Neiman Marcus 2008 Annual Report Download - page 30

Table of Contents
We also receive allowances from certain merchandise vendors in conjunction with compensation programs for employees
who sell the vendor's merchandise. These allowances are netted against the related compensation expense that we incur. Amounts
received from vendors related to compensation programs were $65.8 million, or 1.8% of revenues, in fiscal year 2009, $71.6 million,
or 1.6% of revenues, in fiscal year 2008 and $65.4 million, or 1.5% of revenues, in fiscal year 2007.
Changes in our selling, general and administrative expenses are affected primarily by the following factors:
• changes in the number of sales associates primarily due to new store openings and expansion of existing stores, including
increased health care and related benefits expenses;
• changes in expenses incurred in connection with our advertising and marketing programs; and
• changes in expenses related to insurance and long-term benefits due to general economic conditions such as rising health
care costs.
Income from credit card program, net. Pursuant to a long-term marketing and servicing alliance with HSBC, HSBC offers
credit card and non-card payment plans bearing our brands and we receive 1) ongoing payments from HSBC based on net credit card
sales, 2) compensation for marketing and servicing activities, 3) our allocable share of certain income generated from the credit card
program and 4) our allocable share of certain credit card losses generated from the credit card portfolio (HSBC Program Income). We
recognize HSBC Program Income when earned. In the future, the HSBC Program Income may be:
• increased or decreased based upon the level of utilization of our proprietary credit cards by our customers;
• increased or decreased based upon future changes to our historical credit card program related to, among other things, the
interest rates applied to unpaid balances, the assessment of late fees and the level of usage of promotional no-interest
credit programs;
• decreased based upon the level of future services we provide to HSBC;
• increased for our allocable share of certain income, if any, generated from the credit card program as provided pursuant
to our contractual agreement with HSBC, or any subsequent amendment thereto; and
• decreased for our allocable share of certain credit card losses generated from the credit card portfolio as provided
pursuant to our contractual agreement with HSBC, or any subsequent amendment thereto.
Seasonality
We conduct our selling activities in two primary selling seasons—Fall and Spring. The Fall season is comprised of our first
and second fiscal quarters and the Spring season is comprised of our third and fourth fiscal quarters.
Our first fiscal quarter is generally characterized by a higher level of full-price sales with a focus on the initial introduction of
Fall season fashions. Aggressive in-store marketing activities designed to stimulate customer buying, a lower level of markdowns and
higher margins are characteristic of this quarter. The second fiscal quarter is more focused on promotional activities related to the
December holiday season, the early introduction of resort season collections from certain designers and the sale of Fall season goods
on a marked down basis. As a result, margins are typically lower in the second fiscal quarter. However, due to the seasonal increase in
revenues that occurs during the holiday season, the second fiscal quarter is typically the quarter in which our revenues are the highest
and in which expenses as a percentage of revenues are the lowest. Our working capital requirements are also the greatest in the first
and second fiscal quarters as a result of higher seasonal requirements.
Similarly, the third fiscal quarter is generally characterized by a higher level of full-price sales with a focus on the initial
introduction of Spring season fashions. Aggressive in-store marketing activities designed to stimulate customer buying, a lower level
of markdowns and higher margins are again characteristic of this quarter. Revenues are generally the lowest in the fourth fiscal quarter
with a focus on promotional activities offering Spring season goods to the customer on a marked down basis, resulting in lower
margins during the quarter. Our working capital requirements are typically lower in the third and fourth fiscal quarters than in the
other quarters.
A large percentage of our merchandise assortment, particularly in the apparel, fashion accessories and shoe categories, is
ordered months in advance of the introduction of such goods. For example, women's apparel, men's apparel, shoes and handbags are
typically ordered six to nine months in advance of the products being offered for sale while jewelry and other
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