Neiman Marcus 2009 Annual Report Download - page 19

Table of Contents
Changes in our credit card arrangements, applicable regulations and consumer credit patterns could adversely impact our
ability to facilitate the provision of consumer credit to our customers and adversely affect our business.
We maintain a proprietary credit card program through which credit is extended to customers under the "Neiman Marcus"
and "Bergdorf Goodman" names. Because a majority of our revenues is transacted through our proprietary credit cards, changes in
our proprietary credit card arrangement that adversely impact our ability to facilitate the provision of consumer credit may adversely
affect our performance.
We have a marketing and servicing alliance with HSBC Bank Nevada, N.A. and HSBC Private Label Corporation
(collectively referred to as HSBC). Pursuant to the agreement with HSBC, HSBC offers proprietary credit card accounts to our
customers under both the "Neiman Marcus" and "Bergdorf Goodman" brand names. Our original program agreement with HSBC was
scheduled to expire in July 2010. We have subsequently entered into an agreement with HSBC to extend the program to July 2015
(renewable thereafter for three-year terms). We refer to the agreement with HSBC, including as extended, as the Program Agreement.
Under the terms of the Program Agreement, HSBC offers credit cards and non-card payment plans and bears substantially all
credit risk with respect to sales transacted on the cards bearing our brands. We receive payments from HSBC based on sales
transacted on our proprietary credit cards. Such payments are subject to revisions, both increases and decreases, based upon the
overall profitability and performance of the proprietary credit card portfolio. Based upon current market conditions and the terms of
the current Program Agreement, we believe the future income earned by the Company will be lower than the income earned pursuant
to the original Program Agreement and that a higher portion of such future income will be based upon the future profitability and
performance of the credit card portfolio. In addition, we receive payments from HSBC for marketing and servicing activities as we
continue to handle key customer service functions, primarily customer inquiries and collections, for HSBC.
In connection with our Program Agreement, we have changed and may continue to change the terms of credit offered to our
customers. In addition, HSBC has discretion over certain policies and arrangements with credit card customers and may change these
policies and arrangements in ways that affect our relationships with these customers. Any such changes in our credit card
arrangements may adversely affect our credit card program and ultimately, our business.
Credit card operations 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. 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 business. Changes in credit card use, payment patterns, and
default rates may result from a variety of economic, legal, social, and other factors that we cannot control or predict with certainty.
Our business can be affected by extreme or unseasonable weather conditions.
Extreme weather conditions in the areas in which our stores are located could adversely affect our business. For example,
heavy snowfall, rainfall or other extreme weather conditions over a prolonged period might make it difficult for our customers to
travel to our stores and thereby reduce our sales and profitability. Our business is also susceptible to unseasonable weather
conditions. For example, extended periods of unseasonably warm temperatures during the winter season or cool weather during the
summer season could render a portion of our inventory incompatible with those unseasonable conditions. Reduced sales from extreme
or prolonged unseasonable weather conditions would adversely affect our business.
We are subject to numerous regulations that could affect our operations.
We are subject to customs, truth-in-advertising, labor and other laws, including consumer protection regulations and zoning
and occupancy ordinances that regulate retailers generally and/or 1) govern the importation, promotion and sale of merchandise 2)
regulate wage and hour matters with respect to our employees and 3) govern the operation of our retail stores and warehouse
facilities. Although we undertake to monitor changes in these laws, if these laws or the interpretations of these laws change without
our knowledge, or are violated by importers, designers, manufacturers or distributors, we could experience delays in shipments and
receipt of goods, suffer damage to our reputation or be subject to fines or other penalties under the controlling regulations, any of
which could adversely affect our business.
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