Neiman Marcus Group LTD. LLC, pushed to a net loss in the last quarter by the sale of the company last year, the weather and a data breach, is nonetheless heading into spring feeling upbeat about business and the buying mood of its luxury customers.
This story first appeared in the March 3, 2014 issue of WWD. Subscribe Today.
“Through the holiday season, we certainly found that our customer was definitely embracing luxury,” Karen Katz, president and chief executive officer of NMG, told WWD on Friday. “She is feeling good about her surroundings.”
Product that’s “exciting and differentiated” is selling, Katz noted, citing particular success with Tom Ford, Van Cleef & Arpels and Stefano Ricci, which is sold exclusively at Neiman Marcus and Bergdorf Goodman stores. Katz also cited strong response to designer labels that reflect a “casual luxury” lifestyle approach, such as Brunello Cucinelli and Moncler.
“It’s always been our emphasis to try to have differentiated product. It continues to be our goal. We are looking to enhance the number of luxury lifestyle brands to our assortment.”
Earlier Friday, NMG, which was acquired by Ares Management LLC and Canada Pension Plan Investment Board in October, reported a net loss of $68 million for the second quarter ended Feb. 1 compared with net earnings of $40.4 million in the prior-year period.
Excluding purchase accounting and certain transaction-related and other expenses, adjusted net earnings for the second quarter of fiscal year 2014 were $41.6 million, compared with adjusted net earnings of $56.4 million in the prior year. Among the expenses, the company listed $53.2 million in transaction costs related to its takeover by Ares and CPPIB, $2.1 million in equity from its online venture in China, and $4.1 million related to the cyber attack that occurred during the holiday season, which was revealed in January.
Neiman’s total revenues in the quarter came to $1.43 billion compared with $1.36 billion in the prior year. Comparable revenues increased 5.5 percent, higher than most other retailers have been reporting for the holiday quarter and supporting Katz’s observations on the luxury customer’s willingness to spend. Women’s shoes, handbags and jewelry were top-selling categories last quarter. “We did get some spring receipts early, and in stores where some spring weather was seen, we are actually selling them. I think as the weather breaks customers will get back into the stores quickly,” Katz said during a conference call.
She began the call by addressing the data security breach, and disclosing that the investigation has determined that about 350,000 payment cards could have been exposed to the malware clandestinely installed on NMG’s system and designed to “scrape” payment card data from July 16, 2013 to Oct. 30, 2013. Previously, Neiman’s reported that about 1.1 million customer payment cards were potentially exposed to the malware. Katz said the number was greatly reduced because it was determined that the malware was not operating at all NMG stores, nor was it operating every day in affected stores from July to October. Of the 350,000 payment cards that may have been affected, Visa, MasterCard and Discover notified NMG that about 9,200 were subsequently used fraudulently elsewhere, Katz said. She also said there is no indication that social security numbers and birth dates were compromised, or that Neiman Marcus cards were used fraudulently, that any online customers were impacted or that any PINs were at risk since Neiman’s does not use PIN pads in stores.
Katz also cited progress on the emerging Last Call Studio stores, mentioning that six new ones will open in San Francisco, Chicago, New Orleans, Atlanta and Brooklyn, N.Y., within the next nine months, on top of the six already operating. “We’ve been fine-tuning the concept, adjusting size of store and merchandise assortment.” The company has learned that Last Call Studio stores from 14,000 to 17,000 square feet provide greater flexibility in choosing locations in different types of settings, including lifestyle centers, strip centers and street locations.
Among other growth strategies, Neiman’s is creating a new merchandising system that Katz described as a “multiyear project to deliver a truly omnichannel shopping experience.” Neiman’s also recently launched a new app for browsing and shopping neimanmarcus.com, advance notices of store events and offers, a search-by-department capability and the capability to contact sales associates and connect with them by phone, e-mail or text. The app also offers trend videos, designer interviews and an In-Circle feature to look up benefits and points.