Consequently, we must stay abreast of emerging lifestyle and consumer trends and anticipate trends and fashions that
will appeal to our consumer base. Any failure on our part to anticipate, identify and respond effectively to changing consumer
demands and fashion trends could adversely affect our business.
A breach in information privacy could negatively impact our operations.
The protection of our customer, employee and company data is critically important to us. We utilize customer data captured
through both our proprietary credit card programs and our direct marketing activities. Our customers have a high expectation that we
will adequately safeguard and protect their personal information. The regulatory environment surrounding information security and
privacy is evolving and increasingly demanding, with the frequent imposition of new and constantly changing requirements across all
our business units. A significant breach of customer, employee or company data could damage our reputation and relationships with
our customers and result in lost sales, fines and lawsuits.
Our business and performance may be affected by our ability to implement our store expansion and remodeling strategies.
We expect that planned new full-line stores will add over 89,000 square feet of new store space over approximately the next
three fiscal years, representing an increase of approximately 1.5% above the current aggregate square footage of our full-line Neiman
Marcus and Bergdorf Goodman stores. In addition, we anticipate opening approximately 3 to 5 new Neiman Marcus Last Call stores
annually in each of the next three fiscal years. New store openings involve certain risks, including constructing, furnishing and
supplying a store in a timely and cost effective manner, accurately assessing the demographic or retail environment at a given location,
negotiating favorable lease terms, hiring and training quality staff, obtaining necessary permits and zoning approvals, obtaining
commitments from a core group of vendors to supply the new store, integrating the new store into our distribution network and
building customer awareness and loyalty.
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