NMG PROFITS RISE 58.3% IN 1ST QUARTER

Byline: Catherine M. Curan

NEW YORK--Powered by better results at Neiman Marcus and Bergdorf Goodman and a lower operating loss at Contempo Casuals, Neiman Marcus Group reported a 58.3 percent increase in first-quarter earnings.
In the quarter ended Oct. 29, the retailer earned $12.5 million, or 33 cents a share, compared with $7.9 million, or 21 cents, in the year-ago quarter.
Edward Johnson of Johnson Redbook had projected earnings per share of 24 cents in the quarter. Operating earnings were up 28.5 percent to $43.5 million from $33.8 million.
Sales rose 2.4 percent to $519.7 million from $507.6 million.
Robert J. Tarr, president and chief executive officer, said in a statement that comparable-store sales rose 5.5 percent, despite a continued same-store sales decline at the Contempo unit.
The Neiman Marcus division had improved operating earnings as higher profits at Neiman Marcus stores more than offset a decline at NM Direct. Same-store sales were up strongly at Neiman Marcus, aided by successful
merchandising programs. The decline in operating income at NM Direct reflected lower-than-expected mail-order business and higher operating expenses, Tarr said. At Bergdorf Goodman, sales and earnings were up, with modest same-store sales gains and effective expense controls. The improvements occurred at both the main Bergdorf Goodman store and Bergdorf Goodman Men. The company said it believes the trends will continue through the holiday season.
A Neiman Marcus spokesman said men's business was strong at Neiman Marcus and Bergdorf Goodman Men, especially men's clothing and accessories.
Contempo Casuals posted lower sales, resulting from a same-store sales decrease, the closing of 40 underperforming Contempo stores and all 39 units of the Pastille chain. Tarr, however, noted that Contempo's operating loss was significantly reduced by lower expenses and stronger full-price sell-throughs.
Redbook's Johnson said Neiman Marcus was disappointed with the mail-order business and expressed concern about the division's performance going forward. Johnson projects per-share earnings of 45 cents for the second quarter, against 37 cents last year. He raised his estimate for the year to 75 cents or better--taking into account possible higher interest costs--against 45 cents from continuing operations.
In the quarter, Neiman Marcus said interest expense rose 22.4 percent to $9.3 million from $7.6 million, reflecting higher rates and increased borrowings. The company changed to the LIFO method of accounting for inventories from the FIFO method, which resulted in a $3.1 million charge in the latest quarter against a $2.6 million charge a year ago.
Tarr said the first-quarter results were encouraging, and the firm is "optimistic that these trends will continue through the holiday selling period. However, the improvement will be offset somewhat by significantly higher interest expense as our borrowings increase to fund upcoming new store construction and we feel the impact of higher rates compared to a year ago."
The Neiman Marcus spokesman said much of the company's borrowing is at floating interest rates, and it is looking at changing some of that to fixed rates. He said increased borrowings are needed mainly to fund three new Neiman Marcus units, a new distribution center for the Neiman Marcus Stores and three remodels.
The company has broken ground for units in Short Hills and Paramus N.J., and another unit is planned for King of Prussia, Pa. The distribution center will be outside Dallas, and the remodels include Westchester County; North Park, outside of Dallas, and North Brook, outside of Chicago.--Fairchild News Service

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