The Neiman Marcus Group waiting game is on.
The tony — and heavily indebted — retailer was expected to release fiscal year-end results this week but pushed its report back to Oct. 10.
That timing will give company executives a chance to come back from Europe after their whirlwind tour of fashion weeks and also allow for a better read on the first quarter and how Neiman Marcus’ latest steps are playing out, one source said.
And that extra couple of weeks could matter. The retailer is in a fiscal bind that’s only getting tighter and needs to show results and some traction in the marketplace in order to buy more time to right its balance sheet.
Clearly, Neiman Marcus is trying to do just that.
Just this month, the company said it would shutter 10 off price doors, leaving it with 28 Last Call stores to balance its online and offline presence and invest more in its 42 full-line stores. In July, the firm said a streamlining would result in the loss of 225 positions, or under 2 percent of its work force.
Earlier this year, the company abandoned its plans for an initial public offering and said it was exploring “strategic alternatives” — corporate speak for trying to find a buyer — only to later say any such talks were over. (Hudson’s Bay Co.’s Richard Baker has long been keen on Neiman Marcus, but a buyout now is seen as a long shot given how much debt HBC is already carrying and the struggles at some of Baker’s own department store operations).
Meanwhile, advisers have been called into Neiman’s. The retailer is said to be working with financial specialists Lazard and Moelis & Co., although none of the parties acknowledged they were working with the company.
A spokeswoman for the retailer declined to comment, as did a representative from Moelis. Lazard did not return a query from WWD.
But with all the cuts and the updated approaches, the only number that truly matters to Neiman’s future right now might be $4.4 billion. That’s the company’s long-term debt load, the legacy of its $6 billion buyout by Ares Management and the Canada Pension Plan Investment in 2013.
Over the first nine months of the last fiscal year, the company paid out $220 million in interest to service its debts — its next big maturity comes in October 2020, when the $2.8 billion term loan comes due.
And so the retailer is in cash conservation mode and earlier this year elected to make an “in-kind” interest payment next month on its $600 million in PIK Toggle notes due in 2021, saving $26.2 million in cash that would have had to go to lenders. But that only adds to the debt load and kicks the issue a little farther into the future.
There have also been reports that the company tried to scale back the 215,000-square-foot Neiman Marcus store under construction at the Hudson Yards development on Manhattan’s West Side, but the company denied that the square footage was being dramatically cut. A Neiman’s spokeswoman earlier this month said it is “continuing with an expansive, three-level flagship.”
Given the dropped IPO, the on-again, off-again sale process and the upheaval hitting all of brick-and-mortar retail in the increasingly digital world, experts said the company’s best path forward might be to renegotiate its debt.
Neiman’s is said to have been in contact with debt holders, but it’s unclear how far that process has proceeded. Term loan holders, who are due to be paid in 2020, are said to have hired Ducera Partners as financial advisers. Ducera declined to comment.
There are some recent examples of retailers successfully buying more time to pay off their debts and skirting bankruptcy. J. Crew Group, which is also heavily indebted after a private equity buyout, convinced lenders to swap out their debt after moving its intellectual property into a separate subsidiary. Neiman’s made a similar switch, setting up a separate corporate home for its MyTheresa business and three stores, an arrangement that could figure into a future refinancing.
But beyond all the debt and the contortions that might be necessary to get out from under it, the retailer still has to figure out how to make its business work.
Investment banker William Susman, managing director at Threadstone, said at least Neiman’s has time and few restrictions, or covenants, on its debt.
“They have runway, but at a certain point the [earnings before interest, taxes, depreciation and amortization] is just not enough when it comes time for refinancing,” he said, adding the company needs “better operations before they can get lenders to agree to anything.”
Susman said the company’s biggest issue remains: “If the Dow is at an all-time high so people feel rich and fashionistas continue to shop on Net-a-porter, et al, why is Neiman Marcus not getting its share of the consumer?”
That is a question that, if it applies to Neiman Marcus, also applies to retailers up and down the mall that established themselves when the retail world was ruled by bricks and mortar and are looking warily to the future.
Editors note: This story was updated on Oct. 1.