After a string of significant changes, it isn’t going to get any easier for Neiman Marcus Group Ltd. LLC.
“Now the hard part comes,” Karen Katz, president and chief executive officer of Neiman Marcus, told WWD on Wednesday as she discussed how, in the months ahead, the Dallas-based luxury retailer must focus on carrying out new strategies and operations.
“We have to execute on all of our strategies. We have a great team in place and we are very focused on the execution,” Katz said. She was speaking just after Neiman’s reported its fourth-quarter and fiscal 2014 results that saw a bottom-line net that was impacted by last October’s acquisition of the company for $6 billion by Ares Management and the Canada Pension Plan Investment Board even as women’s results improved, and traffic patterns began to mend.
Katz indicated a revving up of renovations at key locations to increase productivity, including Bergdorf Goodman and Neiman’s stores in Beverly Hills and Palo Alto, Calif., and Oakbrook, Ill.
Capital expenditures for fiscal 2015 will rise to $275 million to $295 million, from $168 million in the last fiscal year. The bulk of the capex budget is for store remodels and information technology projects, including NMG One, a common merchandising system for stores and the dot-com businesses being phased in. According to Katz, much more square footage will be under renovation this year, compared to last year, when it was minimal.
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Neiman’s will also aggressively fuel growth of its online businesses — bergdorfgoodman.com, neimanmarcus.com and its soon-to-be newest asset, mytheresa.com. “The potential is tremendous,” Katz said. “We are further along in terms of e-commerce shopping than the rest of the world, especially in the luxury area. Clearly Alibaba sells a lot of product but it tends to be lower-priced. In high-end luxury fashion, there is tremendous growth potential for both neimanmarcus.com, bergdorfgoodman.com and mytheresa.com. The pie is growing bigger and there are a just a few players going after that pie.” E-commerce currently accounts for 24 percent of NMG’s total revenues.
Neiman’s will pay 150 million euros, or $194.1 million at current exchange, for the Munich-based mytheresa.com and its affiliated Theresa store. The deal was disclosed Monday, two weeks after Neiman’s also revealed that in 2018, it will open its first store in Manhattan, in the Hudson Yards development on the West Side.
Also on the agenda: furthering an already advanced program of omnichannel initiatives; testing new services such as same-day deliveries in San Francisco, Dallas and Miami, and opening four Last Call Studio stores. Last Call Studio is not expected to comprise a significant part of NMG’s revenues overall, but suburban and urban locations will be analyzed to determine how many of the units can be operated around the country.
For the quarter ended Aug. 2, NMG saw comparable sales rise 4.9 percent, though the group posted a net loss of $42.1 million versus net income of $2.9 million in the year-ago quarter, the end of which preceded its Oct. 25 acquisition.
Excluding various acquisition and transaction-related charges, adjusted earnings before interest, taxes, depreciation and amortization fell 0.9 percent to $105.8 million from $106.8 million.
Revenues declined 0.6 percent to $1.11 billion from $1.12 billion in the 2013 period, with specialty retail sales down 2.9 percent and online sales ahead 7.3 percent to $275.6 million. Specialty retail sales, on a comp basis, were up 2.3 percent and online rose 13.7 percent.
For the 12-month period, comps rose 5.5 percent, with specialty retail up 3.4 percent and online up 12.9 percent. Comp results for fiscal 2013 exclude the effect of the 53rd week on the retail calendar.
The net loss for the full year was $147.2 million versus net income of $163.7 million, while adjusted EBITDA rose 0.9 percent to $677.6 million from $671.5 million. Revenues were up 4.1 percent to $4.84 billion from $4.65 billion in the 2013 fiscal year. Neiman’s expects its results will continue to reflect the impact of the acquisition for the next few quarters.
“It was a good year,” Katz said. “We are pleased with our top-line performance in stores and online.”
The year was highlighted by a rebounding women’s fine apparel business. “I just think the product looks better. There are a number of vendors becoming increasingly important to us,” Katz said, citing Chanel, Tom Ford and Brunello Cucinelli, and a lot of young designers that she didn’t specify.
At the Beverly Hills store, Neiman’s will make the dramatic move of relocating beauty to the lower level, also called the plaza level, enabling shoes, handbags and jewelry on the main floor to all get additional space. On the plaza level, gifts and children’s will be discontinued, and the restaurant will get renovated. Asked to comment on whether beauty could lose some productivity once it relocates, Katz replied, “We think the plaza level will be a much more attractive, intimate setting for the customer. We are adding some spa rooms downstairs, which we didn’t have the ability to do on the first floor.” The beauty floor is expected to be completed next January, while the entire store should be ready by the end of 2016.
In a conference call, Katz said, it was “an eventful and exciting year” for the group, highlighted by “a record-high number of customers across all brands. Women’s apparel is a bright spot in our overall business, at the top of our luxury and designer range.”
In the last quarter, business across all geographies was strong, and best in Texas and the West. Top-performing categories were shoes, handbags and fine apparel, including booties, the color gray and knitwear.
Earlier this year, Neiman’s merged its stores and online merchant teams and named John Koryl president of Neiman Marcus stores and online. Moving forward, the buys across the channels will be aligned to project a seamless customer experience. Under the new structure, general merchandise managers, divisional merchandise managers and planners have “omni” responsibilities covering the stores, mail-order and e-commerce businesses. Buyers continue to be channel-specific, with the buying team for stores and another team of buyers for the direct-to-consumer businesses remaining in place.
“This is our most important time for selling regular price,” Katz said on the call. “Things have started off nicely. Everybody is talking about traffic being down. It’s kind of flattened out now. We are not seeing any further declines in traffic, generally speaking. Customers are feeling good about things today. She is very purposeful in her trips to stores. Her use of our e-commerce site to do research before she comes into the stores has become a very important part of her shopping journey. We feel good about where the customer is today.”