Neiman Marcus has turned outward in its bid to strengthen a luxury retailer that is just coming out of a prolonged slump.
The Texas-based high-end department store operator confirmed on Friday a Wall Street Journal report earlier in the week that Neiman Marcus veteran Karen Katz would be stepping down next month after seven years at the helm, and be replaced by former Ralph Lauren (RL) executive Geoffroy van Raemdonck.
In tapping an outsider to lead the storied retailer, Neiman is clearly hoping to inject some new blood and ideas at a time it is struggling to compete with online retailers like Net-A-Porter as well as shoppers’ changing tastes. Neiman Marcus, which also owns the New York department store Bergdorf Goodman, last month reported its first quarter of growth in the nine preceding periods.
On Katz’ watch as CEO, a role she ascended to after more than 20 years at the company, Neiman built on its robust e-commerce business, which generated 31% of sales last fiscal year, more than similar figures at rivals like Barneys New York, Nordstrom (JWN) and HBC’s (HBC) Saks Fifth Avenue. The company bought European e-commerce company Mytheresa.com, and Neiman developed plans for its first New York City store, set to open next year.
There have also been deep problems. On conference calls in the last two years, Katz sometimes seemed bewildered by Neiman’s sales declines, pointing to factors such as what she saw a declining customer loyalty, shoppers’ growing impatience with how long it takes fashions that appear at runway shows to show up in stores, and even the oil industry’s travails. (To be fair, Neiman’s business disproportionately comes from Texas.) Neiman Marcus, which had been sold for $6 billion from one group of private equity owners (including TPG) in 2013 to another (Ares Management and the Canada Pension Plan Investment Board) filed to for an IPO in 2015 to return to the stock market but dumped that plan a year ago. The debt-laden retailer was also reportedly approached by HBC in 2017 to be acquired though no deal materialized. The company has posted losses for a number of years, including $532 million last year.
Under pressure to show growth by Neiman’s private equity owners, Katz put a lot of emphasis on the Last Call discount stores. But last year, in a reversal of that strategy, Neiman said it would close a third of those locations. Having that many outlet stores as Neiman sought to seize a rare area of growth in retail ended up diluting the amount of merchandise from the luxury stores that was available at individual Last Call stores. That meant more of the merchandise there was made specifically for the Last Call stores, disappointing many shoppers looking for real luxury at a discount. Neiman almost certainly harmed its upscale aura and fed its core shoppers’ growing appetite for bargain hunting.
Neiman also struggled to win over younger luxury shoppers to join its established customers, whose average customer is 55 years old. To that end, Katz tried inventive though small measures such as a partnership with Rent the Runway. Some collaborations under Katz, 60, proved to be busts: its collaboration in 2012 with Target (TGT), while daring, was a fiasco. More recently, she and her executives oversaw a botched integration of Neiman’s inventory systems that, while now complete, cost the retailer sales for several quarters.
So van Raemdonck, 45, who last year left Ralph Lauren as a group president, will have a lot on his table to help carve a place for itself in a quickly changing luxury world. But he’ll also be able to tap Katz’ expertise: the retiring executive will keep her board seat. At Ralph Lauren he oversaw the fashion company (also struggling with restoring its high-end aura) in Europe, Middle East and Africa. Before that, he CEO for St. John Knits following several jobs at Louis Vuitton.
That means he’ll have plenty of experience to draw from as he sets about modernizing the iconic retailer.
