Neiman Marcus 2007 Annual Report Download - page 13

Table of Contents
We receive allowances from developers related to the construction of our stores thereby reducing our cash investment in
these stores. We record these allowances as deferred real estate credits which are recognized as a reduction of rent expense on a
straight-line basis over the lease term. We received construction allowances aggregating $36.8 million in fiscal year 2008 and
$24.6 million in fiscal year 2007.
Competition
The specialty retail industry is highly competitive and fragmented. We compete for customers with specialty retailers,
traditional and high-end department stores, national apparel chains, vendor-owned proprietary boutiques, individual specialty apparel
stores and direct marketing firms. 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, in the case of Neiman Marcus and
Bergdorf Goodman, store ambiance. Retailers that compete with us for distribution of luxury fashion brands include Saks Fifth
Avenue, Nordstrom, Barney's New York and other national, regional and local retailers. Many of these competitors have greater
financial resources than we do. In addition, following consummation of the Acquisition many of those competitors are significantly
less leveraged than we are, and therefore may have greater flexibility to respond to changes in our industry.
We believe we are differentiated from other national retailers by our distinctive merchandise assortment, which we believe is
more upscale than other high-end department stores, excellent customer service, prime real estate locations and elegant shopping
environment. We believe we differentiate ourselves from regional and local high-end luxury retailers through our diverse product
selection, strong national brand, loyalty programs, customer service, prime shopping locations and strong vendor relationships that
allow us to offer the top merchandise from each vendor. Vendor-owned proprietary boutiques and specialty stores carry a much
smaller selection of brands and merchandise, lack the overall shopping experience we provide and have a limited number of retail
locations.
Employees
As of September 1, 2008, we had approximately 17,000 employees. Neiman Marcus stores had approximately 14,000
employees, Bergdorf Goodman stores had approximately 1,200 employees, Direct Marketing had approximately 1,700 employees and
Neiman Marcus Group had approximately 100 employees. Our staffing requirements fluctuate during the year as a result of the
seasonality of the retail industry. We hire additional temporary associates and increase the hours of part-time employees during
seasonal peak selling periods. Except for approximately 13% of the Bergdorf Goodman employees, none of our employees is subject
to a collective bargaining agreement. We believe that our relations with our employees are good.
Seasonality
Our business, like that of most retailers, is affected by seasonal fluctuations in customer demand, product offerings and
working capital expenditures. For additional information on seasonality, see Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations—Executive Overview—Seasonality."
Regulation
The credit card operations that are conducted under our arrangements with HSBC are subject to numerous federal and state
laws that impose disclosure and other requirements upon the origination, servicing and enforcement of credit accounts and limitations
on the maximum amount of finance charges that may be charged by a credit provider. In addition to our proprietary credit cards, credit
to our customers is also provided primarily through third parties. Any regulation or change in the regulation of credit arrangements
that would materially limit the availability of credit to our customer base could adversely affect our results of operations or financial
condition.
Our practices, as well as our competitors, are subject to review in the ordinary course of business by the Federal Trade
Commission and are subject to numerous federal and state laws. Additionally, we are subject to certain customs, truth-in-advertising
and other laws, including consumer protection regulations that regulate retailers generally and/or govern the importation, promotion
and sale of merchandise. We undertake to monitor changes in these laws and believe that we are in material compliance with all
applicable state and federal regulations with respect to such practices.
10