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Contempo Knocks NM Group into Red

CHESTNUT HILL, Mass. -- Battered by a $48 million charge for restructuring its Contempo Casuals division, the Neiman Marcus Group reported a net loss of $26.1 million in the third quarter ended April 30.<BR><BR>In the same period a year ago, the...

CHESTNUT HILL, Mass. — Battered by a $48 million charge for restructuring its Contempo Casuals division, the Neiman Marcus Group reported a net loss of $26.1 million in the third quarter ended April 30.

In the same period a year ago, the company earned $3.8 million, or 10 cents a share.

Revenues in the quarter rose 3.5 percent, to $472.7 million from $456.5 million.

Robert J. Tarr, president and chief executive officer, said Neiman Marcus stores posted substantial gains in revenues and operating earnings. This, however, was offset by a much larger operating loss at Contempo Casuals. Tarr said NMG expects to complete the majority of the restructuring, which includes the discontinuance of Pastille stores, by the end of July.

He said this should improve the cash flow and profitability outlook for Contempo, and, therefore, for NMG as a whole.

In the quarter, the Neiman Marcus division, which includes the NM stores and the NM Direct mail-order operations, posted higher revenues and operating earnings. A spokesman said comparable-store sales were up in the mid-to-high single digits. Bergdorf Goodman posted higher sales and a modest gain in operating earnings, Tarr continued, noting business strengthened steadily as the spring weather in New York improved. Same-store sales were up in the high single digits. “We had been expecting operating results in line with last year,” said Thomas Tashjian of First Manhattan, but noted that unlike in past quarters, strength at Neiman Marcus was not enough to counterbalance Contempo’s drag.

Looking ahead, Tashjian noted he has cut his per-share estimate from 55 cents to 49 cents, flat with last year.

Contempo Casuals had a significant same-store sales decline, resulting in an operating loss against a break-even performance a year ago. Pastille’s operating loss widened, reflecting slower than anticipated sales and higher operating expenses.

NMG stock closed Wednesday up 1/4 to 15 5/8 on the New York Stock Exchange.