The main street entrance of Neiman Marcus in downtown Dallas on April 12, 2016. (Rose Baca/The Dallas Morning News)
It’s been a bumpy few months for Dallas-based luxury retailer Neiman Marcus. Longtime leaders in the company have left, following a layoff in October. Sales have declined in two consecutive quarters, including the key Christmas season. An initial public offering of stock that would raise cash has been on hold for months. And rumors swirl that the company could be sold again.
Hasn’t Neiman’s been here before?
While these developments might spell a rapid decline for any other retailer, Neiman Marcus has survived multiple owners and multiple downturns dating back to 1907. Whenever luxury retail is struggling, Neiman Marcus has been able to maintain its unique place.
The retailer has kept up with online and mobile shopping tools, staying as nimble as its disrupting online-only competitors. As designers go directly to customers with their own boutiques, Neiman Marcus is still regarded as the leading edge for fashion.
But it’s not clear what the future holds in an environment where demographics and a weakened global economy make selling luxury goods more of a challenge.
Neiman Marcus sales reached $5.1 billion in its most recent year ended in July. It operates 42 Neiman Marcus stores, two Bergdorf Goodman, 43 Last Call clearance centers, five Cusp contemporary fashion stores targeting younger shoppers, one MyTheresa store in Munich and the Horchow home furnishings catalog.
For more than a century, Neiman Marcus has not only given Dallas its fashion cachet, it’s also been the catalyst for growth of a large number of local businesses. So a faltering Neiman’s could have ripple effects far from its downtown flagship store.
Karen Katz, CEO Neiman Marcus (Courtesy photo)
Pile on
CEO Karen Katz, in her 30-year career at Neiman Marcus, has been a part the chain, a part of the team that has led the company, which has been sold twice in the last 10 years, out of some tough times before including the Great Recession when sales declined 25 percent.
Recent departures include vice chairman Jim Skinner and vice president over store design Ignaz Gorischek. Chief marketing officer Wanda Gierhart has announced plans to leave.
It’s an awkward narrative, but some departures are a coincidence and the IPO window last August was opportunistic when Neiman Marcus first filed to go public, analysts said. What analysts agree on: it needs a better growth story to take to potential investors. That’s the hard part. There are only so many markets that can sustain a Neiman Marcus store.
The handbag department at Neiman Marcus in downtown Dallas on April 12, 2016. (Rose Baca/The Dallas Morning News)
“Neiman Marcus is the best in class, well-regarded retailer in a commanding position,” said Christina Boni senior analyst at Moody’s Investors Service. “Sure the luxury market is in a challenging time right now, but it should ultimately improve and with a different backdrop it can grow cash flow and reduce debt again.”
Katz is sticking to plans to cut costs in order to continue to spend money to grow the company.
Neiman Marcus store under construction in Hudson Yards on the Far West Side of New York, which will occupy floors five through seven. The store, to open in 2018.
A new store opened in Long Island in February. Another one is the works for a fall 2018 opening in Manhattan’s new Hudson Yards development. One of its oldest local stores, opened in Fort Worth in 1977, is moving next year from Ridgmar Mall to a new shopping center under construction just south of downtown and Fort Worth’s cultural district. Major remodels have been completed on Michigan Ave. in Chicago and are in the works at Bergdorf Goodman in New York City and Neiman Marcus stores in Beverly Hills, Boston, Houston and Palo Alto. A refresh of the first floor of the downtown Dallas store was just completed.
The last phase of back office systems changes that cost $100 million and are designed to merge all the company’s merchandise onto the same platform, a program it in internally calls NMG One, is expected to be done later this year.
External issues
But the company is facing several factors out of its control.
The decline in oil prices was bigger than expected, leaving its seven Texas stores more vulnerable to weak demand from customers who depend on the oil patch for their incomes.