Neiman Marcus 2008 Annual Report Download - page 18

Table of Contents
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 185,000 square feet of new store space
over approximately the next four fiscal years, representing an increase of approximately 3% above the current aggregate square
footage of our full-line Neiman Marcus and Bergdorf Goodman stores. 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.
We outsource certain business processes to third-party vendors that subject us to risks, including disruptions in business and
increased costs.
Some business processes that are dependent on technology are outsourced to third parties. Such processes include credit card
authorization and processing, insurance claims processing, payroll processing, record keeping for retirement and other benefit plans
and other accounting processes. In addition, we review outsourcing alternatives on a routine basis and may decide to outsource
additional business processes in the future. We make a diligent effort to ensure that all providers of outsourced services are observing
proper internal control practices, such as redundant processing facilities; however, there are no guarantees that failures will not occur.
Failure of third parties to provide adequate services could have an adverse effect on our results of operations, financial condition or
ability to accomplish our financial and management reporting.
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.
The loss of any of our senior management team or attrition among our buyers or key sales associates could adversely affect
our business.
Our success in the specialty retail industry will continue to depend to a significant extent on our senior management team,
buyers and key sales associates. We rely on the experience of our senior management, who have specific knowledge relating to us and
our industry that would be difficult to replace. If we were to lose a portion of our buyers or key sales associates, our ability to benefit
from long-standing relationships with key vendors or to provide relationship-based customer service may suffer. We may not be able
to retain our current senior management team, buyers or key sales associates and the loss of any of these individuals could adversely
affect our business.
Inflation may adversely affect our business operations in the future.
In recent years, we have experienced certain inflationary conditions in our cost base due primarily to (1) changes in foreign
currency exchange rates that have reduced the purchasing power of the U.S. dollar, (2) increases in selling, general and administrative
expenses, particularly with regard to employee benefits and (3) increases in fuel prices and costs impacted by increases in fuel prices,
such as freight and transportation costs. Inflation can harm our margins and profitability if we are unable to increase prices or cut costs
enough to offset the effects of inflation in our cost base. If inflation in these or other costs worsens, we may not be able to offset the
effects of inflation and cost increases through control of expenses, passing cost increases on to customers or any other method. Any
future inflation could adversely affect our profitability and our business.
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