Commentary

Neiman Marcus May Ride High-End Surge To IPO

In a sign that prospects for the luxury market are rosy as a $3,495 Embroidered Feather-Skirt Dress, Neiman Marcus said yesterday it wants to raise $100 million or more in an initial public offering that some observers say had been delayed as its customers fended off the recession just like everybody else. 

Euromonitor research data show that the global luxury goods industry has grown an average of 4.2% a year since 2005, and it is expected to increase 7.2% a year from 2012 to 2017, Tiffany Hsu reports in the Los Angeles Times.

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“Today, wealthy consumers are more confident about the direction of the economy. They have room in their budgets for luxury purchases,” Proper Insights & Analytics retail analyst Pam Goodfellow tells the Dallas Morning News’ Maria Halkias.

“No other retailer commands the respect or admiration of a Neiman Marcus,” Mike Moriarty, A.T. Kearney retail practice partner tells Halkias. “The next eight years are going to be better than the last eight, and that’s good for Neiman Marcus.”

“In its filing with the Securities and Exchange Commission, Neiman Marcus said it has been riding a surge of high-end shopping,” Hsu writes. “In its 2012 fiscal year, it reported revenue of $4.4 billion, up from $4 billion a year earlier. Its profit during the period also increased to $140.1 million from $31.6 million.”

Writing for Motley Fool, a more cautionary Andrew Marder points out that some analysts see weakness in the luxury market “brought on by a change in the way people view fashion or possibly by changing economic winds in China. Either way, Neiman Marcus will need to reassess the way it works within the department store space.” 

Although he sees Nordstrom’s as “further toward Macy’s than it is toward Neiman Marcus,” he says it is the main competitor to NM. “Nordstrom has spent a small fortune making its store more dynamic, by adding mobile checkout counters and updating its website for smartphones to advance its omnichannel plans,” he points out.

Earlier this month, the company reported that fiscal third-quarter earnings were up 13%, reflecting continued sales growth. “In the specialty-retail-stores segment [that] represents 78% of the top line, sales were up 1%. At its online business, revenue climbed 15%,” Tess Stynes reported in the Wall Street Journal.

The Neiman Marcus Group is comprised of the specialty retail stores division, which includes 41 Neiman Marcus stores across the U.S. and two Bergdorf Goodman stores in Manhattan, as well as an online division, which conducts both print catalog and online operations under the Neiman Marcus, Horchow, Bergdorf Goodman and Last Call brand names, according to the company.

The company was founded in Dallas is 1907 by Herbert Marcus, Sr., his sister, Carrie Marcus Neiman, and her husband, A. L. Neiman. Stanley Marcus, Herbert’s son, ran the show as president or chairman from 1950 to 1976 and “transformed a local Dallas clothing store into an international brand synonymous with high style, fashion and gracious service,” as the citation for his induction into the Advertising Hall of Fame in 1999 reads.  

The Neiman Marcus Group was formed in 1987 in connection with the sales of the company and restructuring of Carter Hawley Hale Stores, Inc. As part of that deal, Harcourt General obtained a significant equity ownership, which was spun off by Harcourt General to its shareholders in October 1999. It was again taken private in 2005 by private equity firms TPG Capital and Warburg Pincus in a $5.1-billion leveraged buyout.

The IPO registration may signal little more than Neiman Marcus’ desire to keep its options open, Reuters’ Phil Wahba reports. “Private equity-owned companies routinely try to sell themselves to other companies or funds while they are also preparing for an IPO in a practice referred to by investment bankers as ‘dual-track.’”

There were informal discussions last month about selling Neiman Marcus to Kohlberg Kravis Roberts & Co., which then would also buy Saks and merge the two, Fortune’s Dan Primack blogs. And he offers “two important caveats” to yesterday’s news. “1) This doesn’t necessarily mean that the Dallas-based company will go public; 2) And if Neiman Marcus does go public, it is highly unlikely to raise as little as $100 million.” 

But if it does go public, look for it to do something like SeaWorld Entertainment, “which filed for a $100 million IPO before ultimately raising more than $700 million,” Primack ventures.

Meanwhile, sources tell the New York Times’ Michael J. de la Merced and Peter Lattman that Hudson’s Bay, “the owner of Lord & Taylor, is exploring a potential bid for Saks.” They observe that the two deals-in-the-making “highlight how the market for Chanel dresses and Louis Vuitton handbags has stayed strong, despite the financial crisis.”

So are the rich really different from you and me? Or are they just richer?

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