Neiman Marcus Inc. is laying off about 375 employees this week across all divisions, including Neiman’s stores, Bergdorf Goodman and NM Direct.
The reduction in the luxury retailer’s 16,000 employees is the result of an efficiency review that started several months ago, said Ginger Reeder, a company spokeswoman.
“This is something we do every five or 10 years, and the negative impact of the economy has accelerated the importance of that effort,” Reeder said. “There could be more layoffs because we are not finished with the company-wide review.”
About half the layoffs are on the cosmetics sales floor because of an organizational change. Brand specialists whose salaries are partly paid by beauty vendors will now be able to ring up sales, which previously were handled exclusively by Neiman’s associates on commission.
“This has been in the works for a couple of years and we have resisted it while the rest of the industry has gone that way,” Reeder said. “It’s overdue, and we believe it will improve sales productivity.”
Reeder didn’t disclose the savings anticipated by the layoffs, but noted the company was providing severance packages. The last time Neiman’s had layoffs was in 1990.
Like other high-end retailers, Neiman’s has been hit hard by the financial crisis and the harsh impact it has had even among more affluent consumers. The company’s comparable-store sales declined 27.5 percent in December.
In another development, Neiman Marcus Group Inc., a wholly owned subsidiary of Neiman Marcus Inc., will use a payment-in-kind option to make some interest payments on its senior notes. Instead of paying interest in cash during the period between Jan. 15 and April 14, Neiman’s will issue more debt to meet obligations for its senior notes due in 2015.
“NMG negotiated for the right to include the PIK feature in its senior indenture relating to the PIK notes because of its belief that this feature could be a useful tool to enhance liquidity under appropriate circumstances,” the company said Tuesday in a filing with the Securities and Exchange Commission.
The Dallas-based firm cited “the dislocation in the financial markets and the uncertainty as to when reasonable conditions will return” for the move and pointed out that it made the decision despite having $576.3 million of unused borrowing still available under its $600 million revolving credit facility.
In lieu of cash, the company will pay in kind with an interest rate of 9.75 percent. Neiman’s will evaluate whether to make subsequent payments-in-kind or return to cash payment prior to subsequent interest periods.
On Monday, citing the “unexpected magnitude of the revenue decline, as well as the potential loss of aspirational customers and the weaker spending by Neiman’s traditional upscale customers,” Moody’s Investors Service put Neiman’s credit ratings under review for a possible downgrade.