Neiman Marcus Inc. reported net earnings of $4 million for its second quarter ended Jan. 30, compared with a net loss of $509.2 million in the prior year, and said business trends are improving.
Total revenues in the quarter came to $1.1 billion versus $1.08 billion in the prior year. Comparable revenues were up 0.6 percent.
While a year ago the luxury chain was grappling with bloated inventories and the recession, Neiman’s is now focused on rebuilding inventories in cases where cuts were too drastic, such as shoes; offering lower prices, but not trading down; formulating new strategies for Last Call outlets and the Cusp specialty chain; maintaining significant cash and liquidity, and deleveraging, although no major debt comes due until 2013, with $1.6 billion due at that time. The company has no outstanding borrowings on its $600 million revolver.
“In those areas we tightened inventory more than appropriate, we lost some business, but we are going to more than make up for it,” Burt Tansky, Neiman’s president and chief executive officer, said during a conference call. “There won’t be any more overreactions. We learned lessons to more accurately calculate demand and inventories.”
Operating earnings were $67.1 million compared with an operating loss of $592.7 million in the year-ago quarter. The company’s adjusted operating loss in the second quarter of fiscal year 2009, excluding noncash impairment charges of $560.1 million, was $32.6 million. The charges were related primarily to writing down the value of goodwill and trade names, as well as certain long-lived assets.
“I am pleased with the results and the progress we have made,” said Tansky. “We have begun to experience improved trends,” including positive comparable-store sales since December. “We entered the holiday quarter with our inventories very much in control. We achieved this increase because we did not take the level of unplanned markdowns as last year.”
Each division contributed significantly to earnings before interest, taxes, depreciation and amortization, Tansky added. The best categories last quarter were jewelry, shoes and contemporary apparel.
Neiman’s, Tansky said, “provided our customers with highly edited assortments at all price points. We have maintained our very strong commitment to the high end, but increased our depth in mid- and opening-price points. The strategy has been well received by our customers. We continue to offer the latest luxury and designer merchandise as always, and, once again, we are not trading down but we are offering additional options within our assortments. This strategy takes time. With spring, progress will be even more visible.…
“The aspirational customer to some degree is coming in and liking what she sees,” Tansky said. “The aspirational customers really got hit hard. We felt they vacated our stores lastyear.”
He cited Bergdorf Goodman’s 9 percent sales increase in the quarter as being primarily due to the return of the “loyal New York customer base and increase in tourism spend.”
He also cited stronger trends in Florida, California “and more broadly the Northeast.”
Some relatively new strategies that are clicking with customers are “perk” cards, including free meals; “midday dashes” providing deals for two or three hours on select items but also getting a “halo” effect on regular-priced goods, and a new iPhone application bringing shoe sales at Bergdorf’s to customers’ fingertips. Every day a single shoe is featured, only through the app or at Bergdorf Goodman.
On the off-price business, Tansky noted an evolving “strategic approach including developing greater infrastructure in stores and online. We have 28 stores now and are working with very important vendors in full-line stores to develop new inventory with prominent labels and focused on exact trends of the moment. We are trying to bring our Last Call stores more in line with what should be available to that customer base….We are enthused by an opportunity to increase our share for the growing off-price mode.”
Like Saks Fifth Avenue previously said, Neiman’s has shifted from “a defensive mode to a more offensive stance,” Tansky said, though the luxury chain is operating with a 22 percent reduction in payroll, which could change as sales continue to improve.
The only full-line store opening planned is in Walnut Creek, Calif., in 2012.
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