Neiman Marcus 2009 Annual Report Download - page 20

Table of Contents
Our revenues and cash requirements are affected by the seasonal nature of our business.
The specialty retail industry is seasonal in nature, with a higher level of sales typically generated in the fall and holiday
selling seasons. We have in the past experienced significant fluctuation in our revenues from quarter to quarter with a
disproportionate amount of our revenues falling in our second fiscal quarter, which coincides with the holiday season. In addition, we
have significant additional cash requirements in the period leading up to the months of November and December in anticipation of
higher sales volume in those periods, including payments relating to additional inventory, advertising and employees.
Our business is affected by foreign currency fluctuations.
We purchase a substantial portion of our inventory from foreign suppliers whose costs are affected by the fluctuation of their
local currency against the dollar or who price their merchandise in currencies other than the dollar. Fluctuations in the Euro-U.S.
dollar exchange rate affect us most significantly; however, we source goods from numerous countries and thus are affected by changes
in numerous currencies and, generally, by fluctuations in the U.S. dollar relative to such currencies. Accordingly, changes in the value
of the dollar relative to foreign currencies may increase the retail prices of goods offered for sale and/or increase our cost of goods
sold. If our customers reduce their levels of spending in response to increases in retail prices and/or we are unable to pass such cost
increases to our customers, our revenues, gross margins, and ultimately our earnings, could decrease. Foreign currency fluctuations
could have a material adverse effect on our business, financial condition and results of operations in the future.
Conditions in, and the United States' relationship with, the countries where we source our merchandise could affect our sales.
A substantial majority of our merchandise is manufactured overseas, mostly in Europe. As a result, political instability or
other events resulting in the disruption of trade from other countries or the imposition of additional regulations relating to or duties
upon imports could cause significant delays or interruptions in the supply of our merchandise or increase our costs, either of which
could have a material adverse effect on our business. If we are forced to source merchandise from other countries, those goods may
be more expensive or of a different or inferior quality from the ones we now sell. The importance to us of our existing designer
relationships could present additional difficulties, as it may not be possible to source merchandise from a given designer from
alternative jurisdictions. If we were unable to adequately replace the merchandise we currently source with merchandise produced
elsewhere, our business could be adversely affected.
Significant increases in costs associated with the production of catalogs and other promotional materials may adversely affect
our operating income.
We advertise and promote in-store events, new merchandise and fashion trends through print catalogs and other promotional
materials mailed on a targeted basis to our customers. Significant increases in paper, printing and postage costs could affect the cost
of producing these materials and as a result, may adversely affect our operating income.
We are indirectly owned and controlled by the Sponsors, and their interests as equity holders may conflict with those of our
creditors.
We are indirectly owned and controlled by the Sponsors and certain other equity investors, and the Sponsors have the ability
to control our policies and operations. The interests of the Sponsors may not in all cases be aligned with those of our creditors. For
example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our equity holders might
conflict with our creditors' interests. In addition, our equity holders may have an interest in pursuing acquisitions, divestitures,
financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might
involve risks to holders of our indebtedness. Furthermore, the Sponsors may in the future own businesses that directly or indirectly
compete with us. One or more of the Sponsors also may pursue acquisition opportunities that may be complementary to our business,
and as a result, those acquisition opportunities may not be available to us.
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