The CEO of Dallas-based Neiman Marcus confirmed in a Tuesday morning conference call that the 110-year-old luxury retailer, faced with declining sales and billions in debt, is considering searching for a buyer to come to its rescue.
"People are consistently shopping less at malls and Neiman Marcus is primarily a mall-based retailer and there's simply less traffic,” said SMU Cox School of Business professor Ed Fox. "And so Neiman Marcus like most mall-based retailers is feeling that pinch."
That pinch includes a 6.1 percent decline in holiday sales and roughly $5 billion in debt. In comments this morning Neiman Marcus CEO Karen Katz concluded that a sale is among the options on the table.
"As indicated in our earnings release earlier today, we are undertaking a process to explore and evaluate potential strategic alternatives, which may include the sale of the company or other assets or other initiatives to optimize our capital structure as well as a number of other alternatives,” Katz said.
"From the perspective of their balance sheet, they owe a lot of money,” said SMU’s Ed Fox. “And they have to service that debt. And at some point, they're going to need help to service that debt because they can't take it up out of operating earnings."
"There have always been talks that Neiman is going to change hands again,” said Korri Kezar, a reporter and retail industry specialist with the Dallas Business Journal. Meanwhile the Wall Street Journal openly predicted a potential buyer is Canada-based Hudson’s Bay Company which already owns luxury retailer Saks Fifth Avenue.
“That would be a very interesting acquisition because Hudson’s Bay owns Saks Fifth Avenue,” said Kezar. “So that acquisition would put two big juggernauts in the luxury retail industry really close together."
A luxury retail industry, just like the rest of mall-based businesses, trying to find the right mix between brick and mortar stores while more and more people choose to shop – and compare prices – online.
"Brick and mortar will probably always be a part of what they offer,” said Kezar. “But digital has to be a pivotal part of what they do as well."
"From my perspective, the bigger issue is they're in a declining business,” added Fox. “And that business is going to shake out."
The question to be answered in the months ahead is who is who will be left after that shake out, and in what retail form, as Neiman Marcus enters its 111th year.
After a leveraged buyout in 2005 and then a sale in 2013, Neiman Marcus is currently owned 50/50 by Ares Management and the Canadian Pension Plan Investment Board.