Who Will Buy Neiman Marcus?

Editor’s Note: This article is an excerpt from one of RetailWire’s recent online discussions. Each business morning on RetailWire, retail industry executives get plugged in to the latest news and issues with key insights from a panel of retail industry experts.

Neiman Marcus, known for selling the most luxurious and memorable of luxury goods, is putting something else up for sale: itself. The retailer is reportedly seeking a buyer or an investor, since soft sales have made it tough for the department store to pay down debt totaling $5 billion.

Neiman Marcus’ most recent quarterly results, for the period ending April 30, 2016, revealed a 5% decline in comp store sales compared to the same quarter the previous year. The decline in net revenues was even sharper, dropping from $19.8 million in Q3 2015 to $3.8 million this year.

The chain, which was acquired in a leveraged buyout by Ares Management LP and Canada Pension Plan Investment Board in 2013, has been hit hard by the woes affecting department stores in general as well as the slump in the energy industry. Two of the chain’s busiest stores are in Dallas and Houston, which have been hit hard by the drop in oil prices.


According to a recent New York Post article, Neiman Marcus CEO Karen Katz recently traveled to China to meet with potential buyers but came home without a deal.

Assigning Blame For Neiman’s Woes

In the comments following this article, retail industry executives and experts dissected what they felt were the true sources of Neiman Marcus’ poor performance.

Dick Seesel, Principal of Retailing In Focus, noted that the intention of the 2013 LBO “might have been to go public (eventually) or to flip Neiman Marcus to another private investor. But the company isn’t in a position to do either of these things right now, unless somebody covets the Neiman brand badly enough to make a vanity purchase.

“Otherwise it’s not inconceivable that the luxury segment is due for the same consolidation that swept the upper-moderate department store segments year ago, especially when Macy’s bought May Company,” Seesel added. “Maybe there is strength in numbers if Hudson’s Bay decides to add Neiman to its portfolio of brands including Saks and Lord & Taylor…that is, if its own private-equity owners want to assume more debt.”

Tony Orlando, Owner of Tony O’s Supermarket and Catering, noted that “Neiman Marcus has hit the ‘wall’ on sales, and they could sell if and only if they are willing to accept much less than the asking price. Online, along with a bad economy, is making them less relevant today. More and more of this stuff will continue to happen, as investors want to clean out their slow-moving portfolios and department stores are all struggling to grow.”

Kai Clarke, CEO of American Retail Consultants, agreed that the vertical itself is facing enormous challenges: “The department store, and Neiman Marcus along with it, are a doomed model. Like gigantic, overpriced sloths, it is time for a diet and better retail positioning. Neiman Marcus needs to adapt or perish, and the Internet is dynamically demanding a slimmer, price centric, ease of access, retailer. This is neither a department store, nor Neiman Marcus, in its current model.”

Others blamed Neiman’s performance on its own shortcomings. “A chain that has been referred to as Needless Markups needs to have great merchandise and provide exceptional customer service,” said Steve Montgomery, President of b2b Solutions, who noted that the service is “not there. My impression has been, and remains, that the staff feel they are doing you a favor.”

William Hogben, CEO of FutureProof Retail, believes the retailer’s online offerings are the issue. “Neiman Marcus has failed to keep pace digitally — delivering a bargain basement web site and mobile offering to a luxury market that’s used to the latest iDevices and conveniences. It’s going to take a total digital overhaul to restore their brand, and buyers capable of such an overhaul will be hard to get.”

But Craig Sundstrom, CFO of Weisner Steel, believes the issues are primarily financial rather than operational: “‘Faltering performance’? It sounds like the comps are pretty typical for a retailer these days. The real problem is the inability to pay down debt from — wait for it — a leveraged buyout…the last thing they need is another one.”



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