Neiman Marcus 2006 Annual Report Download - page 17

and sell these goods is intense. Our relationships with our designers have been a significant contributor to our past success. We have no
guaranteed supply arrangements with our principal merchandising sources. Accordingly, there can be no assurance that such sources will
continue to meet our quality, style and volume requirements. Moreover, nearly all of the brands of our top designers are sold by
competing retailers, and many of our top designers also have their own dedicated retail stores. If one or more of our top designers were to
cease providing us with adequate supplies of merchandise or, conversely, were to increase sales of merchandise through its own stores or
to the stores of our competitors, our business could be adversely affected. In addition, any decline in the popularity or quality of any of
our designer brands could adversely affect our business.
If we significantly overestimate our future sales, our profitability may be adversely affected.
We make decisions regarding the purchase of our merchandise well in advance of the season in which it will be sold. For
example, women's apparel, men's apparel and shoes are typically ordered six to nine months in advance of the products being offered for
sale while handbags, jewelry and other categories are typically ordered three to six months in advance. If our sales during any season,
particularly a peak season, are significantly lower than we expect for any reason, we may not be able to adjust our expenditures for
inventory and other expenses in a timely fashion and may be left with a substantial amount of unsold inventory. If that occurs, we may be
forced to rely on markdowns or promotional sales to dispose of excess inventory. This could have an adverse effect on our margins and
operating income. At the same time, if we fail to purchase a sufficient quantity of merchandise, we may not have an adequate supply of
products to meet consumer demand. This may cause us to lose sales or harm our customer relationships.
Our failure to identify changes in consumer preferences or fashion trends may adversely affect our performance.
Our success depends in large part on our ability to identify fashion trends as well as to anticipate, gauge and react to changing
consumer demands in a timely manner. If we fail to adequately match our product mix to prevailing customer tastes, we may be required
to sell our merchandise at higher average markdown levels and lower average margins. Furthermore, the products we sell often require
long lead times to order and must appeal to consumers whose preferences cannot be predicted with certainty and often change rapidly.
Consequently, we must stay abreast of emerging lifestyle and consumer trends and anticipate trends and fashions that will appeal to our
consumer base. Any failure on our part to anticipate, identify and respond effectively to changing consumer demands and fashion trends
could adversely affect our business.
Our business and performance may be affected by our ability to implement our store expansion and remodeling strategies.
Based upon our expansion strategy, we expect that planned new stores will add over 565,000 square feet of new store space over
approximately the next four fiscal years, representing an increase of approximately 10% above the current aggregate square footage of
our full-line Neiman Marcus and Bergdorf Goodman stores, and that our store remodeling program will add additional new store space
from remodels that are already underway. 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, 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. In undertaking store
remodels, we must complete the remodel in a timely, cost effective manner, minimize disruptions to our existing operations, and succeed
in creating an improved shopping environment. If we fail to execute on these or other aspects of our store expansion and remodeling
strategy, we could suffer harm to our sales, an increase in costs and expenses and an adverse effect on our business.
Acts of terrorism could adversely affect our business.
The economic downturn that followed the terrorist attacks of September 11, 2001 had a material adverse effect on our business.
Any further acts of terrorism or other future conflicts may disrupt commerce and undermine consumer confidence, cause a downturn in
the economy generally, cause consumer spending or shopping center traffic to decline or reduce the desire of our customers to make
discretionary purchases. Any of the foregoing factors could negatively impact our sales revenue, particularly in the case of any terrorist
attack targeting retail space, such as a shopping center. Furthermore, an act of terrorism or war, or the threat thereof, could negatively
impact our business by interfering with our ability to obtain merchandise from foreign manufacturers. Any future inability to obtain
merchandise from our foreign manufacturers or to substitute other manufacturers, at similar costs and in a timely manner, could adversely
affect our business.
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