Neiman Marcus 2013 Annual Report Download - page 14

Table of Contents
have an adequate supply of products to meet consumer demand, thereby causing us to lose sales or adversely affect our customer relationships.
The specialty retail industry is highly competitive.
The specialty retail industry is highly competitive and fragmented. We compete for customers with luxury and premium multi-branded retailers,
designer-owned proprietary boutiques, specialty retailers, national apparel chains, individual specialty apparel stores and online retailers. Many of our
competitors have greater financial resources than we do.
Competition to attract new customers, maintain relationships with existing customers and obtain merchandise from key designers is strong in both
in-store and online channels . We compete for customers principally on the basis of quality and fashion, customer service, value, assortment and presentation
of merchandise, marketing and customer loyalty programs and store and online ambiance. Our failure to compete successfully based on these and other
factors may have an adverse effect on our results of operations.
Online retailing is rapidly evolving and we expect competition in online markets to intensify in the future. With the expansion of online retailing,
we believe our overall business has become and will continue to become more complex. These changes have forced us to develop new expertise in response
to the new challenges, risks and uncertainties inherent in the delivery of an integrated omni-channel retailing model. For example, we face the risk that our
online operations might cannibalize a significant portion of our specialty retail store sales. Through our omni-channel strategy, we seek to attract as many
new customers as possible to both channels. We also continually analyze trends in our online and in-store channels, as well as the relationships between these
channels, to maximize opportunities to drive incremental sales.
A number of other competitive factors could have an adverse effect on our business, results of operations and financial condition, including:
• competitive pricing strategies, including discounting of prices and/or the discounting or elimination of revenues collected for delivery and
processing or other services;
• expansion of product or service offerings by existing competitors;
• entry by new competitors into markets in which we currently operate; and
• alteration of the distribution channels used by designers for the sale of their goods to consumers.
Our business and performance may be affected by our ability to implement our expansion and growth strategies.
To maintain and grow our position as a leading luxury retailer, we must make ongoing investments to support our business goals and objectives. We
make capital investments in our new and existing stores, websites, and distribution and support facilities, as well as in information technology. We also incur
expenses for headcount, advertising and marketing, professional fees and other costs in support of our growth initiatives. Costs incurred in connection with
our business goals and objectives require us to anticipate our customers’ needs, trends within our industry and our competitors’ actions. In addition, we must
successfully execute the strategies identified to support our business goals and objectives. If we fail to identify appropriate business goals and objectives or if
we fail to execute the actions required to accomplish these goals and objectives, our revenues, customer base and results of operations could be adversely
affected.
We routinely evaluate the need to expand and/or remodel our existing stores. In undertaking store expansions or remodels, we must complete the
expansion or remodel in a timely, cost effective manner, minimize disruptions to our existing operations and succeed in creating an improved shopping
environment. In addition, 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. Failure to execute on these or other aspects of our store expansion and
remodeling strategy could adversely affect our revenues and results of operations.
Our online retailing operation represents a critical element of our omni-channel strategy and its growth may replace, rather than be incremental to,
our specialty retail store sales. While we recognize that our online sales cannot be entirely incremental to sales through our retail specialty stores, we seek to
attract as many new customers as possible to both our channels and if we are not successful in doing so, this could adversely affect our revenues and results of
operations.
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