Neiman Marcus confident in exit options
In the wake of reports that it was for sale, Neiman Marcus saw inbound interest both from the public market and financial buyers, a source close to the situation tells Axios.
Why it matters: The overtures give the Dallas-based luxury retailer confidence that it will have a robust sale process, the source says.
Of note: The retailer includes an IPO as well as a sale among its exit options, and a best-case strategy likely involves a dual-track process, the source says,
Yes, but: Market conditions and valuations aren't ideal — and with $1 billion in liquidity, Neiman Marcus isn't in a rush to exit, the source says.
By the numbers: Revenue overall was flat or down slightly, which in part reflects a decrease in luxury spending broadly, the source says.
- While Neiman was still profitable in its most recent fiscal year, which ended July 29, the profit margin was in the mid-single digit rather than in the double digits, the source says.
- A financial source said that EBITDA had declined to $240 million from $400 million.
- It was previously reported that the retailer had about $5 billion in GMV and $495 million in adjusted EBITDA last year.
Flashback: In the years leading up to the pandemic, the luxury retailer strained under some $4 billion in debt.
- That prevented it from reinvesting in the business, namely digital and store renovations while trying to fend off increasing competition.
Between the lines: Rumors have swirled for years that Neiman Marcus could merge with or be acquired by Saks and its owner, Hudson's Bay.
- It's a storyline recently rehashed by the New York Post, which also reported months prior that the company was looking to sell its New York banner, Bergdorf Goodman.
- A third source familiar with Neiman Marcus' thinking says sale options are discussed at the board level with the retailer's investment banker JPMorgan out of a fiduciary duty, but that's the extent.
- It's possible one of the minority shareholders — either Sixth Street, Davidson Kempner, or Farfetch — may be agitating for some deal, the source says.
- There are likely more than one or two potential buyers, including Hudson's Bay, looking to acquire Neiman Marcus at a discount, the source adds.
The big picture: It will be hard to predict how consumers will behave this holiday season, the source says.
- On the one hand, employment remains strong and consumer spending is up.
- On the other, geopolitical and macro events could negatively impact shoppers' mindsets, such as the Israel-Hamas war.
Neiman Marcus and Pacific Investment Management Co. declined to comment. Sixth Street and Davidson Kempner did not immediately respond to a request for comment.