NEIMAN MARCUS PREDICTS RISE IN SECOND-QUARTER EARNINGS

Byline: Valerie Seckler

NEW YORK — Led by an improved performance at its troublesome Contempo Casuals division, The Neiman Marcus Group expects earnings in the second quarter ending Jan. 28 in the range of 43 to 47 cents a share, an increase of 16 to 27 percent.
The retailer reported earnings of 37 cents a share in the year-ago quarter.
In a telephone interview Friday following Neiman Marcus’s annual meeting, Peter Farwell, a vice president at the retailer based in Chestnut Hill, Mass., said Contempo’s gross margins during the Christmas selling season improved 5 percent.
Overall women’s apparel business for the Group was “decent” during the Christmas season, Farwell said.
“To have 5.6 percent comp-store gains at Bergdorf’s and at Neiman Marcus was encouraging,” he noted.
Gross margins at the 27-store Neiman Marcus chain were “good,” if flat, against a “strong” performance a year ago, Farwell said.
At the two-store Bergdorf’s unit, Christmas gross margins “improved modestly,” he said, and Bergdorf Goodman Men is expected to ink a profit for the first time this year.
“The mail order piece of the business is weak,” said Farwell of the second quarter for NM Direct, which includes the Neiman Marcus and Horchow catalogs. “Mostly apparel was weak. It came back in December but will be off for the quarter.” He declined to provide figures.
The 246-store Contempo chain, which has been seeking to stage a turnaround, is on track to notch a “small” profit in the second quarter, said Farwell, while a “modest” loss or break-even performance is anticipated for the fiscal year ending in July.
One key to the improving profit picture at Contempo, he explained, was going to an everyday fair price strategy and getting away from frequent, deeper markdowns.
Also propping up the division’s performance was the shutdown of the 39-store Pastille chain, which accounted for $10.5 million of the unit’s $14.1 million operating loss in fiscal 1994.
Farwell added that a 7 to 8 percent decline in Contempo’s comparable-store sales during the Christmas season had been offset by the gross margin improvement. However, he acknowledged that the chain is continuing to reevaluate its merchandise mix so it produces the comp-store gains crucial to maintaining long-term profitability.
Neiman Marcus said its capital expenditures will approximate $100 million in both 1995 and 1996, some of which will be used to fund three remodeling projects now under way. The three Neiman Marcus stores are located in White Plains, N.Y., Northbrook, Ill., and at the North Park shopping center in Dallas.
By comparison, the retailer spent $65.1 million on capital improvements last year and $56.3 million in 1993.
In another development, Neiman Marcus has $172 million of privately placed debt maturing over the next two years and will be required to begin redeeming nearly $19 million a year of its $374.9 million, 6 percent preferred stock beginning in 1997.
To accommodate those requirements, Neiman Marcus plans to take several steps including:
Issuing about $200 million of fixed-rate certificates, backed by Neiman Marcus credit card receivables.
Increasing its revolving credit lines to $500 million from the current $450 million.
Eliminating the 5-cents-per-share quarterly cash dividend on common stock, following the current quarter’s distribution.
Omission of the dividend is expected to save the retailer $7.6 million in cash annually, which the company will reinvest in its operations.
Asked why Neiman had chosen to eliminate the common dividend rather than the one associated with its preferred stock, Farwell said, “The preferred dividend is the only return Harcourt General is getting now on a very sizable investment.”
Harcourt General Inc. accumulated 65 percent of the retailer’s common stock between October 1990 and January 1993, providing Neiman Marcus with equity capital. It holds all of the preferred shares, receiving annual dividends of about $30 million.
— Fairchild News Service

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