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Neiman Marcus Inc. practically doubled its profits during its first quarter ended Oct. 29, but executives kept their cool, citing the potential impact of stock market gyrations and troubled economies around the world.
This story first appeared in the November 29, 2011 issue of WWD. Subscribe Today.
“We do remain concerned with the broader economy and effects on our customers. Our customers are very attuned to the fluctuations of the stock market and sensitive to the world economic news,” Karen Katz, Neiman’s president and chief executive officer, told investors during a conference call Monday. “As we move into the holidays, we are ever mindful of the uncertainty of the economic news here and abroad.”
However, Katz also said Neiman’s is “well positioned with luxury fashion and the latest trends.”
Although business has been good, Neiman’s executives declined to forecast Christmas or beyond. Katz did offer some positives, however, noting the company’s fortunes are not as tied to Black Friday and that Neiman’s customers tend to shop steadily through the holiday period. “We view the holidays as a time to introduce a full array of gift suggestions. A person can find something from $50 to $50,000.”
She even said certain “fantasy gifts” offered in Neiman’s Christmas catalogue have sold already, such as a $125,000 custom-made library from Assouline that includes wall-to-wall interior design and 250 books; five Johnny Walker Scotch tasting parties for $5,000 each, and 10 bespoke Ferrari cars, priced $395,000 each.
For the quarter, Neiman’s generated $48.4 million in net earnings, compared with $25.7 million a year ago. Sales totaled $1 billion, compared with $927.2 million in the prior year, and comparable revenues rose 8 percent.
Operating earnings from the specialty store group comprised of Neiman Marcus, Bergdorf Goodman and Last Call clearance centers rose to $125.3 million from $108 million. Neiman Marcus Direct saw operating earnings grow to $28.1 million from $25 million.
Revenues at the specialty group rose to $811.8 million from $761.1 million; direct marketing grew to $191.3 million from $166.1 million.
After the call, Katz told WWD that “a great product offering” and increased full-price selling fueled the quarter’s results. She also said resort merchandise in the stores now and the upcoming spring collections look strong. “There’s color, femininity and new trends,” she said.
Katz cited women’s contemporary sportswear, shoes, designer handbags, precious jewelry accessories, beauty and men’s wear as standout categories in the last quarter in stores. The best-performing regions were the West and Southeast, notably Texas and Florida.
With business going well, Katz said, “We don’t feel the need to be more promotional. Inventories are in good control, and we are going on the same kind of promotional cadence as we did last year.” As far as buying, the approach for pre-fall is “kind of cautious.”
Since taking over the reins from Burt Tansky over a year ago, Katz has accelerated technology initiatives to capture greater e-commerce sales and strengthen communications with customers. Smartphones are being distributed to sales associates so they can contact customers via texts, e-mails, phone calls and photographs of products. Currently, smartphones are in the hands of associates at 10 stores. The goal is to have all 42 full-line Neiman Marcus locations outfitted by the end of July, which marks the conclusion of Neiman’s fiscal year.
Neiman’s is also improving its Web site to streamline the checkout procedure, reduce the number of clicks between the entry page and those featuring merchandise, enhance visuals, introduce vendors and refine e-mails so they’re more targeted and personalized to customers. “Clientele management is at the heart of our business model,” Katz said. “If a customer shops contemporary exclusively, we probably would not send an e-mail on fine apparel.” The Last Call clearance Web site has also been enhanced with a new graphic design and simplified navigation.
Neiman’s capital budget for the current fiscal year has been boosted to $160 million to $170 million from less than $100 million, primarily to pay for technology enhancements as well as store renovations and building a new full-line store in Walnut Creek, Calif., which is scheduled to open in March.
The company is also measuring service and loyalty levels through a 10-question survey called the NPS or Net Promoter Score. Among other inquiries, it asks how likely a customer is to recommend Neiman Marcus for shopping. “When we compare ourselves to industry standards, we’re performing very well and although our scores are high, we still aim to be higher and we’re using the customer feedback to drive improvements to our service and to our merchandise offerings,” Katz said.