Bergdorf Goodman wants a sharper edge and will build a “lab” for emerging designers on its sixth floor, as parent Neiman Marcus Group sustains investments in brick and mortar.
This story first appeared in the June 13, 2014 issue of WWD. Subscribe Today.
The designer lab is part of “BG/2020,” a comprehensive, five-year overhaul of the Bergdorf Goodman women’s flagship in Manhattan, commencing in a matter of weeks. “This is the first major renovation of Bergdorf Goodman in the last 15 years. We are starting on the sixth floor and will come back down to the first floor,” Karen Katz, president and chief executive officer of Neiman Marcus Group Ltd. LLC, told WWD on Thursday.
“I do think part of what Josh and the team will be doing is really to make sure we are balancing the assortments between all the wonderful designers we do great business with, with an ability to nurture new, young talent,” Katz said, referring to Joshua Schulman, BG’s president.
On the sixth floor, which currently houses sportswear, coats, eveningwear, lingerie and swimwear, the vision is for the lab for emerging designers, as well as modern designer sportswear and “salons” for evening, outerwear and lingerie, Katz said.
She has been touting NMG’s new owners, Ares Management LLC and the Canada Pension Plan Investment Board, which together bought Neiman’s for $6 billion last October, as eager to invest in the stores.
On Thursday, Neiman’s disclosed results for its third quarter ended May 3, including a net loss of $2.7 million, compared to net earnings of $70.8 million in the year-ago period. Excluding purchase accounting and certain transaction-related and other expenses, adjusted net earnings for the third quarter came to $45.1 million, a 42.7 percent decline compared to $78.7 million in the prior year.
Other expenses driving the net down stemmed from a former investment in Glamour Sales in China; the criminal cyber attack during the last holiday season that breached Neiman’s payment systems, and $15 million in markdowns from a clearance sale that happened in the third quarter this year due to a calendar shift, instead of its usual placement in the fourth. Typically, Neiman’s first and third quarters are predominantly full-price periods, while the second and fourth are mainly markdown periods.
Neiman’s was also impacted by the weather, like the rest of the retail industry.
With greater resources being allocated for “highly productive stores in gateway cities,” as Katz said, the Dallas-based NMG has a big capital expenditure budget, seen at $165 million to $175 million for fiscal 2014, including store, new technology and omnichannel initiatives. That compares to $147 million last year. Store upgrades are justified considering how productive Neiman’s stores are, generating $575 in sales per square foot last year, compared to $545 the year before.
In other projects, Neiman Marcus in Beverly Hills will bring its beauty floor down to the lower level, enabling an expansion of accessories and jewelry on the main floor, as part of a top-to-bottom overhaul of that location. Gifts and children’s on the lower level will be removed while the restaurant remains and gets remodeled. Years ago, Bergdorf’s raised eyebrows when it relocated its beauty business to the lower level. Subsequently, Barneys New York on Madison Avenue did the same.
Other Neiman Marcus renovations and remodels are set for the Palo Alto, Calif., and Oak Brook, Ill., units, following recent redos at the Michigan Avenue, Chicago, and Bal Harbour, Fla., stores.
Neiman’s might invest on Manhattan’s West Side, where it is negotiating with Hudson’s Yard to possibly open a full-line store there. The retailer remains mum on the subject, though one insider said, “Anything can happen.”
Looking ahead, Katz told WWD there are signs that fall luxury selling is off to a good start but that it’s too soon to make a fuller judgment. She singled out fall shoes as being an early strong performer and added that overall “deliveries have been good.” Yet traffic in the stores is running down slightly, Katz said, marking a continuation of the kind of trends seen over the last year.
Neiman’s reported a 5.9 percent comparable-sales gain for the quarter ended May 3 despite the tough retail climate which has been dragging down most retailers. “We felt really good about our sales increases, especially relative to the market. It feels like our customer is out shopping,” Katz told WWD. “It has been that way for the last 12 to 18 months. Customers are definitely buying very expensive items if they have a ‘wow’ factor or some intrinsic value,” such as exotic skins, she said. “If there is something to the item that makes it very luxurious or fashionable, they’re not hesitating. At the same time, a number of businesses continue to perform well at opening price points, found a pretty good balance of what we are selling.”
Neiman’s total revenues were $1.16 billion compared to $1.1 billion in the prior year. Earnings before interest, taxes, depreciation and amortization for the third quarter were $149.1 million compared to $196 million in last year’s quarter. Adjusted EBITDA was $188.1 million compared to $206.6 million a year ago.
Stores had a 4.2 percent comp increase in sales last quarter, led by units in the West and Texas.
The best-selling categories were shoes, designer handbags and men’s.
Online sales rose 11.7 percent and were led by women’s shoes, handbags and beauty. While the stores were down, Katz said “there is no actual data to indicate a shift from customers shopping in-store to online. Intuitively, you would believe it. But the number of those shifting their shopping online is very, very low. There is nothing to indicate a big shift, at least with our customers.”
During the call, Katz emphasized initiatives on the omni front, in addition to brick and mortar. “Customers no longer differentiate between the channels,” Katz said. “We have been relentless in our pursuit of a seamless shopping experience.”
As reported in April, NMG merged its stores and online merchandising and planning teams into one team, led by Jim Gold. “I have been with Neiman Marcus for 29 years and this is the biggest organizational change we made in all those years. It allows us to grow both channels at a faster pace.…Now we can develop one perspective that is consistent across channels,” said Katz.