NEW YORK — The resurgence of the upscale customer played directly into the hands of Neiman Marcus Group in the first quarter, allowing the luxe leader to post double-digit increases in overall and same-store sales as well as profits.
The Dallas-based retailer of luxury goods recorded earnings of $56.2 million, or $1.16 a share, for the three months ended Nov. 1, matching Wall Street’s previously raised expectations and representing a 97.1 percent improvement over year-ago earnings of $28.5 million, or 59 cents. Excluding a change in accounting principle in the earlier quarter, earnings rose a more modest but still vigorous 29.8 percent from $43.3 million, or 91 cents.
Total revenues for the quarter rose 12.4 percent to a better-than-anticipated $824.9 million from $734.1 million and comparable-store sales increased 10.7 percent.
The specialty retail stores segment revenues strengthened 11.6 percent to $671 million, compared with $601 million and comps rose 9.5 percent, with NM stores up 8.2 percent and Bergdorf Goodman up 18.2 percent. Neiman Marcus Direct revenues were $128 million, 12.2 percent above last year’s $114 million.
“Our first quarter is a very important full-price selling quarter and this quarter was no exception,” Burt Tansky, president and chief executive, said on a late afternoon conference call. “It was the strongest quarterly sales performance in three years.”
Explaining NMG’s focus on improving its expense ratio and sales, Tansky said he believes the company’s financial performance “demonstrates our priorities are in the right place and our actions will serve the company in the future.”
Key merchandise categories in the quarter included women’s handbags and shoes, especially designer; contemporary sportswear; beauty, particularly luxury skin care; jewelry, both precious and designer, as well as fine apparel, including couture and designer.
He said while the strong sales left inventories at the end of the quarter up 1 percent, the gap between sales and stock increases will narrow in the current quarter.
Regarding the men’s business, Tansky said NMG is beginning to see strong customer response to its offerings.
“The merchandise is exciting, unique and special,” Tansky said of the overall assortment. “Driven by the desire for design, style and quality, our customers will trade up.” He noted the average sale per transaction increased more than 10 percent versus last year and full-price selling remains strong.Tansky said sales are generated from its loyal luxury customer as well as newer, aspirational shoppers. “The core customer is clearly spending more than she had been, which we started to see in May, and she is continuing to be aggressive in her spending.”
In addition, he said he believes NMG is more important to the aspirational customer. “This is part of our long-term strategy and I think we are enjoying an increase of shoppers of both of these parties.”
The positive sales momentum blew into November, as comps in the specialty retail division increased 5 percent during the month. As expected, the company said last month’s sales were negatively impacted by its decision to eliminate several significant promotional events that occurred last year. It reaffirmed its earlier expectations for second-quarter comps to advance 7 to 9 percent. Merchandise that sold well last month included women’s contemporary sportswear and dresses, women’s shoes, jewelry and accessories.
After two years spent in a fashion black hole, luxury retailers and designers have very much been enjoying a revival in the past few months and many analysts predict the good times are sure to keep rolling in 2004.
“Fashion is exciting for the first time in two years and the high-end consumer is back,” Eric Beder, a retailing analyst with Northeast Securities, said of the recent uptick in upscale sales. “There is still an upside to the story.”
He based his upbeat assessment on the fact that high-end consumers, perhaps more than other customer segments, received generous tax cuts, perceived an economic lift ahead and reacted strongly to festive, colorful clothing.
NMG, Beder noted, represents the “gold standard for service in this industry. They offer their customers every type of amenity they can and people are flocking to this.”
Deborah Weinswig, a broadline analyst with Smith Barney, wrote that NMG has successfully maintained its unique positioning with the high-end customer, is increasing its dominance in the luxury retail market and continues to benefit from other department store competitors’ movements downstream through increased private label offerings and lower price points.
“The company continues to strengthen its competitive position through differentiating its luxury product offering, staying on the cutting edge of fashion trends, and intensifying its vendor relationships,” she wrote. “The proactive marketing and merchandising initiatives that are being implemented at both the specialty store and NM Direct divisions further encourage us as they signal a refusal on management’s part to ‘rest on their laurels’ with regard to recent performance improvement.”
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