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NMG Bounces Back to Black

NEW YORK — Inventory management and strong full-price selling turned Neiman Marcus Group’s final quarter into a profitable one and helped it beat Wall Street estimates.<br><br>For the 14 weeks ended Aug. 3, the Dallas-based parent firm of...

NEW YORK — Inventory management and strong full-price selling turned Neiman Marcus Group’s final quarter into a profitable one and helped it beat Wall Street estimates.

For the 14 weeks ended Aug. 3, the Dallas-based parent firm of Neiman Marcus and Bergdorf Goodman said it recorded a quarterly profit of $5.3 million, or 11 cents a diluted share, reversing a loss of $20.6 million, or 44 cents, for the 13 weeks last year. Analysts were expecting NMG to report earnings of 8 cents, according to First Call. The bottom-line results include numerous charges, including a 2 cent per share toll for the write-down of three Kate Spade stores in the most recent quarter and, in the previous year, 13 cents in impairment charges for NMG’s investment in WeddingChannel.com.

Total sales notched up 4.7 percent to $666 million, including $37 million in sales in week 14, from $636 million, but decreased 2.8 percent on a comparable-store basis.

Reporting on the eve of the anniversary of the terrorist attacks, Burton M. Tansky, NMG’s president and chief executive, described 2002 as a year “without precedence. It is a given there will always be things we cannot influence or control, and yet we proved that we could do the things necessary to make a difference in our performance.”

He cited many steps taken to adjust to the difficult climate, including bringing inventory more in line with sales trends, marking down overstock goods, working with vendors to adjust and even cancel orders, and eliminating unprofitable vendors and classifications. In addition, he noted the company made substantial reductions in its future receipts.

“Though these times require conservatism, we will not allow ourselves to become paralyzed and no longer take chances on strong sales trends,” Tansky said. “Without the burden of too much inventory for spring, we were in a favorable position to improve profitability and we more than held our own in a competitive, if not bleak, business environment.”

By division, sales at specialty stores grew 4.1 percent to $553 million compared with $531 million in the previous year’s quarter, consisting of a 4.8 percent sales increase at NM and a 0.3 percent decrease at BG. However, comps fell 3.1 percent, including a 2.5 percent decline at NM and a 7.3 percent drop at BG. Neiman Marcus Direct, its direct marketing operation, reported sales of $96 million, a 6.7 percent increase over last year’s $90 million. Gross margins at the specialty group extended 350 basis points because of inventory management and regular-price selling.

Tansky said that, despite a rough start, he expects fall comps to increase in the low- to mid-single digits. “As challenging as the current business environment has been, we believe our company and its market position is strengthened by the positive actions we have taken this year.”

Eric Beder, a retail analyst at Ladenburg, Thalmann & Co., said the quarter demonstrated NMG’s discipline more than it did a signal that the high-end consumer was back, but he was bullish on NMG’s upside potential, especially when viewed against last year’s soft comparisons, partly attributed to strong spring trunk shows.

In 2002, net income landed in at $99.6 million, or $2.08 a diluted share, a 7.4 percent decrease from income of $107.5 million, or $2.26 in 2001. Gains and charges, taken together, added 4 cents a share to 2002 earnings and cost 13 cents a share in fiscal 2001. Total sales fell 2.2 percent to $2.95 billion.