As Karen Katz sees it, the time is right for her to retire, with the Neiman Marcus Group on “a much better trajectory” and someone with fresh perspectives taking the reins.
After an impressive 32-year career at the $4.7 billion Dallas-based luxury retailer, rising from an assistant manager of a small Neiman’s store in Houston to divisional merchandise manager, head of stores, head of e-commerce and ultimately president and ceo for the past seven years, her final day running the company is officially Sunday. The grand farewell will be tonight with hundreds of well-wishers expected at The Plaza for her retirement party, though she remains on the board indefinitely.
“I feel like I am leaving at a really good time. I really believe it is,” Katz said during an interview.
“One of things I was focused on was getting the business to a much better place in terms of sales and profits.” This year — Neiman’s began its fiscal year in August — “we are on a much better trajectory.”
That means that her successor, Geoffroy van Raemdonck, a former Ralph Lauren and Louis Vuitton executive, “can really start thinking strategically about where he wants to take the company,” Katz said.
“There are balance sheet opportunities, to change the debt profile, with the sales and profits growing — they’re healthier than they have been,” compared to recent years. “Bringing in a person having a different perspective is really positive. Geoffroy knows Neiman Marcus and Bergdorf Goodman. The possibilities are endless. For me, now as a board member, I am very excited to see the directions he takes the business in. I am a real believer that there is still a place for stores like Neiman Marcus that offer a multibrand, high-service level experience. Geoffroy feels the same way.”
Katz said there are opportunities — others would say necessities — to transform Neiman’s stores and e-commerce business to meet the changing needs of affluent consumers. Though mall traffic has been declining, it’s less of a concern to Neiman’s which is generally housed in productive “A” malls or on high streets. “Neiman Marcus has always been less about traffic,” Katz said. “It doesn’t take a lot of customers to do the kind of volume we do.”
Perhaps foreshadowing some of van Raemdonck’s challenges, Katz said, “Some of our stores may be too large in terms of footprint, and our stores could potentially have more experiences that suit the needs of customers — blow dry salons, restaurants, more opportunities for those kinds of things.”
One thing Neiman’s has going for itself are its sales associates. “They’re doing a a good job today. Because of their iSell app, they are really selling outside the four walls of the stores,” Katz said. “You don’t need traffic if you develop relationships with customers. We have been going down that path. We gave iPhones to sales associates seven years ago so they would have better one-to-one communications to customers. No one was thinking about marketing and communicating with customers via iPhone in a sales associate’s hands then. Through that, we developed this iSell app, giving sales associates amazing information about customers.” It gives the associates a deeper view into customer purchases and selling habits.
As far as how Neiman’s is positioned for the future, “That’s going to be Geoffroy’s decision,” Katz said. “There are lots of things he can think of to continue to evolve Neiman Marcus,” while still targeting the affluent, Katz said.
With business currently challenging at upscale stores such as Saks Fifth Avenue, Neiman’s and its sister division Bergdorf Goodman, there are industry concerns that consumers are less interested in expensive designer ready-to-wear and accessories and prefer to spend on home products, travel, restaurants and other experiences.
Katz firmly disagrees. “I just don’t see it. When we offer very differentiated product, the customer is really drawn in,” she said, citing efforts at offering more casual luxury, pop-ups and special presentations themed around certain holidays.
“It’s all about seeing product that is unique. I actually believe luxury customers are ready and willing to spend if they can find interesting things that emotionally resonate with her. There is nothing in our viewpoint that says [luxury] is no longer relevant.”
While there are signs of certain venerable designer labels going stale, Katz believes creativity will prevail. “Brands ebb and flow. That’s always part of the industry we are in. But the amount of creativity out there is just crazy.
“In terms of new designers, they can launch in many ways. They don’t necessarily have to go with a store like ours. They can open their own stores or have an online presence. But in many ways the pinnacle of their success is when they are represented in Neiman’s or Bergdorf Goodman, or on our web sites.”
One of Katz’s biggest decisions was to green light the opening of a store in Hudson Yards, the massive mixed-use project under development on the far west side of Manhattan. It’s a big gamble that — in a city already filled with luxury stores — residents and tourists will shop at Hudson Yards, which is untested, virgin territory for retail.
Katz sounded confident in the decision to open what will be Neiman’s first store in Manhattan, although the retailer does have stores in nearby suburban communities. She said it will be Neiman’s fourth-largest location, at three levels and 190,000 square feet, and that it will be unique to the luxury chain. “I think you are going to see a lot of different ways of merchandising the floors and a lot of special experiential ideas in the store. It will look and feel different than other Neiman Marcus stores,” Katz said. It will also contain “the best of the Neiman Marcus art collection,” which was started in 1951 by the late and legendary Stanley Marcus, son of founder Herbert Marcus, with the purchase of a large Alexander Calder sculpture, “Mariposa,” exhibited in the Michigan Avenue store in Chicago.
“As Geoffroy gets here, he will want to put his imprint on the store,” said Katz. “I toured Hudson Yards a couple of weeks ago. The development itself is just extraordinary.” The store is scheduled to open in March 2019 and it’s at least one industry event Katz wants to attend. “I asked that I get invited. All the board members will be invited.”
While NMG’s losses are still deep and the long-term debt remains high at about $4.4 billion, Katz for a while now has been citing improvements and momentum in the business. The company did narrow its net loss in its last fiscal year and Katz believes the performance at Neiman’s stores has been stabilizing. Accomplishing that, along with “doubling down” on digital growth and online services through a strategy called Digital First, has been her last priorities. She also had to get the NMG One inventory management system in order after a rocky start with operational issues disrupting ordering and information exchange with vendors and severely impacting profits. It was a mess.
She’s credited for aggressively growing NMG’s e-commerce business; developing omnichannel operations such as buy-online-pickup-in-stores; putting mobile devices in the hands of sales associates to better communicate with customers and personalize service, and the purchase of the Mytheresa luxury web site, giving Neiman’s entry to Europe and a boost to the online business.
She’s leaving the business with an appropriate store count, 42, and a few key openings under her belt, including Roosevelt Field, Long Island; Walnut Creek, Calif. and Fort Worth, Tex. In addition, in 2013 she refocused Neiman’s charitable strategy to focus on youth arts education.
Katz, who turned 61 on Wednesday, will certainly miss aspects of the job, but not all. She’s been president and ceo since 2010 and it was certainly no cakewalk navigating the company through much of the Great Recession, which began two years before she became Neiman’s ceo and caused about a 25 percent decline in volume. She had to make difficult decisions on new strategies, hirings, firings and consolidations. And the company had to retreat from undertaking an initial public offering and couldn’t be sold, disappointing owners Ares Management and the Canada Pension Plan Investment Board, which bought the business for $6 billion in 2013.
“There has been some tough moments,” Katz acknowledged. “During the recession, it was incredibly difficult to watch our business drop as much as it dropped. Those kind of moments you don’t forget. Anytime you have a downturn, it unnerves people. It becomes a matter of making sure that the team stays calm, and that customers and shareholders stay calm. It was really difficult, even the last couple of years we were going through challenging times.
“The business is moving at such a frantic pace, it is challenging to figure out where to place your bets, which directions to take, which technologies to bet on, or to move from one area of business to another. It’s one of the hardest things retail ceo’s have to do today. We have always stayed aligned and dedicated to great product, the affluent consumer, and giving her the experience she expects.
“Over 19 years ago, we bet on going deep on the digital and e-commerce business, earlier than anyone else. It’s paid off handsomely.”
But a bet on building an e-commerce business in China years ago didn’t pay off. Katz said the Chinese consumer wasn’t ready for it, the business never gained traction and there were logistics issues getting products to the country.
“We came back and bought Mytheresa,” the Munich-based luxury web site. Buying an existing business, she said, proved to be a better idea than launching one. “It’s been terrific.”
For Katz, there also will be no more store openings to plan, no more European buying trips and no more front row seats at fashion shows. For some retailers, there’s glamour in the spectacle of the runway, though not so much for Katz. “I’m done. I don’t think I will miss it for one minute. I have a whole opinion about the fashion show schedule. I won’t miss it at all.”
She and her husband Alan, a physicist working at Hunt Energy Enterprises in Dallas, are moving out of the house where they raised their son and into an apartment in Dallas. Her son lives in San Francisco now, so Katz said an apartment will make life easier. She also has an apartment in New York City.
When she graduated from the University of Texas, she wasn’t sure what she wanted to do. Ironically, she got rejected from Neiman’s training program in 1978 but got accepted to the one at Foley’s, a former department store division of May Co., which got merged into Macy’s years ago.
“I don’t know why Neiman’s rejected me then. I like to say success is sweet revenge.”
It was at Foley’s as a buyer when she had her “a-ha” retail moment. “I bought budget dresses for $9.99, $19.99 and $29.99. It was all about negotiating to get a good price. It was all about me honing my negotiating skills. I loved the pace of things. There was a report card every day and you knew exactly how you were doing. Retail got into my blood. I originally thought I would work for a couple of years at Foley’s, quit and get an MBA. But I loved retail so much that I decided to get an MBA at night at the University of Houston. I went to school two nights a week, while working at Foley’s. I just loved so much what I was doing.”
After six years at Foley’s, a friend working at Neiman’s told her there was an assistant store manager job open in one of the retailer’s two stores in Houston. She talked to the store manager and he hired her. “Because I grew up in Dallas and grew up shopping at Neiman Marcus, it’s always been part of my life. I wanted to get to the place that was so much a part of my life. Neiman’s no longer has that store in Houston, it was a small store in the Town and Country Mall. We closed it many years ago, but it was the perfect place for me to start.”
Staying with Neiman’s, Katz relocated to Dallas to work as a divisional merchandise manager for handbags. “I like to say I somewhat introduced Prada to the U.S. Prada had a couple of their own stores in Los Angeles and New York but there wasn’t any big retail store that carried Prada. At the beginning, it didn’t sell very well at Neiman’s. Customers didn’t understand the prices. But we stuck with it. We also expanded the number of boutiques.” Katz was also responsible for Neiman’s being the first retailer to roll out Chanel handbag shops.
“We made luxury designer bags much more important to the business.”
Another high point in her Neiman’s career was as general manager of the NorthPark Center store in Dallas from 1991 to 1995. “While I was there, it grew into a $100 million store. It was Neiman’s first $100 million store.” It’s still considered the largest-volume store in the Neiman’s chain, and it’s said to have exceeded $200 million in annual sales. Neiman’s would not confirm its volume.
Katz recalls that on the evening of his first day as ceo of Neiman’s, Burt Tansky decided to visit the NorthPark store. “I didn’t know Burt. He and I walked the store together. It was going through a major renovation and Burt told me off because the store was dusty.
“But there was something about our interaction that evening. It was the first step in us developing our relationship. Soon after, he promoted me to senior vice president and director of the Texas, Florida and Atlanta stores. Burt was without question my mentor. Now he’s a lifelong friend. He promoted me every couple of years. I believe he saw something in me. He saw that I was a merchant. He wanted to talk about merchandise. He asked for my opinion on things. I had well-thought-out responses. We just connected. He saw that I could take on more responsibility and that I was very passionate about what I did, and that I focused on product and the customer. That fit in with the way he was thinking about the business.”
Katz became executive vice president over all stores for a few years and in 1999, president and ceo of Neiman Marcus Direct, which had just started neimanmarcus.com a few weeks before. It was around when Amazon and eBay were launched, and Neiman’s shareholders at the time, the Smith family, were willing to invest in e-commerce and Neiman’s, because of its catalogue operations, already had call centers and warehouse facilities.
“The hardest thing to do was to convince our European vendors to join us online,” Katz said. “I spent so much of my time groveling to vendors to join us. Begging them to try something new and different. Remember, this was very early on. Nobody really understood.”
Except for Mark Lee, ceo of Yves Saint Laurent at the time. “I remember the day he sent me a fax — we still used faxes back then — that Saint Laurent wanted to join us online. It was an inflection point.” And the icebreaker for other upscale brands to come online, too.
“Our greatest hope was that the e-commerce volume would be more than our largest volume store at the time. We blew through that volume very, very quickly. We way underestimated the kind of volume we could do…I feel like I’m leaving a great digital footprint,” with e-commerce accounting for about a third of NMG’s total revenues.
Katz, as one of the few females in the U.S. running a major retail corporation, has held a special place in the industry. She is also chair of the National Retail Federation Foundation, which provides scholarships and educational programs for students entering the profession.
“I do feel fortunate that the retail industry is more accepting in general of women in senior leadership positions. I did feel a responsibility to make sure that women in the organization and the women we do business with viewed me as a good role model for them. It’s important as female leaders to show people that you can achieve things at the highest level and still have a balance of a personal and professional life. You have to work at that, learn to work hard, and you have to have good support. I don’t think any human being can do it all themselves. I don’t believe things just come to you because you are lucky. I’m not a believer in luck. I believe luck follows hard work.
“You need support and you need to know that as you juggle things, some balls will fall by the wayside. I do think I sacrificed many things, like trips with my girlfriends. But my priorities were making sure my son was well cared-for and well schooled, maintaining a terrific relationship with my husband and that I worked hard. Work is never done. I never really counted it in hours. One blended into the next. If you’re having a good time, that’s good.”
Moving into a new phase of life, “I have no idea yet what I am going to,” Katz said. “I am exploring lots of possibilities, but I have no idea. I will take a few months off. I am staying in Dallas for the most part.
“When we made the public announcement a month ago I thought I would have some bittersweet feelings about my retirement, but I am getting more and more excited about what’s next for me. I feel really good about where the company is.”