By  on March 21, 2005

NEW YORK — Compared with the recent merger of Federated Department Stores and May Department stores, factors believe the sale of Neiman Marcus Group should have little impact on vendors. That is, unless Federated or another direct competitor gets into the mix.

At the heart of the matter, for factors, is the fact that large-scale mergers often result in their vendor clients having their sales concentrated in one retailer. This translates into an increased risk should the retailer run into problems.

Concentration issues shouldn’t be a problem when it comes to Neiman Marcus, though, said several of the factors, simply because it is not as large a player as a Federated or May.

“Right now there’s really no implication until we know who’s going to buy them,” said Thomas Pizzo, president and chief executive officer of Wells Fargo Century. “I can’t see any weak company buying them, so I don’t see anything negative that can come out of it.”

David Milberg, president of Milberg Factors Inc., believes the motivation to sell might have been based on a mix of timing and an acknowledgment of the consolidation happening around them. 

“My guess is that Neiman Marcus is noticing a couple of things,” said Milberg. “One, the luxury business has been strong and two, there is this continued trend toward consolidation. I imagine both those things are weighing on their minds.”

But Milberg and others in the apparel industry are betting that Neiman’s will be scooped up not by another retailer, but by a financial company.

Either way, according to Michael Stanley, executive vice president at Rosenthal & Rosenthal, the merger of two strong companies insures that factors can continue to offer credit to vendors that sell to those retailers. “In the case of Federated and May, the combined effort is going to be strong, it’s not going to deteriorate the credit status because it’s got the wherewithal,” said Stanley.

Still, Neiman’s merging with another retailer could create more issues for vendors.

“I think what would make the biggest difference with Neiman’s would be if a Saks or a Nordstrom were to merge with it; the stores that tend to compete more with Neiman Marcus,” said Milberg. “That’s where the [vendors] will feel the leverage of the consolidation play. It really depends on whether they merge with a direct competitor or not.”

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