The Neiman Marcus Group wants to widen its lead in luxury digital sales.
Digital sales accounted for 36 percent, or $1.5 billion, of NMG’s total sales of $4.7 billion in the last fiscal year.
“We can quickly get to 40 percent,” said Geoffroy van Raemdonck, chief executive officer of the Neiman Marcus Group.
Longer term, “I can imagine that the balance will be 50-50,” van Raemdonck said, referring to the split between brick-and-mortar and digital sales at NMG.
Van Raemdonck, who became NMG’s ceo in February, on Wednesday talked up Neiman’s growing digital business during a conference call with retail analysts that covered results for the fiscal third quarter ended April 28.
Van Raemdonck said neimanmarcus.com is undergoing a “re-architecture” to improve the site. “We started the re-architecture a couple of months ago. July is when it will be complete.” Objectives include providing improved checkout and other functionality enhancements, increasing flexibility in testing new concepts and features, and enhancing visuals.
“‘Digital First’ is a key strategy for us,” the ceo said, referring to the retailer’s strategy to double down on e-commerce and digitally based businesses. Digital First aims to bolster luxury services online so they emulate the in-store experience; achieve greater product innovation and differentiation, and re-platform NMG’s web sites to deploy different kinds of software for greater flexibility interacting with customers.
During the last quarter, van Raemdonck said NMG’s four web sites: neimanmarcus.com, bergdorfgoodman.com, MyTheresa.com and Horchow.com, all experienced double-digit gains.
Overall, Neiman’s third-quarter results were good, helped by solid inventory control, improved selling trends, even at full-price, as well as digital sales gains. The company was also pleased with sales at stores, though they weren’t as robust as those online.
The company is benefiting from its NMG One common merchandising system geared for better planning, markdown optimization and maximizing the efficiency of inventory across channels. The system initially experienced serious glitches, but they were cleared up by last fall.
During the latest quarter, NMG narrowed its net loss to $19.9 million from $24.9 million in the year-ago period. Adjusted earnings before interest, taxes, depreciation and amortization increased to $143.8 million compared to $135.9 million in the prior year.
Revenues reached $1.17 billion, a 4.8 percent increase from total revenues of $1.11 billion in the year-ago period. Comparable sales increased 6 percent.
Handbags, accessories and jewelry paced the business, though no categories underperformed, van Raemdonck said.
While the latest numbers were good, NMG is still making up for lost ground. On a year-to-date basis, the company reported total revenues of $3.77 billion, representing an increase of 5.1 percent compared to total revenues of $3.59 billion for the same stretch of time a year ago. However, at the end of the fiscal third quarter of 2015, the company reported $3.93 billion in sales on a year-to-date basis.
On Wednesday, Neiman’s cautioned that sales comparisons get challenging as the year progresses since better sales trends started surfacing last year and the company had a strong fiscal fourth quarter.
The ceo said Neiman’s first New York City store, which will be in Hudson Yards on Manhattan’s West Side, is on track for a March opening. Typically, the company expects new stores to reach full productivity in two to three years.
At Last Call, 11 stores closed down as of January, and three more locations will be closed by July, bringing the number of chain locations to 24. Officials said they’re comfortable with a Last Call chain that size.
“To continue to advance Neiman Marcus’ transformation and to sustain our momentum, we are incredibly focused on fostering a test, learn and iterate environment. We are committed to building high-performing teams supported by top talent at all levels, fostering agility across the organization and delivering innovation to both our brand partners and customers,” van Raemdonck told WWD after the conference call.
He also said the in-store partnerships, activations and events generated by the new “Idea Factory” team and starting to appear this week at a handful of Neiman Marcus stores are “just the tip of the iceberg of what’s coming to NM.”
Retail experts cite several reasons why Neiman’s is ahead of the curve in digital selling. The company launched e-commerce around 2000, getting a head start over the rest of the industry when many doubted whether luxury fashion would sell on the Internet.
“Direct-to-consumer is part of the heritage of this company,” observed Craig Johnson, president of Customer Growth Partners, who noted that by already operating catalogues including Horchow and the over-the-top Neiman Marcus Christmas Book and having fulfillment operations, Neiman’s had an advantage in moving forward in the digital space.
Neiman’s also got a lift through its purchase of the Mytheresa luxury web site in September of 2014.
Johnson also said Neiman’s InCircle loyalty program, which includes Neiman’s biggest spending customers, is an important factor in the online growth. “They use the data collected through the InCircle program to communicate with customers more directly and quite frequently,” leading to online sales, Johnson said.
He also explained that Neiman’s only operates 42 stores in 18 states and Washington, D.C., yet they have customers in all 50 states. “There are a lot of wealthy places like in Oklahoma where Neiman’s doesn’t have a store and customers in these places don’t want to drive 200 or 300 miles to get to a Neiman’s store. If Neiman’s had 400 stores instead of 42, I guarantee that their online percentage would be a lot lower,” Johnson said.
Neiman’s isn’t alone in pushing digital sales, both in total and as a percentage of overall revenues. At Nordstrom, digital sales increased 18 percent in the first quarter, and digitally enabled sales represented 29 percent of first-quarter sales, up from 25 percent a year ago.