Neiman Marcus Puts Itself Up for Sale As Business Shrivels
Pricey clothes and shoes aren’t the only things for sale at Neiman Marcus now.
The luxury department store chain, reporting its sixth straight quarter of declining comparable sales, on Tuesday said it was putting itself for sale, one a number of “strategic alternatives” it is exploring as it looks to fix its struggling business.
The Wall Street Journal reported on Tuesday that one potential bidder to step up is Hudson’s Bay Co, (HBC) the owner of Neiman’s main rival, Saks Fifth Avenue (which it bought in 2013) and a conglomerate that had reportedly been interested in taking over the much larger rival Macy’s. (M).
Hudson’s Bay declined to comment on the report but allowed that it does “selectively evaluate opportunities.”
Neiman Marcus, which also runs the 27-store discount “Last Call” chain and Bergdorf Goodman, said comparable sales fell 6.8% during the crucial holiday quarter, hurt by what it has called lower shopper loyalty and by a bungled tech systems migration that has wreaked havoc with its e-commerce. (Saks and Nordstrom (JAN) have also reported soft business in their full service department stores, but not to the same extent.)
Neiman Marcus Group CEO Karen Katz, reading a script on a conference call but not taking questions from investors, re-iterated some of the problems that are decimating the retailer’s sales: shoppers have become far less loyal, in large part because of the ease of internet shopping and price comparisons, and want to buy items when they see them on a runway, rather than wait for months. The strong U.S. dollar is also pinching sales.
“More and more, we’re seeing our customers shop multiple stores and web sites, not just ours,” Katz said.
The retailer withdrew its application to become listed on a public stock exchange in January, 17 months after first filing the paperwork, stoking concerns it would probably only fetch bargain basement prices for its shares. Neiman is owned by private-equity firm Ares Management and Canada Pension Plan Investment Board, which paid about a high $6 billion price in 2013, when Neiman was far healthier.
And Neiman is saddled with $5 billion in debt. (Standard & Poor’s recently downgraded Neiman’s debt saying “the company’s capital structure is unsustainable over the long term.”) The company said there was no guarantee a sale would occur nor would it give a timeline for a transaction or other alternative.
In its second fiscal quarter, Neiman reported total revenues of $1.4 billion, down 6.1% compared to a year earlier. The retailer reported a net loss of $117.1 million for the quarter compared to net earnings of $7.9 million last year.
HBC owns iconic department stores like Saks, Lord & Taylor and Canada’s Hudson’s Bay, all of which own highly valuable real estate in city centers like New York City and Toronto, so it is easy to see how the company could be tempted by the Bergdorf trophy, along with Neiman’s stores in markets like Beverly Hills, San Francisco’s Union Square and Dallas.