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Commenting on second-quarter results released Thursday, Burt Tansky, president and chief executive officer of The Neiman Marcus Group, took several shots at rival Barneys New York.

NEW YORK — A retail feud could be brewing.

Commenting on second-quarter results released Thursday, Burt Tansky, president and chief executive officer of The Neiman Marcus Group, took several shots at rival Barneys New York. Barneys is on an expansion drive of its own that kicks off today with the opening of a new flagship in Boston’s Copley Place complex, its first in 13 years.

Tansky, though, isn’t that impressed. “We are very aware of the Barneys rollout strategy,” he said in a conference call with analysts. “In fact, here in Dallas [where Neiman’s is based], Barneys is opening an 80,000-square-foot store. We understand their strengths and weaknesses and we are watching very carefully whether they have the ability to manage a network of stores outside of New York. That takes a lot of art and skills. We know the merchandise mix very well.”

As for Barneys’ new 45,000-square-foot store in Boston, Tansky said, “We are and will continue to be very competitive, but it’s far too early to tell what impact it will have on our store. The new guy in town always gets a little bit of a rush with new customers, but that tends to last rather shortly.

“I don’t think at this point it is going to have any kind of terrific impact on our business,” he continued. “We have been beefing up areas, especially our contemporary areas, which Barneys seems to have some strength in. But generally, we have a very different mix and customer base and we have been operating very well against them in Beverly Hills,” where Barneys has another flagship.

“At the end of the day, we are a very large company, much larger than they are, and larger on a store-for-store basis where they operate. I don’t expect to give up any ground to their rollout.”

The comments came as Neiman’s, despite a strong underlying performance, reported a 95.7 percent decline in net earnings for its second quarter ended Jan. 28 as a result of $50 million in special charges related to its acquisition by Texas Pacific Group and Warburg Pincus.

Net earnings fell to $3 million from $70.9 million. The $50 million in items involved amortization costs and asset valuations.

This story first appeared in the March 10, 2006 issue of WWD. Subscribe Today.

Neiman’s officials stressed Thursday the company continued to perform well, and that a more meaningful measure of its health and performance is obtained by examining adjusted operating earnings and comp-store sales and by combining results from the first and second quarters for a fuller read on the fall season.

Adjusted operating earnings rose 1.7 percent to $122 million, compared with $120 million in the year-ago period. Total revenues came to $1.23 billion compared with $1.13 billion, and comps rose 6.4 percent.

In the half, adjusted operating earnings rose 7 percent to $262 million from $245 million. On an unadjusted basis, operating earnings reached $177 million, down from $230 million.

Comp sales increased in the half 7.3 percent and revenues for the first six months rose to $2.21 billion from $2.04 billion.

“Our customer is still buying luxury and quality, there is no retreating, we can continue to be optimistic,” said Tansky. Strong sales results, he added, helped Neiman’s achieve a record productivity rate of almost $600 a square foot for the last 12 months, compared with $559 the year before.

He also said the gross margin rate was about flat for the season, decreasing in the second quarter due to an increase in markdowns and the addition of a sales event shifted from the first quarter, when selling was more robust, particularly in September.

TPG and Warburg Pincus completed their $5.1 billion acquisition of the then-publicly held Neiman Marcus Group in October. The luxury retailer faces new challenges under private ownership and will be pressured to find additional avenues of growth. The company is expected to soon announce a prototype said to involve selling contemporary merchandise in a scaled-down retail setting, possibly 30,000 square feet in size.

But Neiman’s and Barneys aren’t the only ones looking to expand. Nordstrom is beefing up its designer offerings and has two prototypes in Florida and Texas featuring more defined designer shops.

Tansky said Neiman’s continually looks for growth opportunities and cited the home area as one for intensification with “more interesting and dynamic categories and classifications, but no furniture.”

“We are always looking at new ideas and new concepts,” he said. “Some we are actually developing. We have nothing to announce officially. There is a lot of unofficial chatter, but in the next few weeks, hopefully we’ll announce some new ideas that we are working on.”

Providing a more detailed rundown of the business, Tansky stated that Neiman Marcus Stores posted a 3.9 percent gain in the quarter, while Bergdorf’s rose 8.7 percent. In its release, the company said that in the second quarter, sales at its specialty stores (Neiman’s and Bergdorf’s) rose to $981.5 million from $912 million, and direct sales rose to $213 million from $188.2 million. Operating earnings at the specialty stores were $94.3 million in the quarter, versus $98.7 million. Direct marketing posted $37.9 million in quarterly operating earnings, versus $27.9 million.

The best categories were women’s and men’s contemporary sportswear, fueled by denim and velvet, designer handbags, jewelry, evening dresses and the overall men’s business. For spring, Tansky cited oversized handbags, especially in stark white, tropical colors and bold prints and patterns; dresses “the most important wardrobe element” neutral colors, and cropped pants and jackets.

“Denim is continuing. There are a lot of new looks. Dresses is really the big category. It’s huge. In shoe selling, we’re selling wedges and new thicker heels.”

NMG has a long-term goal for square footage growth of 2 to 3 percent, but this year, there will be a 6 percent gain. Next year, 3 percent growth is seen.

Five full-line stores are scheduled to open in the next three fiscal years, and there will also be some clearance center openings since Neiman’s tends to have one clearance center for every two full-line stores.

The direct-marketing segment surpassed $100 million for the first time in December, and exceeded $200 million for the first time last quarter.

In regards to Laura Mercier and Kate Spade, which are majority owned by NMG, the company is still trying to sell them. Spade continues to struggle and James Skinner, NMGs senior vice president and chief financial officer, blamed problems there on late deliveries.

Neiman Marcus has yet to announce a successor to Joan Kaner, the fashion director who retired in the fall. “We have met a number of candidates internally and externally and will be filling that job in the near future,” Tansky said.

The company still reports sales and earnings because it has public debt. Executives have been discussing whether the practice will continue going forward.

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