BREAKING: Neiman Marcus Group May File Bankruptcy
DALLAS, TEXAS — The worldwide spread of the coronavirus caught us all off caught. It was not a way that we were able to prevent or prepare for it. It’s happened out of nowhere and spread so fast all around the world.
The pandemic affected the fashion industry a lot! Events were canceled, shows were postponed, retailers closed and even laid off some of their staffs. Now we’re hearing bankruptcy!
The Neiman Marcus Group, impacted by its heavy debt load and the coronavirus pandemic, is “evaluating all courses of action” to preserve its financial health, including a possible bankruptcy.
Neiman Marcus Group is owned by Ares Management LLC and the Canada Pension Plan Investment Board, which together bought the business for $6 billion in 2013, bringing long-term debt up to $4.46 billion.
NMG has been paying around $300 million in annual interest expense, dragging down the profitability and resulting in losses. The luxury retailer generates $5 billion in annual volume through its 43 Neiman’s stores, two Bergdorf’s stores, neimanmarcus.com, bergdorfgoodman.com, the Mytheresa.com, the Horchow direct-to-consumer business and Last Call outlets. Just last week, DM Fashion Book reported that the Neiman Marcus Group will focus on only luxury and the department store announced that it will close the majority of its 22 Last Call discount stores by early next year (see it here).
“Most businesses today are facing some degree of disruption from the unprecedented global economic environment resulting from the COVID-19 pandemic. We are evaluating all courses of action to preserve our financial strength so that we may continue serving our customers and associates, and being a great partner to luxury brands globally,” a NMG spokeswoman said Tuesday morning.
“Our priority has been and will always be to ensure stability for our associates and brand partners.”
The spokeswoman would not comment specifically on a possible bankruptcy.
Before the coronavirus outbreak, it was speculated that Neiman’s could be a headed toward bankruptcy candidate. The retailer did show some improved selling trends last year but then decided to discontinue publicly reporting its quarterly results. Bloomberg first reported Monday evening that Neiman’s is considering a possible bankruptcy but that no decision has been made.
A Neiman’s bankruptcy would be an opportune time for Hudson’s Bay Co. — operator of Saks Fifth Avenue, Saks Off 5th and Hudson’s Bay — to pursue a takeover. It’s no secret that Richard Baker, executive chairman and chief executive officer of HBC, has long been interested in combining Saks and Neiman’s to create a dominant North American luxury retailer. A bankruptcy would bring the price on Neiman’s down, though retail sources question whether Baker could raise the money required to buy NMG, considering HBC has its own operating difficulties and has been losing money, and much was spent to take the company private this month at 11 Canadian dollars a share. Baker has a track record for devising innovative financial deals and partnerships.
There’s no certainty that NMG will go bankrupt. In the event of a bankruptcy, its owners, Ares and CPPIB, would wipe out their investment in the business for pennies on the dollar.
Also, lenders are likely to be more forgiving considering the challenges created by the pandemic, and allow for more time to pay off debt and see if Neiman’s, post-pandemic, can improve business performance.
NMG, led by CEO Geoffroy van Raemdonck, is in the midst of a four-year “transformation” plan involving creating a “luxury customer platform” involving becoming more “seamlessly” multichannel, delivering new kinds of experiences and products — fashion and nonfashion — no longer being considered primarily a department store business, sharpening the focus on full-price selling, personalization and strengthening customer relationships. The plan also targets those spending less than $10,000 annually at its stores and web sites and to win over new customers, while still focused on much bigger spenders. Van Raemdonck launched the transformation plan in August 2018.
NMG has also been exploring strategic alternatives for its Mytheresa luxury website, including selling it.
Photos Credit: Courtesy of Neiman Marcus