Net income for the third quarter declined to $3.8 million from $19.8 million a year earlier and total revenues dropped 4.2 percent to $1.17 billion from $1.22 billion. Same-store sales fell 5 percent in the quarter. Sales per square foot for the trailing 12 months were $558, down from $589.
On a year-to-date basis, total revenues declined 2.7 percent to $3.82 billion from $3.93 billion. Year-to-date net earnings were $1.1 million compared to $47.8 million in the prior year.
A one-two punch of declining tourist business at gateways stores and oil patch disruption in its Texas stores knocked the wind out of Neiman’s sales. The lack of Brazilian shoppers has hurt the company’s stores in Florida while Russian tourism also has dried up.
“As you know, we have a large presence in Texas. Two of our biggest stores are in Dallas NorthPark and Houston Galleria, where the economy and our customers’ business interests are heavily dependent on the oil and gas industry,” said Karen Katz, the company’s chief executive officer.
Katz also cited the stock market and the U.S. presidential election as reasons why business has suffered. Store traffic is down, but online business is up, as Katz pointed out that even high-end consumers have less interest in going into a physical store. The ceo added that online customer growth was coming from newer customers, yet lower-spending ones.
There are several store renovations under way and this also has affected business. In particular, the Bergdorf Goodman store in Manhattan has two entrances closed, which has impacted business. Some analysts on the conference call questioned whether the renovations were to blame for the decline in sales, but Katz pointed out that all the retailer’s stores were challenged, just to different degrees.
Since Neiman’s couldn’t control customer traffic, it worked aggressively to align inventory with the reduced consumer demand. Chief financial officer Donald Grimes said Neiman’s has been canceling orders, returning goods to vendors and negotiating additional markdown allowances.
The company had more clearance in the third quarter than last year. For the third quarter, gross margin decreased by about 170 basis points compared to last year. The fourth-quarter receipts, which have started coming in over the past few weeks, is the pre-fall delivery and Katz said Neiman’s has cut back on those. As a result, a combination of clearance and a reduction of pre-fall product should bring down inventory levels.
“We’re continuing to work aggressively to align our inventory levels and purchases with anticipated future customer demand,” Grimes said. But he and Katz declined to give analysts on the earnings call any insight into the current quarter or future ones.
Citigroup credit analyst Jenna Giannelli was satisfied with the inventory levels. She said, “Inventories rose 2.3 percent year-over-year better than our expectations, and we believe better than feared, which should quell some margin concern going through the remainder of the year.”
In addition to tightening up on inventories, Neiman’s attacked its expenses and managed to save 70 basis points in areas like payroll and compensation. The company was even looking to save money on its janitorial services.
On a positive note, Katz said women’s and men’s shoes were trending better than the total business. She said the beauty business was also a highlight and that the handbag category was less challenging than it had been.
The Mytheresa e-commerce site has garnered exclusive product launches with Victoria Beckham dresses and Prada women’s ready-to-wear. This will be the first time that Prada rtw will be available online outside of the Prada web site.