Luxury retailer Neiman Marcus is making small but mighty strides as it works toward transforming a debt-saddled business hurt by digital shifts and a more price-conscious customer, according to CEO Geoffroy van Raemdonck.
The beleaguered high-end department store on Thursday reported flat year-over-year revenues of $1.1 billion but saw comparable sales climb 2.8 percent — eking out a pattern of five consecutive comp gains. Still, just ahead of the all-important holiday shopping season, Neiman Marcus widened its losses to $28.2 million, from $26.2 million in the year-ago quarter. (The department store reported results for the 13-week period ended Oct. 27.)
Despite the mixed finish, van Raemdonck said the results “demonstrate the ongoing stabilization of [the] business,” which made both online and in-store advances — with sales at the former up 8.9 percent and the latter experiencing “positive store performance.”
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Van Raemdonck also told investors during Thursday’s conference call that he was “pleased” that new customer growth for the Neiman Marcus banner was up 5 percent.
Still, he noted the increasingly discount-laden nature of the luxury sector — a change bolstered, in part, by progressively price-conscious millennial and Gen Z customers who scour the internet for low prices on comparable wares — has compelled the firm to retool its business. (Neiman Marcus’ former, longtime exec and CEO Karen Katz, who exited the firm this year, had also previously blamed a spree of soft performances at the store on lower oil prices that hurt its luxury clientele.)
“The luxury retail industry continues to adopt an increasingly promotional approach to attract customers that includes both expanded existing promotions and additional promotions,” he said. “During the first quarter, we responded to the industry shift by increasing our competitiveness with promotional activity while still maintaining healthy margin control through our efforts in markdown optimization.”
The company — owner of Bergdorf Goodman and MyTheresa — said its gross margin for the quarter was 36.6 percent. On an adjusted basis, margins held steady at 37.2 percent, flat to last year.
“We remain focused on the quality of sales and driving full-price selling,” addedvan Raemdonck.
Despite the seemingly positive outlook the firm is taking post-Q1, some industry insiders remain sidelined about whether Neiman Marcus can truly stabilize its business without appropriately addressing its heavy debt load stemming from a $6 billion leveraged buyout by Ares Management and the Canada Pension Plan Investment Board in 2013.
“Neiman Marcus Group has been in discussions with our lenders and investors to improve our balance sheet and strengthen NMG as a company,” van Raemdonck told investors Thursday. “These discussions formally commenced only recently — at which times it was agreed lenders would become unrestricted if we didn’t reach an agreement at this particular stage. We view these negotiations as an ongoing process that will likely take time. We commenced this process early and believe we have ample runway to address our debt. We believe a mutually beneficial solution can be reached and intend to continue to seek a result that will benefit the company and its stakeholders.”
For now, as it works on cleaning up its balance sheet, the Neiman Marcus chief said the goal is “to deepen our customer relationships, build a seamless experience and create the magic for our customers — we are making incremental investments in these areas.”
“The key to driving our business forward is fostering a culture of talent, performance and innovation,” he added.
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