Most Recent Articles In Financial
Latest Financial Articles
- Yoox Profits Surge
- L’Oréal’s Sales Climb 15.3% on Currency Boost
- Avon Reports Net Profit Gains 51.6% for Q2
More Articles By
NEW YORK — Under new ownership, the Neiman Marcus Group is getting daring.
Bergdorf Goodman could branch out with a store in Las Vegas, and the company is close to launching a handful of scaled-down Neiman Marcus stores for fall openings, which vendors say will be geared to attract younger customers with “more affordable luxury” emphasizing contemporary fashion, in places like Tysons Corner, Va.; the Georgetown section of Washington, D.C., and Century City, Calif.
Asked about Bergdorf’s designs on Vegas, Burt Tansky, chairman and chief executive officer of the Neiman Marcus Group, said Monday, “We are evaluating the possibility.”
He declined to comment further.
Sources close to the company said that at this point, serious thought regarding Bergdorf’s expansion only revolves around Vegas, though one vendor said Los Angeles had also been discussed.
A Las Vegas store has the best chance of getting off the ground in Taubman Centers’ luxury retail development to be included in Project CityCenter, MGM/Mirage’s $5 billion project that has a target debut date of 2009.
One source close to the store said Bergdorf’s has been considering the city for about a year. At the Taubman development, “They’re working on assortment plans and figuring out dollars per square foot,” said the source. Last year, “Steve Wynn had come with an offer, but they passed on it,” said the source, referring to the year-old Wynn hotel.
“The biggest question is who is going to assort the store and how would they do it?” asked a retail competitor. “Bergdorf’s does a big business with brands like Loro Piana and Akris. These things are not spontaneous buys and it’s not glitz. The Bergdorf buyers are laser-focused on the New York customer.”
Selecting vendors is a long way off. “As soon as they have a firm deal, then they start discussions with vendors,” said Barbara Cirkva, executive vice president of fashion, watches and fine jewelry for Chanel Inc.
Asked about the idea of Bergdorf’s in Vegas, Cirkva replied, “I think it would be fantastic, because Las Vegas has a tremendous influx of tourists. It would have tremendous appeal to clients who don’t have the opportunity to come to Bergdorf’s in New York.”
This story first appeared in the May 16, 2006 issue of WWD. Subscribe Today.
However, she said most luxury brands are already in Vegas with stores, sometimes in more than one location, raising challenges for Bergdorf’s. Also, Neiman Marcus and Saks Fifth Avenue both have locations by the Strip offering plenty of designer goods, and Barneys New York is planning a flagship in the Palazzo project being developed by the Venetian.
Chanel has two stores in Las Vegas, in the Wynn and Bellagio hotels. “Both locations are doing great,” Cirkva said. “Obviously, no one wants to be overly distributed.”
Bergdorf’s designs on Las Vegas, reported in the New York Post Monday, come while its sister division Neiman Marcus Stores continues with its tradition of opening one or two stores annually.
However, Neiman’s new owners, Texas Pacific Group and Warburg Pincus LLC, paid about $5.1 billion for the luxury retailer, buying it from the Smith family, who had controlled Neiman’s for 20 years. They were supportive, without taking a heavy hand in running the company, allocating capital to renovate and expand stores and open new ones at a methodical pace, and enabling Tansky and his team to sharpen the service, merchandising and luxury appeal.
But considering the high price the new owners paid for Neiman’s, there’s more pressure to grow the retailer to service the debt load and get good returns in advance of eventually floating or selling the chain. Developing new formats for growth, such as store prototypes, are in progress. An accelerated expansion program, while complicated and risky, could bring TPG and Warburg the return they want.
However, it’s not the first time the notion of branching out with Bergdorf’s has surfaced.
Bergdorf’s once operated a store in White Plains, N.Y., and considered branches in Manhasset, N.Y., Short Hills and Paramus, N.J., as well as in Europe. The White Plains store failed because it didn’t have strong assortments with sufficient sizes and colors in each item, and customers in the suburbs preferred the Fifth Avenue location, sources said. The store eventually closed and Bergdorf’s owner at the time, the former Carter Hawley Hale Stores, decided to put money into the New York flagship instead of branches.
“The issue of whether Bergdorf’s should have even a limited rollout has been on the table for the last 25 years,” observed Isaac Lagnado, president of tactical.org consulting firm. “With Vegas, it could be sort of a one-off kind of thing. There is a lot of impulse shopping, people are in a certain frame of mind, being on vacation or because they are winning in the casinos.
“All the data we have seen from Vegas have really made the point that the customer is receptive to very high price point items, be it Judith Leiber minaudières or Louis Vuitton accessories. The beauty of the Vegas move is that it does not cannibalize any New York business. The situation would be similar to Hawaii, where you don’t have repeat customers, but you have customers with a narrow window of time and with deep pocketbooks.”
One former Bergdorf’s executive said, “I think conceptually it has legs and if there is one market where a Bergdorf’s branch could work, it would probably be Vegas. But one store is nothing. Is there a strategic initiative à la Barneys? If there was at Bergdorf’s, it probably would be a big stretch for the organization. There are so many people on the senior management team at Bergdorf’s who are new. It might make sense to let the Neiman Marcus Stores infrastructure run additional Bergdorf stores. The beauty of Bergdorf’s is that its management knows and understands every nuance of their customers. What Bergdorf’s has is a very unique situation with the world’s wealthiest customers with great fashion sensibility and great sophistication. How many markets does that customer exist in? Buyers for branch stores would be a learning curve.”
Bergdorf’s has recently had some turnover, and continues to search for a senior marketing executive. Reportedly, some shoe merchants also recently departed.
However, the store continues to operate off a strong foundation and gets good results.
“Burt [Tansky] was always very protective of Bergdorf’s and the Smith family [the former owners] were too. Texas Pacific Group [the new owners] could take a totally different push,” the former executive said.
Other sources agreed it would be difficult for the Bergdorf Goodman experience to be duplicated anywhere. “It’s nearly impossible from a merchandise presentation, decor, sales people, alterations perspective,” said one retailer. “If they have a space large enough to do a tremendous assortment it could work, provided you present nothing less than what sits on Fifth Avenue and 58th Street. Anything less in a big space would be a big disappointment.”
On the other hand, “the Bergdorf Goodman men’s store is quite easily transportable. It is a more commercial operation” compared to the high style of the women’s store.
The retailer also said a “boutique” version of Bergdorf’s could do well.
According to one consultant, “Las Vegas wouldn’t be my first choice,” for a Bergdorf’s branch. “I’m thinking about the personality of the store and the personality of the location. Bergdorf’s is very much about customer relationships. Their customers are so loyal and come back time and time again. It’s not just a drop-in kind of place. But in Tokyo, I think Bergdorf’s could be phenomenal. Also, Bergdorf’s has always been interested in one-of-a-kind exclusives. That’s very hard to do with branches.”
Said a former Neiman’s executive, “I thought they would look to Europe first. The thinking has always been that if they were to consider something it might be Europe. But times change and you have a new cast of characters.”
According to sources, executives at Bergdorf Goodman had expressed interest in expanding into either Los Angeles or Las Vegas, perhaps with a smaller format concept that would just focus on a tightly edited selection of vendors. “They could succeed in either of those markets with great success,” said a senior executive at a European fashion house. “They edit collections differently from Barneys, and have a distinct point of view, which is very focused, and an exceptional level of service, which would make them competitive in any market they choose to go into….I would support Bergdorf’s expansion, provided they have a specialty store format that would be a smaller and more edited version” of the Manhattan flagship.
— With contributions from Sharon Edelson and Marc Karimzadeh