There are other concerns. The memorandum notes that NMG has 22 stores in cities in California, Florida and New York that typically host a large number of international travelers. But international tourism has dropped to almost zero due to the pandemic, although the situation could change with an effective global rollout of COVID-19 vaccines.
In addition, Neiman’s stated that “recent fluctuations in the strength of the dollar against other international currencies, including the euro, have affected and may continue to affect the willingness of tourists and other non-US customers to purchase luxury merchandise in our stores in those [four] states like a stronger dollar relative to their local currencies makes our merchandise more expensive for them in relative terms.
Another problem lies with some of the major designer brand partners that have or are considering converting from wholesale deals to concessions. In the concession model, the designer brand markets its boutiques in stores and pays Neiman’s a predetermined percentage of the revenue.
“While such conversions have not had a significant impact on our revenue and profitability in prior periods, we expect the impact to increase in the short term,” Neiman’s says in the memo. “If not offset by initiatives currently underway, these conversions, taken together, are expected to negatively affect our revenues, earnings and profitability. If the designers who represent a significant portion of our sourcing were converted to concession agreements and we were unable to offset the related impact, the effects of these conversions could be significant. ” Gucci and Chanel are among the top brands that operate concessions in department stores.
According to the memorandum, for the fiscal year ending August 30, Neiman’s lost $ 2.47 billion, compared to the loss of $ 531.7 million in the prior fiscal year.
For the six months ended January 30, 2021, Neiman’s lost $ 1.83 billion compared to a loss of $ 194.4 million in the prior year period. In the 12 months through January 2021, Neiman’s lost $ 446.6 million.
Adjusted EBITDA reached $ 51.2 million in the fiscal year ending August 30, compared to $ 436.3 million in the prior fiscal year. During the six months through January 2021, Adjusted EBITDA was $ 84.7 million versus $ 257.1 million in the same period last year. During the 12 months through January 2021, the adjusted loss was $ 121.2 million.
On the revenue side, online sales declined 6 percent during the six months ended January 30, 2021 and 4.1 percent during the 12 months through January 30, 2021.
Store sales were down 33.6 percent during the six months ending January 30, 2021 and 47.3 percent during the 12 months through January 2021.
For the fiscal year ending August 1, NMG’s total revenue was $ 3.65 billion, compared to $ 4.66 billion the previous year.
For the six months ended January 30, 2021, Neiman’s total revenue was $ 1.63 billion, up from $ 2.42 billion in the prior year period. And during the 12 months through January 30, NMG generated $ 2.86 billion in revenue, with 44 percent of sales generated by the online channel.
Interest expense amounted to $ 375.7 million in the fiscal year ended August 30, 2020. During the 12 months through January 2021, there was $ 219.8 million in interest expense.
As of January 30, 2021, NMG inventories fell more than 37 percent overall and 24 percent on a comparable basis from fiscal 2020.
NMG currently has 37 Neiman Marcus stores, two Bergdorf Goodman stores and five Last Call units. The memo reiterates what the retailer’s executives have stressed: that after bankruptcy, the remaining fleet is “particularly well positioned and smart investments are being made to continue optimizing the in-store experience.” Neiman executives have been working hard to gain ground in e-commerce, launching new technologies and virtual events with designers to encourage online shopping, but the memo shows declines in e-commerce. Earlier this year, the company said $ 85 million will be invested in supply chain innovation, specifically systems and fulfillment centers. NMG is implementing a new order management system, a new warehousing system and investments at the company’s Pinnacle Park distribution facility in Dallas.
Neiman’s plans to renovate eight stores, including the Bal Harbor Shops in Miami and the Tysons Galleria in McLean, Va., Using about $ 110 million in capital expenditures contributed by developers. In connection with Chapter 11, five Neiman Marcus stores and 17 Last Call stores were closed.
If Neiman’s can’t handle its debt through cash flow, it could sell assets. In the past, there has been speculation about the sale of Bergdorf Goodman, but that is the ‘jewel in the crown’ of NMG, which sees’ a huge growth track at Bergdorf Goodman on the online channel, with early testing points of success in digital ».
The collateral securing the notes will include “substantially” all of the retailer-owned and land-leased stores, including 17 mall stores and three urban locations, which were not specified. A third-party broker valued the properties at around $ 650 million, of which about 54 percent is attributed to urban properties. Of the value attributed to the 17 properties in the mall, 80 percent are in malls rated “A ++” and “A +.”
Excluding expenses and working capital requirements related to the reorganization, free cash flow was $ 150 million in the second quarter of fiscal 2021 and $ 134.9 million in fiscal 2021, representing a improvement of $ 39.7 million compared to the second quarter of the fiscal year. 2020 and $ 112.2 million compared to fiscal 2020 to date as a result of expense and cash management and lower levels of capital investments.
The memo also reveals that NMG spent $ 17.2 million in April 2019 for a minority stake in Fashionphile Group, an e-commerce company focused on luxury second-hand bags and accessories.
The memo also states:
• Approximately 78 percent of NMG clients are women, approximately 64 percent of clients have an annual family income of more than $ 250,000, and approximately 30 percent of clients have a family net worth greater than $ 5. millions.
• Approximately 46 percent of Neiman’s clients are Generation X or Millennials, and are active on social media.
• About 30 percent of total US revenue in the past 12 months was generated by members of Neiman’s InCircle loyalty program who achieved reward status. These customers spend around nine times more than other customers.
• Approximately 40 percent of net sales come from customers who spend $ 10,000 or more annually.
The exterior logo of Neiman Marcus in Fort Worth, Texas. Jason voinov
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