Neiman Marcus 2006 Annual Report Download - page 5

PART I
ITEM 1. BUSINESS
Business Overview
We are one of the nation's leading luxury retailers, offering distinctive merchandise and excellent customer service that cater to
the needs of the affluent consumer. Since our founding in the early 1900s, we have established ourselves as a leading fashion authority
among luxury consumers and have become a premier U.S. retail channel for many of the world's most exclusive designers. Currently, we
operate 39 Neiman Marcus full-line stores at prime retail locations in major U.S. markets and two Bergdorf Goodman stores on Fifth
Avenue in New York City. We also operate catalogs and e-commerce websites under the brands Neiman Marcus®, Bergdorf Goodman®
and Horchow®. During fiscal years 2007, 2006 and 2005, we generated revenues of $4,390.1 million, $4,030.1 million and $3,695.1
million, respectively, and operating earnings of $476.8 million, $329.0 million and $397.4 million, respectively.
We operate an integrated, multi-channel retailing model as described below:
Specialty Retail. Our specialty retail store operations (Specialty Retail) consist primarily of our 39 Neiman Marcus stores and
two Bergdorf Goodman stores. We also operate 21 clearance centers to provide an outlet for the sale of end-of-season clearance
merchandise. Over our past five fiscal years, Specialty Retail has achieved a compounded annual growth rate, or CAGR, in revenues of
8.7%. Specialty Retail accounted for 83.7% of our total revenues in fiscal year 2007, 83.7% in fiscal year 2006 and 84.0% in fiscal year
2005.
• Neiman Marcus Stores. Neiman Marcus stores offer distinctive luxury merchandise, including women's couture and
designer apparel, contemporary sportswear, handbags, fashion accessories, shoes, cosmetics, men's clothing and
furnishings, precious and designer jewelry, decorative home accessories, fine china, crystal and silver, children's apparel
and gift items. We locate our Neiman Marcus stores at carefully selected venues that cater to our target customers in major
metropolitan markets across the United States, and design our stores to provide a feeling of residential luxury by blending
art and architectural details from the communities in which they are located. Our full-line Neiman Marcus stores and
clearance centers accounted for 71.6% of our total revenues in fiscal year 2007, 72.2% in fiscal year 2006 and 72.9% in
fiscal year 2005 and 85.6% of Specialty Retail revenues in fiscal year 2007, 86.3% in fiscal year 2006 and 86.8% in fiscal
year 2005.
• Bergdorf Goodman Stores. Bergdorf Goodman is a premier luxury retailer in New York City well known for its couture
merchandise, opulent shopping environment and landmark Fifth Avenue locations. Bergdorf Goodman features high-end
apparel, fashion accessories, shoes, decorative home accessories, precious and designer jewelry, cosmetics and gift items.
Our Bergdorf Goodman stores accounted for 12.1% of our total revenues in fiscal year 2007, 11.5% in fiscal year 2006 and
11.1% in fiscal year 2005 and 14.4% of Specialty Retail revenues in fiscal year 2007, 13.7% in fiscal year 2006 and 13.2%
in fiscal year 2005.
In the fourth quarter of fiscal year 2006, we opened one store under a new concept called CUSP. We opened two additional
CUSP stores in fiscal year 2007 and one store in early fiscal year 2008. CUSP is a smaller store format (7,000 to 11,000 square feet) that
targets a younger, fashion savvy customer with a contemporary point of view. To date, the operations of the CUSP stores are insignificant
to the revenues and operating earnings of our Specialty Retail stores. We are currently evaluating the performance of our existing CUSP
stores and the potential, if any, for future CUSP stores.
Direct Marketing. Our upscale direct-to-consumer operation (Direct Marketing) conducts online and catalog sales of fashion
apparel, accessories and home furnishings through the Neiman Marcus brand, online and catalog sales of home furnishings and
accessories through the Horchow brand, and online sales of fashion apparel and accessories through the Bergdorf Goodman brand. In
addition, Direct Marketing currently operates 11 designer websites (including one that was launched at the beginning of fiscal year
2008). In connection with the designer websites, Direct Marketing creates and/or maintains separate e-commerce sites bearing the
designers' brand names. Direct Marketing procures inventory from each designer to be showcased on that designer's website and
bears all the responsibilities related to the fulfillment of goods purchased on the designer website.
Direct Marketing generated 16.3% of our total revenues in fiscal years 2007 and 2006 and 16.0% in fiscal year 2005. Over one
million customers made a purchase through one of our websites or catalogs in fiscal year 2007. In recent years, internet sales have
increased as a percentage of Direct Marketing revenues. As a percentage of total revenues of Direct Marketing,
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