Neiman Marcus 2003 Annual Report Download - page 8

advances made for consigned goods, at the time the goods are sold by the Company. The Company had net outstanding advances to
vendors of approximately $27.8 million at July 31, 2004.
Inventory Management
The Company's merchandising function is decentralized with separate merchandising functions for Neiman Marcus stores, Bergdorf
Goodman and Neiman Marcus Direct. Each merchandising function is responsible for determining the merchandise assortment and
quantities to be purchased and, in the case of Neiman Marcus stores, for the allocation of merchandise to each store.
The majority of the merchandise purchased by the Company is initially received at one of its centralized distribution facilities. To
support its Specialty Retail Stores, the Company operates a primary distribution facility in Longview, Texas, a regional distribution
facility in Totowa, New Jersey and five regional service centers. The Company also operates two distribution facilities in the Dallas-
Fort Worth area to support its Direct Marketing operation.
The Company's distribution facilities are linked electronically to the Company's various merchandising staffs to facilitate the
distribution of goods to the Company's stores. The Company utilizes electronic data interchange (EDI) technology with certain of its
vendors, which is designed to move merchandise onto the selling floor quickly and cost-effectively by allowing vendors to deliver
floor-ready merchandise to the distribution facilities. In addition, the Company utilizes high-speed automated conveyor systems
capable of scanning the bar coded labels on incoming cartons of merchandise and directing the cartons to the proper processing areas.
Many types of merchandise 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.
With respect to the Specialty Retail Stores, the majority of the merchandise is held in the Company's retail stores. The Company
closely monitors the inventory levels and assortments in its 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. The Company also maintains certain
inventories at the Longview distribution facility. The goods held at the Longview distribution facility consist of goods held in limited
assortment or quantity by the Company's stores and replenishment goods available to stores achieving high initial sales levels. All
stores have the ability to ship merchandise from the Longview distribution facility directly to the customer. The Company has
expanded the quantity of inventories maintained at the Longview distribution facility in recent years. The Company plans to continue
to expand this program to deliver goods to its customers more timely and to enhance the allocation of goods to the Company's stores.
Capital Investments
The Company makes capital investments annually to support its long-term business goals and objectives. Capital is invested in new
and existing stores, distribution and support facilities as well as information technology.
Capital is invested in the development and construction of new stores in both existing and new markets. Extensive demographic and
marketing research is conducted prior to the Company's decision to construct a new store. The Company competes with other retailers
for real estate opportunities principally on the basis of its ability to attract customers. In addition to the construction of new stores, the
Company also invests in the on-going maintenance of its stores to ensure an inviting and customer-friendly ambiance in its stores.
Capital expenditures for existing stores range from minor renovations of certain areas within the store to major remodels and
renovations and store expansions.
The Company also believes capital investments for information technology in its stores, distribution facilities and support functions
are necessary to support its business strategies. As a result, the Company is continually upgrading its information systems to improve
efficiency and productivity.
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