NEW YORK--Led by strong gains at NM Direct and Bergdorf Goodman, The Neiman Marcus Group Inc. reported earnings rose 10.9 percent in the third quarter ended May 3, before dividend payouts. Earnings rose to $20.7 million, or 41 cents a share, from $18.7 million before the company paid $7.3 million in dividends on preferred stock a year ago. The company last November redeemed all its preferred stock. After preferred dividends, net earnings a year ago were $11.5 million, or 30 cents a share. Results were slightly ahead of Wall Street's average estimate of 40 cents. Shares of NMG closed at 26 5/8, unchanged on the New York Stock Exchange. Sales gained 6.8 percent to $506.5 million from $474.1 million. Same-store sales climbed 4.5 percent. "Demand for luxury goods continues to expand, and our results reflect the strong competitive position which the Neiman Marcus and Bergdorf Goodman brands hold with affluent consumers," Richard A. Smith, chairman and chief executive officer, said in a statement. Smith said NM Direct benefited from a 9.9 percent revenue gain, and a lower expense ratio to generate a "significant" earnings increase in the quarter. Although Bergdorf's same-store sales inched up only 0.4 percent, gross margins and expense ratios both improved, resulting in substantially higher operating earnings there, according to Smith. The core Neiman Marcus chain chalked up a 4.4 percent same-store gain, but gross margins declined from last year's, resulting in flat operating earnings in the period. In a research note, Robert F. Buchanan, an analyst at NatWest Securities, said strength in designer merchandise at the Neiman Marcus chain was offset somewhat by weakness in the lower-priced bridge category. He said NMG is facing a current inventory glut as a result of overbuying some basics in fall 1996. "From what we can tell, management doesn't feel compelled to take markdowns to address the problem, instead preferring to slow down receipts." Total inventories at the end of the period were $490.1 million compared with $421.8 million. Buchanan expects the department store chain to earn $1.73 for the full year, compared with $1.17 a year ago. For the nine months, earnings before dividend payouts rose 15.8 percent to $77.2 million from $66.7 million. After dividend payouts and a loss on redemption of preferred stock, net earnings were $48.7 million, or $1.05 a share, against $44.8 million, or $1.17. Sales were up 7.7 percent to $1.72 billion from $1.58 billion.
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