NMG Wary About 3rd Quarter

NEW YORK — Neiman Marcus Group unveiled increases in both quarterly and six-month profits and sales late Wednesday, but warned comparable-store sales for the current quarter would be negatively impacted by the recent combination of wintry...

NEW YORK — Neiman Marcus Group unveiled increases in both quarterly and six-month profits and sales late Wednesday, but warned comparable-store sales for the current quarter would be negatively impacted by the recent combination of wintry weather and a chilly economy.

This story first appeared in the March 6, 2003 issue of WWD.  Subscribe Today.

The Dallas-based luxury retailer reported Wednesday net income rose 33.6 percent to $32.5 million, or 68 cents a diluted share, for the second quarter ended Feb. 1. That outshines income of $24.3 million, or 51 cents, in the same quarter last year. Earnings were 2 cents above consensus estimates.

Overall sales in the three months notched up 3.3 percent to $938.5 million from $908.1 million because of higher average price points, offset by weaker traffic. Comps rose 0.5 percent.

Sales in its specialty retail segment rose 1.3 percent to $756 million versus a year-ago mark of $746 million. Sales at Neiman Marcus stores rose 0.7 percent, but fell 3.2 percent on a comp basis. At Bergdorf Goodman, working from its base of two stores in both periods, sales increased 7.1 percent.

Key categories were women’s handbags, shoes, designer sportswear, contemporary sportswear and cosmetics.

Results were reported after the markets closed Wednesday. Neiman Marcus shares finished the day at $26.25, down 25 cents, or 0.9 percent, in New York Stock Exchange trading. The stock has traded as high as $39.80, on May 8, and as low as $23.75, on July 24, in the past year.

NMG said February comps increased 2.5 percent, with specialty stores’ comps up 2.1 percent. It said last month’s sales benefited from a shift in its promotional calendar related to an extra week in 2002. Neiman Marcus expects a corresponding shift in the other direction this month, resulting in negative comps.

In addition, it warned that, because of the shaky economic climate and inclement weather, it now anticipates its comps for the current third quarter to be in a range of down 1 percent to up 1 percent. It originally called for comps to increase 2 to 4 percent.

Along with softer sales, higher inventory levels are expected to pressure gross margins for the current quarter.

At Neiman Marcus Direct, its direct marketing division, sales ascended 11.8 percent to $161 million from $144 million.

While NMG will continue to focus on expense control, Burton M. Tansky, president and chief executive, said on a conference call from Milan that, to drive increased profitability and productivity, the upscale retailer will continue to work with top vendors and designer houses that provide uniqueness and produce the best sell-throughs. He said by cultivating relationships, NMG was able to receive spring goods early to meet the demands of its customers who want to be first with the latest fashion.

“We know from experience new receipts drive sales,” the ceo said. “Throughout the quarter, if the merchandise was unique and special, customers would buy it.”

With the sluggish economy and the possibility of conflict with Iraq ahead, Tansky said he is cautious, but is moving forward with plans and investments.

He outlined a four-part business strategy to help drive profits and sales as NMG weathers the current storm. Among these was identifying several merchandise categories upon which it will focus, complete with increased marketing and spending for them; customer research which will focus on lifestyle, not merchandise categories; identification of stores with increased sales potential; and a restructured merchandise planning process to increase the productivity of the inventory with improved analysis of initial buys and store allocation.

“We worked hard to identify and get deep into where the opportunities are by merchandise category and tried to cross-reference those with lifestyle issues within customer focus groups and the focus stores to see how they interact with each other,” Tansky said. “That process is ongoing but near completion and I hope a great deal of the plan is in place this fall.”

“Neiman Marcus is not losing sales to competition, but because of the environment,” said Adrianne Shapira, an analyst with Goldman, Sachs. She credited NMG management’s keen sense of its customers for its results and says it will stay on course by continuing to provide what it does best — luxury and service.

Asked for his reviews of the Milan shows, Tansky appeared pleased, noting the miniskirt is back as well as looks from the Sixties, fur trim, leather and sexy, colorful eveningwear.

Tansky said NMG would postpone new store openings until 2005, but will continue two remodels on existing stores and the conversion of its San Francisco store into a 250,000 flagship with a 60,000-square-foot addition. This year, the retailer has opened stores in Orlando and Coral Gables, Fla., and renovated its Las Vegas store.

For the six months, income increased 29 percent to $61 million, or $1.28, versus income in 2001 of $47.3 million, or $1. Sales grew 5.2 percent to $1.67 billion, compared with $1.59 billion.