Neiman Marcus 2013 Annual Report Download - page 10

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Fifth Avenue in New York. Our primary vendors in this category include Ermenegildo Zegna, Brioni, Giorgio Armani, Tom Ford, Brunello Cucinelli and
Burberry in men’s clothing and sportswear and Ermenegildo Zegna, Brioni, Prada, Ferragamo, Gucci and Tom Ford in men’s furnishings and shoes.
Designer and Precious Jewelry: Our designer and precious jewelry offering includes women’s necklaces, bracelets, rings, earrings and watches that
are selected to complement our apparel merchandise offering. Our primary vendors in this category include David Yurman, John Hardy and Ippolita in
designer jewelry and Chanel and Van Cleef & Arpels in precious jewelry. We often sell precious jewelry that has been consigned to us from the vendor.
Cosmetics and Fragrances: Cosmetics and fragrances include facial and skin cosmetics, skin therapy and lotions, soaps, fragrances, candles and
beauty accessories. Our primary vendors of cosmetics and beauty products include La Mer, Chanel, Sisley, Bobbi Brown, La Prairie, Estee Lauder, Laura
Mercier and Tom Ford.
Home Furnishings and Décor: Home furnishings and décor include linens, tabletop, kitchen accessories, furniture, rugs, decorative items (frames,
candlesticks, vases and sculptures) as well as collectables. Merchandise for the home complements our apparel offering in terms of quality and design. Our
primary vendors in this category include Jay Strongwater, MacKenzie-Childs and Baccarat.
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Our merchandise assortment consists of a broad selection of highly differentiated and distinctive luxury goods purchased from both well-known
luxury-branded fashion vendors as well as new and emerging designers. We communicate with our vendors frequently, providing feedback on current
demand for their products, suggesting changes to specific product categories or items and gaining insight into their future fashion direction. Certain
designers sell their merchandise, or certain of their design collections, exclusively to us and other designers sell to us pursuant to their limited distribution
policies. Our relationships and purchasing power with designers allow us to obtain a broad selection of quality merchandise. Our women’s and men’s apparel
and fashion accessories businesses are especially dependent upon our relationships with these designer resources. We monitor and evaluate the sales and
profitability performance of each vendor and adjust our future purchasing decisions from time to time based upon the results of this analysis. We have no
guaranteed supply arrangements with our principal merchandising sources. In addition, our vendor base is diverse, with only two vendors representing more
than 5% of the cost of our total purchases in fiscal year 2014. These vendors represented 7.0% and 5.1% of our total purchases in fiscal year 2014. The
breadth of our sourcing helps mitigate risks associated with a single brand or designer.
Consistent with industry business practice, we receive allowances from certain of our vendors in support of the merchandise we purchase for resale.
We also receive advertising allowances from certain of our merchandise vendors, substantially all of which represent reimbursements of direct, specified and
incremental costs we incur to promote the vendors’ merchandise. In addition, we receive allowances from certain merchandise vendors in conjunction with
compensation allowances for employees who sell the vendors’ merchandise. For more information related to allowances received from vendors, see Note 1 of
the Notes to Consolidated Financial Statements in Item 15.
To expand our product assortment, we offer certain merchandise, primarily precious jewelry, which has been consigned to us from the vendor. As of
August 2, 2014 and August 3, 2013, we held consigned inventories with a cost basis of approximately $376.8 million and $358.9 million, respectively.
Consigned inventories are not reflected in our Consolidated Balance Sheets as we do not take title to consigned merchandise.
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The majority of the merchandise we purchase is initially received at one of our centralized distribution facilities. To support our Specialty Retail
Stores, we utilize distribution facilities in Longview, Texas and Pittston, Pennsylvania and three regional service centers. We also operate two distribution
facilities in the Dallas-Fort Worth area to support our online operation.
Our distribution facilities are linked electronically to our various merchandising staffs to facilitate the distribution of goods to our stores. We utilize
electronic data interchange (EDI) technology with certain of our vendors, which is designed to move merchandise onto the selling floor quickly and cost-
effectively by allowing vendors to deliver floor-ready merchandise to the distribution facilities. In addition, we utilize high-speed automated conveyor
systems capable of scanning the bar-coded labels on incoming cartons of merchandise and directing the cartons to the proper processing areas. Many types of
merchandise are processed in the receiving area and immediately “cross docked” to the shipping dock for delivery to the stores. Certain processing areas are
staffed with personnel equipped with hand-held radio frequency terminals that can scan a vendor’s bar
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