NEIMAN’S NET DROPS 83.2% IN 4TH PERIOD
Byline: Thomas Cunningham / With contributions from David Moin
NEW YORK — Hurt by a shift in its promotional calendar and sluggish July sales at its Neiman Marcus chain, The Neiman Marcus Group Inc. said Tuesday that its earnings for the fourth quarter ended July 31 plummeted 83.2 percent.
However, officials also said that selling during August was strong and that they have a very positive outlook for fall.
Net income for the quarter fell to $2.7 million, or 6 cents a diluted share, from $16.2 million, or 33 cents, a year earlier. The results were 1 cent above the consensus estimate of Wall Street analysts and in line with guidance the company gave in August.
The market responded favorably to the performance, bidding its shares up 11/16 to close at 22 1/4 on the New York Stock Exchange Tuesday.
Revenues climbed 5.3 percent to $565.4 million from $536.7 million a year earlier. Comparable revenues ticked up 0.5 percent.
Revenues at Neiman Marcus stores climbed 3 percent to $426.9 million, although same-store sales fell 1.1 percent. At Bergdorf Goodman, revenues rose 6.1 percent to $60.7 million. Revenues at the NM Direct catalog operation climbed 5.8 percent to $68.7 million.
“Our spring InCircle parties, which are part of Neiman Marcus Stores’ customer loyalty program, were moved from May last year to April this year, resulting in a significant transfer of revenues and operating earnings from the fourth quarter into the third quarter,” Robert A. Smith, co-chief executive officer of The Neiman Marcus Group, said in a statement.
The quarter’s results were also reduced by weaker revenues at Neiman Marcus stores in July, mainly in discounted merchandise, and higher-than-expected markdowns at both Neiman Marcus stores and Bergdorf Goodman, Smith noted.
“Despite softness in the closing month, sales trends in the second half of the year rebounded from a weak fall season across all our merchandise lines,” Smith said. “We are encouraged that these improving trends have continued into the start of the fall season, as evidenced by a 9.6 percent increase in our comparable revenues in August.”
“We remain optimistic that the company will achieve its revenue and earnings growth targets in fiscal 2000,” he added.
LIFO accounting for inventories also reduced the quarter’s operating income by $5.7 million, the company said.
“Some of the promotional activity didn’t pan out, but regular-priced selling was very strong through June,” said Burt Tansky, president and chief operating officer of Neiman Marcus Group. “Discounted merchandise did not perform as well as we expected.”
Tansky said August, marked by more regular-priced, early-fall selling than July, was strong, led by accessories, women’s shoes, fine apparel and eveningwear.
However, bridge and leisure sportswear, considered Neiman’s opening price point categories, have been “fair.” Some vendors did not perform as expected, Tansky noted, saying recent management and design transitions at some of these companies, such as Emanuel, have had an impact.
“I think the outlook for luxury is more positive than we thought,” said Christine Kilton-Augusting, analyst at ING Barning Furman Selz.
Neiman Marcus Group is benefiting from its strategy to seize more exclusive and semi-exclusive merchandise, she said.
On a combined basis that excludes the effect of the promotion shift, operating earnings for the third and fourth quarters eased 0.5 percent to $76.7 million from $77.1 million a year ago, Neiman Marcus Group said. Revenues in the second half climbed 8.6 percent to $1.18 billion.
The company told analysts that its investments in Kate Spade and Laura Mercier are exceeding expectations. It also said that results were above plan at its previously lagging Hawaii store, opened September 1998.
Stephen Schuster, portfolio manager at Gemini Capital, said NMG recently has been plagued by “poor planning” that has caused a “yo-yo effect” in same-store sales, but he still sees strength in the luxury business, pointing to the pickup in sales for NMG in August and strength seen at Tiffany and Gucci.
Schuster said he likes the long-term prospects for NMG because many competitors, such as Saks Fifth Avenue, Nordstrom and Bloomingdales, have deemphasized upscale merchandise.
“Over the last couple of years, we’ve seen these chains moving their price emphasis lower toward the middle market, where they once had a much higher-end type of customer,” Shuster said.
For the full year, Neiman Marcus Group’s earnings fell 12.1 percent to $93.5 million, or $1.90 a diluted share, from $106.3 million, or $2.13, a year earlier.
Total revenues climbed 7.6 percent to $2.55 billion from $2.37 billion. Comparable revenues rose 2.6 percent.
At the specialty retail stores group, which includes Neiman Marcus stores and Bergdorf Goodman, operating earnings fell 10.2 percent to $178 million. The decline was due to lower gross margins, higher expense ratios and a comp-sales decline at Berg-dorf Goodman, the company said.
Revenues at Neiman Marcus stores climbed 6.9 percent to $1.94 billion and comparable revenues improved 3.4 percent. Revenues at Bergdorf Goodman fell 2.3 percent to $267.7 million, and were hurt by the ongoing remodeling project at the main women’s store, the company said.
Operating income at NM Direct fell 7.1 percent to $14.5 million as a result of higher expense ratios. Revenues at the division climbed 13.4 percent to $321.8 million.
Inventories at the end of the year were up 5.9 percent to $528.5 million from $499.1 million.
As reported, on Sept. 15 the boards of Neiman Marcus Group and its 54 percent owner, publisher Harcourt General, will vote on Harcourt’s proposal to spin off to its shareholders most of its interest in Neiman Marcus Group.