Neiman Marcus 2012 Annual Report Download - page 12

Table of Contents
Inventory Management
Our merchandising functions are responsible for the determination of the merchandise assortment and quantities to be purchased for each of our
channels and, in the case of Neiman Marcus and Last Call stores, for the allocation of merchandise to each store. We currently have approximately
400 merchandise buyers and merchandise planners.
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 code and transmit the necessary information to a
computer to record merchandise on hand. We utilize third party carriers to distribute our merchandise to individual stores.
With respect to the Specialty Retail Stores, the majority of the merchandise is held in our retail stores. We primarily operate on a pre-distribution
model through which we allocate merchandise on our initial purchase orders to each store. This merchandise is shipped from our vendors to our distribution
facilities for delivery to designated stores. We closely monitor the inventory levels and assortments in our retail stores to facilitate reorder and replenishment
decisions, satisfy customer demand and maximize sales. Transfers of goods between stores are made primarily at the direction of merchandising personnel
and, to a lesser extent, by store management primarily to fulfill customer requests.
We also maintain inventories at the Longview and Pittston distribution facilities. The goods held at these distribution facilities consist primarily of
goods held in limited assortment or quantity by our stores and replenishment goods available to stores achieving high initial sales levels. With our “locker
stock” inventory management program, we maintain a portion of our most in-demand and high fashion merchandise at our distribution facility. For products
stored in locker stock, we can ship replenishment merchandise to the stores that demonstrate the highest customer demand. In addition, our sales associates
can use the program to ship items directly to our customers, thereby improving customer service and increasing productivity. This program also helps us to
restock inventory at individual stores more efficiently, to maximize the opportunity for full-price selling and to minimize the potential risks related to excess
inventories.
The two distribution centers supporting our Online operations facilitate the receipt and storage of inventories from vendors, fulfill customer orders on
a timely and efficient basis and receive, research and resolve customer returns.
In connection with our omni-channel approach to retailing, we implemented technologies and processes in fiscal year 2012 whereby certain
inventories were made available to both our in-store and online channels. For these merchandise categories, our sales associates are able to fulfill customer
demand originating in-stores from the inventories held in their assigned store, other stores or the distribution and warehouse facilities supporting both our store
and online channels. Conversely, website orders can be fulfilled from our distribution and warehouse facilities as well as from our retail stores. We are
expanding and will continue to expand our capabilities to share inventories across our store and online channels in fiscal year 2014 and beyond.
Capital Investments
We make capital investments annually to support our long-term business goals and objectives. We invest capital in new and existing stores, e-
commerce websites, distribution and support facilities as well as information technology. We have gradually increased the number of our stores over the past
ten years, growing our full-line Neiman Marcus and Bergdorf Goodman store base from 36 stores at the beginning of fiscal year 2003 to our current 43 stores.
We invest capital in the development and construction of new stores in both existing and new markets. We are focused on operating only in attractive
markets that can profitably support our stores as well as maintaining the quality of our stores and, consequently, our brand. We conduct extensive
demographic, marketing and lifestyle research to identify attractive retail markets with a high concentration of our target customers prior to our decision to
construct a new store. In addition to the construction of new stores, we also invest in the on-going maintenance of our stores to ensure an elegant
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