January 19, 2022
👋 Good morning, Retail readers! Richard Collings here with the first edition of this Axios Pro newsletter. We'll cover a range of deal news across the retail sector and bring you smart, informed analysis every weekday. And we'll have some fun while we do it.
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Situational awareness: "Peloton hires McKinsey to review cost structure; cycle maker may cut jobs, close stores." (CNBC)
1 big thing: Neiman Marcus invests in the future
Neiman Marcus has access to $1 billion–$2 billion in liquidity and plans to spend $600 million on capex over the next three years, CEO Geoffroy van Raemdonck tells me.
Why it matters: Putting the cash toward reinvestment rather than paying a dividend shows the belief in the business by its management team and its investors, led by Pacific Investment Management Co. (PIMCO).
Flashback: The luxury banner emerged from bankruptcy in September 2020 with a new set of owners that, in addition to PIMCO, include Davidson Kempner Capital Management, Sixth Street Partners and J.P. Morgan Asset Management.
By the numbers: The department store operator will invest $100 million into supply chain capabilities, he said. In addition...
- It will also spend $250 million into refreshing its physical locations, which include 37 namesake stores and two Bergdorf Goodman locations.
- And, invest another $200 million on bolstering its digital offering, including putting that money toward machine learning.
The latest: The CEO reiterated Neiman Marcus' stance that it does not plan to split off or sell its e-commerce operations, or its Bergdorf Goodman banner.
- "Customers who shop across channels are worth much more," he said, meaning they're more valuable to the singular company than they are if they were spread across separate divisions.
A banker raised these questions with me: If Neiman Marcus were to separate e-commerce, what would be left of the business? And how would the owners of the private company manage the exit of a broken-up business?
My thought bubble: Neiman Marcus could still study the value of splitting off e-commerce and then share those findings to market the business as part of a dual-track process.
What we're watching: When the company emerged from bankruptcy, the thinking was its backers would seek a liquidity event within roughly 18 to 24 months.
- That would place an exit sometime between March and September of this year.
- Van Raemdonck declined to comment on the exit's timing. He also declined to address whether Neiman Marcus has or is working with a financial adviser or conducted a study of splitting up the business.