Neiman Marcus Group warned today that its sales suffered during March, and that this could result in flat yearly earnings and increased cost reductions.
The one bright spot-and it isn't a big one-is that the retail giant's catalogs performed well during the five-week period that ended March 31. Otherwise, the firm suffered a nasty decline in revenue.
Comparable revenue decreased overall by 4.7%, compared with a 16.3% increase during the same period last year, said Burton Tanksy, president and chief operating officer, speaking during a conference call today.
"We started the first week with a strong response to our beauty event," said Tansky, who takes over as CEO on May 15. "But sales fell well below plan for the remainder of the month for Neiman Marcus and Bergdorf Goodman."
Specifically, comparable revenue for Neiman Marcus stores declined by 8.2%, compared with a 11.4% gain during the same period last year. Bergdorf Goodman experienced a 3.9% decrease, compared with a 35% rise in 2000.
In contrast, comparable revenue rose by 9.5% for Neiman Marcus Direct, compared with a 23% increase a year ago. Neiman by Mail and Chef's Catalog had modest gains. Horchow, the venerable home furnishings catalog, increased sales by 20%.
But the gains may have been illusory. For one thing, some catalogs mailed in February hit in March, as did some books that are normally mailed in April. The gains may also reflect a general upturn for the previously sleepy Horchow catalog, one outside observer said.
Why didn't the catalog performance put the company over the top? Sheer scale. Catalog sales totaled $364 million last year, compared with $5 billion for the entire business, according to Neiman Marcus spokesperon Jonna Kanes.
Meanwhile, the firm expects third-quarter comparable revenues to decline by one to three percent, and for more business shifts into the fourth quarter, which is primarily a time for clearance.
In response to these conditions, Neiman Marcus plans to seek additional cost reductions over the $16 million it has already cut this year, Tansky continued. The plan is to reduce operating expenses so that the firm can plan more conservative top-of-line growth in fiscal 2002 and still deliver earinings growth. The cuts will primarily hit non-selling expenses.
Tansky also said there may be personnel cuts, but these may take the form of a hiring freeze, according to Kanes.,p> "We're looking at every category," Tansky said.,p> And the products?
Sales of cosmetics and fragrances were up by double digits in the stores, but "these [sales[ reflected a five-day beauty event in March," Tansky said. "There were weaknesses in all major categories other than that."
On the mail order side, there were double-digit gains in sales of bath linens and table-top merchandise. Ready-to-wear sales also jumped, following a soft period.
Some European designers were late in delivering merchandise.
Tansky acknowledged that store traffic was lighter in March than it had been a year ago. This may have been partly due to the "worst weather nationwide in ten years.," but it also was caused by fears about an economic downturn.
"Some of this is real, and some of it is clearly psychological," Tansky said. "Certainly, the affluent consumer has the wherewithal to shop, and is shopping."
The trouble is that these shoppers "seem to be buying less," Tansky continued. "This ties back to "psychology of the market and environment. We're convinced they could snap out of this very, very quickly."
