Neiman Marcus reportedly cutting 225 jobs
Neiman Marcus said on Wednesday that it will eliminate 225 jobs as part of its ongoing reorganization effort, according to the Dallas Morning News. A company spokesperson confirmed that in an email to Retail Dive on Thursday, saying, in part: "[W]e are streamlining our operations to complement our strategic focus. This has resulted in the elimination, re-organizations or regionalization of approximately 225 positions across all brands and operating divisions. Employees affected by these changes have been offered severance packages and will be considered for other Neiman Marcus Group job openings."
The struggling department store chain has also ended efforts to sell itself, according to the report. Canadian department store company Hudson's Bay, which already owns Lord & Taylor and Saks Fifth Avenue in addition to its flagship stores, was in talks about a takeover until June.
As it continues to stem falling sales, the company has begun to scrutinize the size of its Last Call off-price fleet. "We are also assessing our Last Call portfolio to optimize our store footprint and ensure we have the right mix of brick and mortar and online stores to meet our customers’ evolving demands," the Neiman Marcus spokesperson said.
Neiman Marcus’ nearly $5 billion debt burden (and counting) has added to the woes of the declining luxury department store. "Neiman is a walking death march," Howard Davidowitz, chairman of New York City-based retail consulting and investment banking firm Davidowitz & Associates told Retail Dive about its debt troubles. "That is what happens when private equity takes over. As long as you’ve got money you have the time to fix your problems, you have the luxury to fix things. If you don’t have money but you have debt instead, you’re in the realm of divine intervention."
As it mulled a purchase of the upscale department store, Hudson's Bay, which has about $2.4 billion of debt of its own, had hoped to avoid taking on Neiman Marcus' full debt load but little progress was ever made on the deal. The debt has interfered with its efforts to restructure and possibly sell itself, and prompted GlobalData Retail Managing Director Neil Saunders late last year to warn that debt levels were "completely unsustainable."
"Indeed, even if all interest was frozen and the entirety of operating profit was to be directed to the purpose of paying down the debt, it would take well over 40 years to remove it from the balance sheet," Saunders said in a note emailed to Retail Dive. "Such a position underlines the fragile nature of the company’s finances, something that hits home when the $72 million quarterly interest payments are appreciated. This acts as a major barrier to the company being sold and makes an IPO far less attractive. It also guarantees that without a significant rise in sales, the company will remain loss-making."
Despite mounting debt, Neiman Marcus doesn’t have any major debt maturity until October of 2020 and retains significant brand equity, Debtwire retail analyst Philip Emma told Retail Dive in May, saying that that gives the company some time for a sale. It appears now that time has run out.
Neiman Marcus has scrambled to catch up with changing shopper priorities and beat back against the headwinds hitting department stores, which are having particular difficulty maintaining consumer interest. However, as it contended with massive debt, the upscale retailer in the new year ditched its longstanding plans for a return to Wall Street trading and in June lost its interim chief financial officer and chief operating officer Michael Fung after just seven months.
CEO and President Karen Katz said in June that the company was "prudently investing" in its stores and online business, and saw "positive signs" in the company's financials. Still, Neiman saw margins shrink during its third quarter as it discounted merchandise in the face of competition and declining demand. The luxury department store retailer logged a net loss of $24.9 million in the quarter ended April 29, as compared to net earnings of $3.8 million in the year-ago period, according to a company press release. Sales fell 4.9% to $1.1 billion and same-store sales decreased 4.9% during the quarter, as adjusted interest, tax, depreciation and amortization (EBITDA) fell 21.5% from the year-ago period to $135.9 million in the third quarter.
But a spokesperson on Thursday told Retail Dive that Neiman Marcus Group is committed to being the clear leader in high-end luxury retail, both in stores and online."
That, according to the company's statement, will be "driven by digital performance and analytics that enable us to deliver a highly personalized shopping experience to our customers across channels. To better align our operations and team with our business strategy, we regularly evaluate all aspects of our business to determine when and where changes make the most sense for our customers and our company."
- Dallas Morning News Neiman Marcus to cut 225 jobs, assess Last Call's future
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