Vendors generally reacted positively to the news that Neiman Marcus Group is changing hands, although there was caution over the fact that it’s the second luxury retailer to see new ownership after Hudson’s Bay Co.’s bid to acquire Saks Inc.
This story first appeared in the September 10, 2013 issue of WWD. Subscribe Today.
An executive from one factoring firm, who requested anonymity, said whenever there’s a sale, the new owners always want to show they can grow the business. “One of my concerns is that to push growth, there is an increase in lower-price merchandise or an increase in floor space for younger, more contemporary designers, which in turn could mean taking away space from the designer category,” this individual said.
Walter Loeb, a former retail analyst and now consultant, said, “As new owners, the financial firms who bought Neiman’s and Hudson’s Bay, which is acquiring Saks, would each want sales volume and profits. To get there, it might mean offering more popular priced merchandise. The question is, where is the growth for these firms?”
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While both Neiman’s and Saks are considered luxury firms, they don’t necessarily sell the same brands. That’s because Neiman’s caters to customers who are, on average, older than their Saks counterparts. Neiman’s carries more designer brands, while Saks focuses more in the contemporary space. That could be good or bad. If a merchandising change results in a brand losing some square footage at either retailer, it might be hard to find another retail account to make up for the loss, one financial source said.
Another financial source said Neiman’s growth is in its Last Call outlet concept, while Saks’ expansion is likely overseas and its outlet business, Saks Off 5th.
J. Michael Stanley, managing director at factoring firm Rosenthal & Rosenthal, doesn’t see any major changes ahead for Neiman’s. He said, “Neiman’s wants those luxury brands. It wants those partnerships. That’s what it’s known for, and it hunts for the best and newest brands available. I think the sale of the company is fundamentally good for everyone.”
Jeff Kappelman, co-chief executive officer at Hilldun Factors, said he expects Neiman’s to continue to function as it has been, given that existing management is expected to stay on at the luxury retailer. As for Saks, “I think the Saks aesthetic will become the spearhead for Hudson’s Bay, so the new owner will want to preserve that aesthetic identity. New ownership in both firms could reinvigorate all aspects of [luxury retailing].”
Yeohlee Teng said, “I think that while consolidation is inevitable, the result can be finer than expected.” She cited the great leadership team at HBC, which will likely have some influence at Saks once it becomes a part of the Canadian firm’s umbrella.
Andrew Rosen, ceo of Theory, said, “I hear these guys [at Ares] are really good retailers. Neiman Marcus has an incredible management group, Ken [Downing, fashion director] is terrific as is Jim [Gold, president of specialty retail]. With Neiman’s and Saks, all this shift in retailing is healthy and exciting. Doing things the way you used to do them isn’t going to work anymore.”
Mark Weber, chairman and ceo of Donna Karan International and ceo of LVMH U.S., said, “I think change is good. The most important thing is they retain the people who brought them to this position. They’re passionate about this business. I know they work hard and they’re very talented.”
Pamella Roland, president and designer of her namesake designer sportswear and eveningwear collection, said, “This is really positive for Neiman Marcus — they can now focus on the business at hand and remain laser-focused on serving their luxury customer.”
She said Ares Management has “a strong history in investing in strong brands, infusing them with capital and helping them capture a real leadership position.
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“This infusion of capital will give Neiman Marcus the opportunity to grow and expand and that’s good for all of its vendors,” said Roland.
“Neiman Marcus’ management team is top notch, so it will be business as usual from a vendor-merchant standpoint. They have fantastic relationships in the marketplace and we’re rallying for them and will be very supportive,” said Roland.
Other vendors also hope they won’t see major changes in Neiman’s once the $6 billion acquisition deal goes through, since they feel the retailer’s brand image is valuable.
“I am just relieved with the turn of events and the way it still is,” said Josie Natori. “We still have Saks Fifth Avenue and we still have Neiman Marcus. It’s good to have it set and now they can focus on the business. I don’t know anyone who would buy Neiman Marcus and Saks Fifth Avenue to change the emphasis. Rather, they will maximize it further.
“Neiman Marcus is an amazing enterprise,” said Natori, noting there are places they can expand the business, such as e-commerce and internationally. “Anybody buying it knows they’re buying a marquee name. They’ve been amazing partners. I’m just happy with the turn of events and to keep them intact. There’s no reason why both Saks and Neiman’s can’t exist.”
“It comes down to the people running the store,” said Bud Konheim, ceo of Nicole Miller. He explained that historically when there have been retail ownership changes, there have been shifts in emphasis when the people changed. “Speculation is really a futile exercise. Everything is Wall Street economics at this stage of the game. What it boils down to is what effect will it have on the customer coming into the store? If the customer likes it better, business will go up.”
He said when they changed top management at J.C. Penney Co. Inc., “it all went south. Could that happen to Neiman Marcus? Of course. It’s about the people,” said Konheim. He recalled something that Phil Kelly, former ceo of Garfinckels in Washington, D.C., once told him that applies to this day. “It’s all about what’s in the store. We’re storekeepers.
“When they lose sight of that, and it becomes a great Wall Street maneuver, they’re kidding themselves. I think Neiman Marcus occupies a special place in American retail mythology. It goes all the way back to ‘his and her’ elephants. It had Stanley Marcus branding and still has it. What they do with it is up to the new management. Neiman Marcus has tremendous brand equity.”