In an era where the retail landscape is rapidly evolving, Dallas-based luxury retail department store chain, Neiman Marcus, is once again the subject of Wall Street speculation. Reports have emerged that the luxury retailer, which has been sold three times in the past 15 years, may be considering a sale to Toronto-based Hudson’s Bay, the parent company of Saks Fifth Avenue. This narrative is not new, as rumors have been swirling about the future of the company and potential sales of its brands, including Bergdorf Goodman. However, the retailer has remained tight-lipped, stating that it does not comment on rumors and speculation.
Neiman Marcus, a significant player in the luxury retail sector, has been through a series of financial ups and downs, including bankruptcy reorganization in 2020 due to the burdensome debt from two leveraged buyouts and the uncertainty of the pandemic. However, the retailer has bounced back, remaining profitable despite a moderation in business since the pandemic’s luxury boom. The company’s ownership is currently held by some of the world’s largest asset management companies, hedge funds, and private equity firms, including PIMCO, Davidson Kempner Capital, and Sixth Street. The question now is: Can Neiman Marcus navigate another sale, and what would this mean for the luxury retail landscape?
Speculations Surround Possible Sale of Luxury Retailer Neiman Marcus
Who’s in the Running?
According to a recent report by The New York Post, luxury department store chain Neiman Marcus may be considering a sale to Toronto-based Hudson’s Bay, parent company of Saks Fifth Avenue. The speculation follows a period of apparent disunity among the three owners of the Dallas-based retailer. These rumors have not been confirmed by any other publications to date, and the Neiman Marcus spokesperson has declined to comment on such speculations.
The Company’s Acquisition History
The renowned retail chain has been sold thrice in the past 15 years, with each sale being marked by significant leveraged buyouts. The most recent sale occurred in late 2020 during its bankruptcy reorganization, with the buying price being a whopping $6 billion. The retailer’s past leveraged buyouts, coupled with the uncertainty brought about by the pandemic, had led to its bankruptcy.
It’s important to note that Neiman Marcus is currently owned by some of the world’s largest asset management companies, hedge funds, and private equity firms, including PIMCO, Davidson Kempner Capital, and Sixth Street. Additionally, London-based Farfetch made a minority equity investment of $200 million in Neiman Marcus Group in May 2022.
Performance Amid Pandemic
Despite the challenges of the pandemic, the luxury retailer has managed to stay profitable. While sales and profits in the most recent fiscal third quarter remain above those of 2019, they are down from fiscal 2022. However, its balance sheet has improved significantly since its bankruptcy. In March 2021, the company issued $1 billion in senior secured notes due in 2026 to refinance its bankruptcy exit debt, providing the company with the capacity for an additional $1.23 billion in secured debt.
When it comes to the retail market, Neiman Marcus and Saks Fifth Avenue are direct competitors. Both companies have been privately held for several years. Based on estimates, Neiman Marcus is approximately twice as large as the Saks Fifth Avenue store division in terms of revenue. Their store real estate overlaps in major US cities, with the exception of Dallas-Fort Worth where Saks Fifth Avenue doesn’t have a full-line store.
Neiman Marcus’ online business has historically accounted for more than 30% of total sales. On the other hand, Saks has spun off its e-commerce business as a standalone company.
While the prospect of Neiman Marcus being purchased by Hudson’s Bay is purely speculative at this point, the potential sale could have a significant impact on the luxury retail landscape. The retailer’s past financial struggles and its recent recovery show its resilience in a volatile market. If the sale does go through, the consolidation could lead to a reshaping of the luxury department store sector. However, given the company’s size and the potential complexities involved in such a deal, any potential sale is likely to be a complex and lengthy process.