Neiman Marcus 2012 Annual Report Download - page 4

Table of Contents
PART I
ITEM 1. BUSINESS
Business Overview
We are one of the largest luxury, multi-branded, omni-channel fashion retailers in the world. We offer distinctive merchandise to a highly loyal and
affluent customer base. With a history of 100+ years in retailing, the Neiman Marcus and Bergdorf Goodman brands are recognized as synonymous with
fashion, luxury and style. We have established ourselves as a leading fashion authority among luxury consumers and are a premier retail partner for many of
the world’s most exclusive designers. In fiscal year 2013, we generated revenues of $4.6 billion, which was an increase of 7.0% from fiscal year 2012,
operating earnings of $446.4 million, or 9.6% of revenues, and EBITDA of $635.3 million, or 13.7% of revenues. In fiscal year 2013, the 53 week
generated revenues of $61.9 million, operating earnings of $10.7 million and EBITDA of $13.6 million.
In our omni-channel retailing model, we operate in both the in-store and online retail channels to provide our customers with the ability to shop
“anytime, anywhere, any device.” We believe this omni-channel model maximizes the recognition of our brands and strengthens our customer relationships.
We are investing and plan to continue to invest resources to further enhance the customer’s seamless shopping experience across channels, which is consistent
with our customers’ expectations as well as our core value of exceptional customer service. We report our store operations as our Specialty Retail Stores segment
and our direct-to-consumer operations as our Online segment.
We currently operate 41 Neiman Marcus full-line stores in prime retail locations in major U.S. markets, including U.S. gateway cities that draw
customers from all over the world. In addition, we operate two Bergdorf Goodman stores in landmark locations on Fifth Avenue in New York City. Neiman
Marcus and Bergdorf Goodman cater to a highly affluent customer, offering distinctive luxury women’s and men’s apparel and accessories, handbags,
cosmetics, shoes and designer and precious jewelry. In addition, we operate 36 off-price, smaller format stores under the brand Last Call catering to an
aspirational, price-sensitive yet fashion-minded customer. We also operate six smaller format stores under the brand CUSP catering to a younger customer
focused on contemporary fashion.
We complement our in-store operations with direct-to-consumer sales through our Online business, which currently generates annual revenues of just
over $1 billion, primarily through our e-commerce websites under the brands Neiman Marcus , Bergdorf Goodman , Last Call , CUSP and Horchow . In
addition, we have taken recent steps to globalize our Neiman Marcus brand. In 2012, we launched international shipping to over 100 countries, including
Canada, Japan, Australia, Russia and several countries in the Middle East. In addition, we launched a full-price, Mandarin language e-commerce website for
the Neiman Marcus brand to cater to the growing affluent population in China. Our well-established, online operation expands the reach of our brands
internationally and beyond the trading area of our U.S. retail stores. Almost 40% of our online Neiman Marcus customers for fiscal year 2013 were located
outside of the trade areas of our existing full-line store locations. We also use our Online operations as selling and marketing tools to increase the visibility and
exposure of our brands and generate customer traffic within our retail stores.
On September 9, 2013, we entered into an Agreement and Plan of Merger (the Merger Agreement) with NM Mariposa Holdings, Inc. and Mariposa
Merger Sub LLC, both of which are owned by an investment group consisting of investment funds affiliated with Ares Management LLC and Canada
Pension Plan Investment Board (collectively, our Future Sponsors). Under the Merger Agreement, we will be acquired for a purchase price based on a total
enterprise value of $6.0 billion (the Future Sponsors’ Acquisition). A portion of the purchase price will be used at closing to repay all amounts outstanding
under our existing senior secured credit facilities. The currently outstanding 7.125% Senior Debentures due 2028 are expected to remain outstanding
immediately following the closing of the transaction in accordance with the terms of the indenture governing such debentures. Consummation of the merger is
subject to various conditions, including (i) the absence of a material adverse effect on the Company, as defined in the Merger Agreement, (ii) the expiration or
termination of any applicable waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 (which has now occurred) and (iii) the
completion of the marketing period related to financing of the Future Sponsors’ Acquisition as provided for under the Merger Agreement. We currently
anticipate the closing date for the Future Sponsors’ Acquisition to occur in October or November 2013.
Our Market Opportunity
We operate in the growing luxury apparel and accessories segment of the retail industry and market and sell merchandise, both in-store and online.
Our luxury-branded fashion vendors include, among others, Chanel, Gucci, Prada, David Yurman, Giorgio Armani, Akris, Brioni, Ermenegildo Zegna,
Christian Louboutin, Van Cleef & Arpels and Tom Ford. Luxury and fashion brands intentionally maintain limited distribution of their merchandise to
maximize brand exclusivity and to facilitate the sale of their goods at premium prices. Our omni-channel model offers our designers
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