Neiman Marcus 2006 Annual Report Download - page 11

Men's Apparel and Shoes: Men's apparel and shoes include suits, dress shirts and ties, sport coats, jackets, trousers, casual wear
and eveningwear as well as business and casual footwear. In recent years, this category has been an area of increased focus. Bergdorf
Goodman has a fully dedicated men's store in New York. Our primary vendors in this category include Ermenegildo Zegna, Brioni,
Giorgio Armani, and Prada in men's clothing and sportswear and Ermenegildo Zegna, Brioni, Prada, Ferragamo, Gucci and Stefano Ricci
in men's furnishings and shoes.
Designer and Precious Jewelry: Our designer and precious jewelry offering includes women's necklaces, bracelets, rings,
earrings and watches that are selected to complement our apparel merchandise offering. Our primary vendors in this category include
David Yurman, John Hardy and Stephen Dweck in designer jewelry, Henry Dunay, Cartier and Roberto Coin in precious jewelry. We
often sell precious jewelry which has been consigned to us from the vendor.
Home Furnishings and Décor: Home furnishings and décor include linens, tabletop, kitchen accessories, furniture, rugs,
decoratives (frames, candlesticks, vases and sculptures) as well as collectables. Merchandise for the home complements our apparel
offering in terms of quality and design. Our primary vendors in this category include Jay Strongwater, Daum, Waterford, Steuben and
Baccarat.
Vendor Relationships
Our merchandise assortment consists of a wide selection of luxury goods purchased from both well-known luxury-branded
fashion vendors as well as new and emerging designers. We communicate with our vendors frequently, providing feedback on current
demand for their products, suggesting, at times, changes to specific product categories or items and gaining insight into their future
fashion direction. Certain designers sell their merchandise, or certain of their design collections, exclusively to us and other designers sell
to us pursuant to their limited distribution policies. We compete for quality merchandise and assortment principally based on relationships
and purchasing power with designer resources. Our women's and men's apparel and fashion accessories businesses are especially
dependent upon our relationships with these designer resources. We monitor and evaluate the sales and profitability performance of each
vendor and adjust our future purchasing decisions from time to time based upon the results of this analysis. We have no guaranteed
supply arrangements with our principal merchandising sources and, accordingly, there can be no assurance that such sources will continue
to meet our needs for quality, style and volume. In addition, our vendor base is diverse, with no single vendor representing more than 5%
of the cost of our total purchases in fiscal years 2007 or 2006. The breadth of our sourcing helps mitigate risks associated with a single
brand or designer.
Consistent with industry business practice, we receive allowances from certain of our vendors in support of the merchandise we
purchase for resale. We receive certain allowances to reimburse us for markdowns taken or to support the gross margins that we earn in
connection with the sales of the vendor's merchandise. Other allowances we receive represent reductions to the amounts we pay to
acquire the merchandise. We also receive advertising allowances from certain of our merchandise vendors, substantially all of which
represent reimbursements of direct, specified and incremental costs we incurred to promote the vendors' merchandise. These allowances
are recorded as a reduction of our advertising costs when incurred. In addition, we receive allowances from certain merchandise vendors
in conjunction with compensation allowances for employees who sell the vendors' merchandise, which allowances are netted against the
related compensation expenses that we incur. For more information related to allowances received from vendors, see Note 1 to our
audited consolidated financial statements included herein.
In order to expand our product assortment, we offer certain merchandise, primarily precious jewelry, which has been consigned
to us from the vendor. As of July 28, 2007 and July 29, 2006, we held consigned inventories with a cost basis of approximately $307.6
million and $251.3 million, respectively, (consigned inventories are not reflected in our consolidated balance sheet as we do not take title
to consigned merchandise). From time to time, we make advances to certain of our vendors. These advances are typically deducted from
amounts paid to vendors at the time we receive the merchandise or, in the case of advances made for consigned goods, at the time we sell
the goods. We had net outstanding advances to vendors of approximately $31.4 million at July 28, 2007 and $25.0 million at July 29,
2006.
Inventory Management
Our merchandising function is decentralized with separate merchandising functions for Neiman Marcus stores, Bergdorf
Goodman and Direct Marketing. Each merchandising function is responsible for the determination of the merchandise assortment and
quantities to be purchased and, in the case of Neiman Marcus stores, for the allocation of merchandise to each store. We currently have
over 400 merchandise buyers and merchandise planners.
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