Neiman Marcus Earnings Call: Real Softness in a Couple of Texas Stores

Their clothing and shoes (and jewelry! yes jewelry!) make us happy, but a little doom and gloom is hanging over Neiman Marcus after the retailer’s Tuesday morning earnings call this week. And if you are in the business of pushing luxury products, like million dollar homes or vacation homes, you pay attention. The take-aways: it’s been a challenging Q2, lowest oil prices in a decade definitely impacted Texas, home to Neiman’s largest volume stores, and more of their customers are turning to the internet to shop. Other factors that kept people from spending and challenged holidays sales were the skiddish stock market and strong U.S. dollar limiting international tourists in key store markets.

First of all, Neiman’s fiscal year ends in July. The company has been struggling. In October, Neimans announced layoffs for 500 employees, or 3 percent of its workforce.

Also in October, Neimans said it would delay the initial public offering it filed for in August, 2015.

For the all important 13 week period that ended Jan. 30, which includes the shop-rich cha-ching Christmas shopping season, Neimans experienced a 2.3 percent dip in revenue. Cyber Monday shopping on November 30, their highest volume day, was 9% higher than 2014. And when comparing fiscal 2015 to recent sales for the first half of this fiscal year, things are looking down. The company reported total revenues of $2.65 billion for the 26 weeks ended Jan. 30,  a 2.1 percent decrease over fiscal 2015. Clearly, low oil prices are taking their toll on the luxury shopper’s paradise.

But there are other forces at work here, too. Shopping trends have changed — while consumers still prefer to buy items in stores rather than order (and return them, sigh) over the internet and receive by mail. Forty percent of consumers make purchases inside a physical store at least once a week, compared to just 27 percent who do the same online. Shoppers today are buying different things — more experiences, brands and innovative products:

The current retail environment is being driven by income bifurcation, demographic transitions, and evolving purchasing behaviors from technological advances. While the majority of consumers will likely spend the same or slightly more this holiday season compared to last year, the “survivalists” (shoppers with household incomes less than $50,000 per year) continue to face a challenging economic environment and have indicated that they will be spending less. Coupled with the fact that millennials – which represent 75 million people – are now a major force in the consumer markets and spending a larger share of their holiday dollars on experience-related purchases, and selectionists (shoppers with household incomes more than $50,000 per year) have a greater interest in distinctive brands and innovative products.

Karen Katz, President and CEO, even said that 30% of the total Neiman Marcus group sales came from online. The largest single transaction: a necklace purchase that was initiated on Neimans.com.

One of the bankers asked specifically how oil prices have affected sales, and Katz said that they have real softness in a couple of Texas stores. She said that while they don’t break out comps for individual stores, Houston was called out as one where customers had definitely pulled back.

However, Neimans is finishing up its shining new Clear Forks store in Fort Worth, so the message was yeah, little slowdown. Bergdorf Goodman’s jewelry department is apparently killing it, and I think someone said midwest sales were strong.

Neiman’s is weathering the storm, hopefully in a very chic Burberry coat.