CONTEMPO BOOSTS NET AT NM GROUP
Byline: Valerie Seckler
NEW YORK — Bolstered by improved gross margins at its troubled Contempo Casuals chain, The Neiman Marcus Group netted record second-quarter earnings per share of 51 cents, topping its estimates of 43 to 47 cents.
Neiman Marcus stores and Bergdorf Goodman saw second-quarter comparable-store gains in the mid-single digits, said a spokesman, while revenue at NM Direct continued to be depressed by soft apparel sales.
Earnings were $26.5 million for the quarter ended Jan. 28 against $21.5 million, or 37 cents, a year ago. Sales advanced 1.2 percent to $658.6 million from $650.7 million. Comparable-store sales increased 4 percent.
Despite its improvement, the 246-unit Contempo chain was put on the selling block last fall, according to Jeffrey Branman, managing director of Financo Inc., a New York investment banker.
Told of the report, a Neiman Marcus spokesman said, “We’ve never indicated publicly that Contempo is for sale. It’s not something that we’d comment on.”
Gross margin at Neiman Marcus, based in Chestnut Hill, Mass., increased to 30.7 percent in the quarter from 29.5 percent, due mostly to Contempo.
Neiman Marcus officials noted that improved performances at NM stores and Bergdorf Goodman also contributed to the record second-quarter net, offsetting weaker results at NM Direct and higher interest expense.
Bergdorf Goodman Men “made a little bit of money for the quarter and the first half, and we expect a profit for the year,” Neiman’s said.
Interest expense in the quarter rose to $10.2 million from $8.1 million, due to higher rates and increased borrowings.
Inventories stood at $314.7 million at Jan. 28, down 2.6 percent from $323.1 million.
For the six months ended Jan. 28, Neiman Marcus reported earnings applicable to common shares advanced 26.2 percent to $46.3 million or 84 cents, from $36.7 million or 58 cents.
Sales in the half grew 1.7 percent to $1.18 million from $1.16 million.
Since Contempo is one of the biggest specialty retailers in juniors, a business that has been devastated by weak results and bankruptcies, Neiman Marcus could be having trouble finding a purchaser, Branman said.
“The problem is that the juniors business is going through a shakeout, and there are very few big players left who are looking for real estate,” he reasoned. “Deb Shops and Wet Seal aren’t doing well, Merry-Go-Round is in Chapter 11, Canadians and Paul Harris are just out of Chapter 11 and Petrie has lots of stores” and doesn’t need more.
“The market’s left with a lot of small-to-medium companies,” Branman said.
Contempo’s gross margin grew about 5 percent in the second quarter, helping the chain notch a small operating profit in the quarter, compared with a year-ago loss.
Contempo’s everyday low pricing strategy, implemented last fall, “has worked, allowing us to sell more merchandise at full price,” the spokesman said.
On the downside, comparable-store sales declines continue to plague the division. Contempo’s same-store sales were off “in the high single digits” for the second quarter, including a 7 to 8 percent decline in the Christmas selling season.
However, profits have been lifted, in part by the closing of 40 weak units and its 39-unit Pastille chain in the second half of fiscal ’94, shaving a total of about $60 million off sales.
“Given that Contempo has been on the selling block, who knows how much attention the chain is getting?” Branman said. “They have merchandising problems. It’s the easiest thing to point out and the hardest thing to fix.”
Asked for a progress report on Contempo, the spokesman said, “The spring merchandise hit the stores earlier this month. The stores are what they are. We have a long way to go at Contempo before we can claim victory.”
Robert J. Tarr Jr., president and chief executive officer of Neiman Marcus, acknowledged, “While we are encouraged by the improvement in gross margins that led to the profitable quarter at Contempo, we are disappointed by continued comp-store sales declines.
“Stronger revenue results will be required for Contempo to meet its objectives for the second half of the fiscal year,” which include breaking even for fiscal ’95.
— Fairchild News Service