Neiman Marcus in The Shops at Hudson Yards is close to declaring bankruptcy due to the effects of the COVID-19 pandemic forcing closures across America, New York, NY May 1, 2020. (Anthony Behar/Sipa USA)(Sipa via AP Images)

The Neiman Marcus in Natick, Mass., could be next on the luxury chain’s growing list of store closings.

No one predicts a massive amount of store closings by the bankrupt Neiman Marcus Group, but it’s likely to be at least twice the number disclosed last week in court documents, according to real estate sources. Neiman’s, in bankruptcy proceedings since May 7, indicated in court documents that it will close its department stores in Hudson Yards in Manhattan; Palm Beach, Fla.; Bellevue, Wash., and Fort Lauderdale, Fla.

“The company is figuring out the next five or six to close,” said one source familiar with Neiman’s real estate, adding that it’s expected that the retailer will shutter up to 10 of its 43 department stores, including the four disclosed last week.

At most risk, according to two real estate sources and one retail source, is the 103,000-square-foot Neiman’s in the Natick Mall in Natick, a suburb of Boston.  “Natick, Mass. — 100 percent will close,” said the source.

Other units said to be at risk at are those in downtown Dallas; St. Louis, and Westchester, N.Y.

In addition, Neiman’s has been working with A&G Real Estate Partners to market its department stores in Walnut Creek, Calif., and Mazza Gallerie in Washington, D.C., though there is no indication those two units are at risk to close. Better financial and lease terms with landlords could be worked out. A&G is also working with Neiman’s on the phaseout of the Palm Beach and Bellevue units, which should be completed this fall.

The vast majority of Neiman’s stores have been very productive over the years. Yet profitability of the corporation has been depleted by its large debt, which also hampered sufficient upgrades. Neiman’s blames its bankruptcy on COVID-19, which caused stores to temporarily close in mid-March forcing the company to default on the debt.

Among the top-performing doors historically for the Neiman Marcus Group are Bergdorf Goodman in Manhattan, and Neiman’s in Beverly Hills; NorthPark, Dallas; Houston; Chicago; San Francisco; Short Hills, N.J., and Bal Harbour, Fla. Denver is reportedly among the better doors as well.

Neiman’s current assessment of stores is comprehensive and said to concentrate on a list of 20. The strategy involves seeking ways to monetize locations and not necessarily close them. Some locations could be downsized or could receive more favorable lease terms, depending on negotiations with landlords and court approvals and Neiman’s outlook on each unit and its profitability. Sale lease-backs could be considered as well.

According to Neiman’s 2018 annual report, (the last one available to the public) most locations are leased. Two are owned completely; two are owned but have partial ground leases; four are owned but mortgaged to secure credit and debentures; 17 are owned buildings on leased land, and 18 are leased.

“They are going to landlords asking for money to downsize, renovate, or cut the rent. They are trying for different things in different places,” said another real estate executive.

Neiman’s officials have stated that there won’t be a large number of department store closings.

The Hudson Yards store, opened in March 2019, is said to have generated around $100 million in sales in the first 12 months but was paying $9 million to $10 million in rent and losing money. About a third of the volume was generated by the leased Louis Vuitton and Chanel shops, leaving little margin. However, Neiman’s did receive significant capital from Related Companies, codeveloper of Hudson Yards, to build the store.

Neiman’s in St. Louis, according to one real estate executive familiar with the location, is a money-maker off a much lower level of volume and expense, but is perceived as not having much growth potential and possibly not worth keeping open. The Westchester store, sources said, has been experiencing declining volume.

While Neiman’s review has been focused on 20 doors, sources agreed that under half that are seen closing.

However, “It only takes one key vendor to pull out in order to change the outlook on a store,” said the source familiar with Neiman’s real estate. “If a vendor doing $6 million pulls out, the store might quickly no longer be profitable.”

Last week, Lana Todorovich, president and chief merchandising officer of Neiman Marcus, told vendors in a letter that beyond the four stores scheduled to close permanently,  “We have no other store closures to announce at this time, but we will continue to assess our store fleet throughout the restructuring process. We will communicate any additional decisions as they are made.”

Todorovich also wrote, “The closing of these select stores is a difficult action but it will optimize our market presence and ensure the long-term success of NMG. Final closing dates have not been determined yet, but we anticipate these stores closing in the fall… We are purposefully focusing on the stores that maximize customer relationships and increase profitability.”

As of last week, Neiman’s reopened 31 stores for customer traffic and 42 stores for customer appointments, after they were temporarily closed due to the pandemic.

Among the stores said to be on the list of 20 under consideration for various actions are units in Dallas, Willow Bend and Ft. Worth, Tex.; St. Louis; Topanga and Walnut Creek, Calif.; Roosevelt Field and Westchester, N.Y.; Oakbrook and Northbrook, Ill.: Natick; Chevy Chase, Md.; Charlotte, N.C.; Orlando and Tampa, Fla., as well as the four aforementioned units Neiman’s already determined will close.

Neiman’s officials had no comment on the Natick, Mass. store or the list of 20 under consideration for various actions, but a spokesman did say, “We are always assessing our store footprint to ensure it is optimal to enhance revenues, overall profitability, and our integrated retail strategy.” The spokesman said the four store closing disclosed last week will occur in the fall this year.

Two weeks ago, Amber Seikaly, vice president of corporate communications for the Neiman Marcus Group, said, “This ongoing assessment may include marketing of leases for certain locations. This is not necessarily an indication that we are closing a particular store, but rather a way to monetize the value of the leases at these properties and allocate the proceeds toward investments that drive profitable and sustainable growth. Ongoing discussions with landlords are private and confidential.”