NEW YORK — The Neiman Marcus Group keeps rolling with the vibrant luxury market — from big Internet gains to positive reads on early fall selling.
Neiman’s on Thursday reported operating earnings of $151 million in the quarter ended April 29, compared with $134.7 million in the year-ago quarter, an increase of 12.1 percent.
Although net earnings dropped to $40.5 million for the quarter, from $79.8 million for the year-ago period, company executives explained it was primarily related to expenses from the sale of the Neiman Marcus Group last year to Texas Pacific Group and Warburg Pincus LLC. Citing interest costs and other special items and charges from the acquisition, executives stressed the adjusted operating results were a truer indication of the company’s health.
TPG and Warburg Pincus completed the $5.1 billion acquisition of the then-publicly held Neiman Marcus Group in October. The retailer faces new challenges under private ownership and will be pressured to find additional avenues of growth.
Burt Tansky, chairman and chief executive officer, said during a conference call, “Sales remained very strong for the third quarter. Early fall deliveries are already checking very fast at both Neiman’s and Bergdorf’s.”
There already has been reordering on some accessories, and some early fall apparel “looks like it will be reorderable,” he said.
During the last quarter, sales were strongest in women’s apparel, especially evening, couture and dresses, as well as contemporary sportswear for men and women, precious jewelry, and other men’s wear. “As always, we remain very focused on key items and categories, including fine apparel, shoes, handbags, beauty, contemporary sportswear and jewelry, with increased capital for inventory and marketing,” Tansky said.
Same-store sales rose 6.8 percent during the quarter on top of a “very strong” 8 percent in the previous year, he said. Sales per square foot are tracking at $605 this fiscal year, compared with $567 a year ago — and exceeding $600 for the first time.
Overall, the company’s sales and margins are being lifted by improving full-price selling, higher ticket prices, on average, finding ways to leverage expenses, as well as hefty growth on the Internet. With Bergdorf Goodman, which started online transactions 18 months ago, “We are shipping merchandise to all 50 states,” Tansky said. “That gives us terrific comfort and shows the power of the brand. We assumed most of the business would come from the New York tristate area. It turns out that around 67 percent is coming from outside the New York area.”The biggest spenders at NMG are those shoppers that utilize all three channels: stores, catalogues and Internet, said James Skinner, senior vice president and chief financial officer.
Bergdorf’s high sales gains on the Internet are encouraging NMG to consider opening more BG stores, possibly in Las Vegas and elsewhere. BG’s expansion potential — it only operates in Manhattan — has been debated inside the corporation for decades.
Asked about Bergdorf’s growth, Tansky replied: “We have nothing specific to talk about. We explore all ideas and opportunities for all our businesses.”
On a different front, the company is developing a scaled-down retail prototype to sell contemporary merchandise, possibly 30,000 square feet in size, although few details have been disclosed.
Tansky was more open discussing conventional store openings, saying that a 90,000-square-foot unit will open in Princeton, N.J., in spring 2010, in the Quaker Bridge Mall. “We have a full calendar of store openings for the next few years,” Tansky said. Other openings previously announced are in Charlotte, N.C., in fall 2006; Austin, Tex., spring 2007; Natick, Mass., fall 2007; Oyster Bay, N.Y., and West Los Angeles, in fall 2008.
With store openings, Tansky said, “We are very, very disciplined.” Any potential site must pass “demographic and psychographic tests.”
Princeton made sense because there is “clearly a gap” between Neiman’s Philadelphia and Short Hills, N.J., units, he said. “Many customers were coming up from the Princeton area to shop Short Hills.” Princeton’s high income demographics, growing pharmaceutical and financial industries and Princeton University provide a base for luxury sales, Tansky said.
Neiman’s is also actively renovating stores, to update aging properties and offset the impact of competitors such as Nordstrom, Bloomingdale’s and Barneys New York.
“We have completed or are in the final stages of several important remodels,” Tansky said. He cited the San Francisco store on Union Square, which added 50,000 square feet, bringing it to 250,000 square feet, among other projects. The Last Call clearance center at Sawgrass Mills in Florida expanded to 45,000 square feet from 25,000, establishing it as Neiman’s largest Last Call.He also mentioned Bergdorf’s, where most floors have been renovated and work is under way on its third level. BG had a 14.3 percent sales gain in the quarter. The company did not break out its sales volume.
Barneys’ emerging flagship strategy, which includes a recent opening in Boston, as well as upcoming openings in Dallas and Las Vegas, poses a threat to Neiman, which Tansky addressed. “We are watching their development very carefully with great interest,’’ he said. “So far, we have not felt any dramatic impact. We are geared up and prepared, and we know we have a very loyal customer base in these locations and we will continue to do well.”
For the 13 weeks ended April 29, NMG’s total revenues came to $1 billion versus $933.4 million in the year-ago period, and same-store sales revenues increased 6.8 percent. On a non-adjusted basis, operating earnings were $132.7 million compared with $134.7 million for the year-ago quarter.
For the 39-week period, adjusted operating earnings were $413.4 million compared with $379.5 million, an increase of 8.9 percent. Total revenues were $3.2 billion versus $3 billion, same-store sales revenues increased 7.1 percent, and operating earnings were $309.3 million against $364.2 million.
At the time of the acquisition, Neiman’s revalued its assets, including customer lists, leases and benefit plans, leading to non-cash charges. The amortization of customer lists, favorable lease commitments and benefit plans came to $18.2 million in the last quarter and $42 million in the 39 weeks. Interest expense in the quarter came to $67.2 million, versus $2.9 million in the year-ago quarter.
The company also recorded its highest-ever third-quarter gross margin rate of 41.6 percent, a 30 basis point improvement from last year.
Neiman Marcus and Bergdorf Goodman stores combined registered $804.2 million in sales for the quarter, against $766.9 million a year ago. Direct marketing sales, including catalogue and online, came to $152 million, representing a 16.5 percent increase over $130.5 million in the year ago. Internet alone posted $97 million in sales, for a 31 percent increase over last year.
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