DALLAS — Citing the tough business climate, Neiman Marcus Inc. is trimming 450 employees this week in positions from the vice president level on down and is reducing salaries for some personnel.
This story first appeared in the February 25, 2009 issue of WWD. Subscribe Today.
The majority of the terminations took place Monday and Tuesday as the luxury retailer reduced its workforce by 2 percent to 15,385, spokeswoman Ginger Reeder said. Last month the company eliminated 375 jobs, many of which were on the cosmetics sales floor in a realignment of responsibilities in that area.
In addition, the company this week is imposing a 2 to 4 percent pay reduction on all management and salaried employees. About 3,000 employees will be affected, Reeder said.
Sales associates, who typically are paid straight commission, and support staff on hourly wages were not included in the wage cuts.
Neiman’s is continuing an operations review that could result in more layoffs, Reeder said. She added that the company is taking other cost-cutting measures but declined to reveal them.
“Business is difficult and we anticipate continuing challenges throughout the rest of the year,” Reeder said. “These times are unique and they demand an unprecedented response in order to remain both profitable and competitive.”
The layoffs follow a slowdown in sales at Neiman’s that began in September and accelerated as the economic upheaval worsened, affecting the luxury market. Last month, the chain’s comparable-store sales slid 24.4 percent.
“When a company lays off up to 4 percent that is a normal, natural process of a business cycle,” said Marshal Cohen, chief retail analyst at The NPD Group. “When it starts to get to 11, 12, 15 percent, that is a problem. But Neiman Marcus is still in line with keeping pace with the business. They don’t need a lot of people standing around.”
Neiman’s wealthy customers are “thinking about the daily dire news drumbeat” and shopping less, while the aspirational customer is no longer able to spend at Neiman’s, said Stevan Buxbaum, executive vice president of retailing consultants Buxbaum Group.
“Neiman Marcus and Saks have been hit very hard by this downturn,” said Milton Pedraza, chief executive officer of the Luxury Institute, a market research and ratings firm. “They got caught with too much inventory and not enough cash, and I don’t think things will get better until the second half. That doesn’t mean we’ll have a great Christmas, but things will start to bottom out. Anyone who had assets in the stock market, now they are worth half. Even the wealthy will spend less.”