'No excitement' at the Neiman Marcus flagship store in downtown Dallas? (Image via Dfwcre8tive)

Business

Is Neiman Marcus’ Real Problem Not Keeping Up With the Times?

It's something to consider, says a former CEO of the troubled luxury retailer, which announced it may be looking to sell itself.

Sure, Neiman Marcus president and CEO Karen Katz has had one hand tied behind her back, given the billions of dollars in debt the luxury retailer has strained under since a 2013 leveraged buyout. And, yes, consumer habits are changing fast, with some shopping less frequently and e-commerce putting the hammer down on traditional brick-and-mortar stores.

But Katz’s Dallas-based, high-end department store—which announced Tuesday that it’s exploring a number of rescue strategies, including selling the company—isn’t entirely blameless for its deteriorating situation. Some think Neiman’s has strayed too far from the customer-centric philosophy of the founding family’s Stanley Marcus, who retired in 1975. “Mr. Stanley” always insisted that the store executives get out from behind their desks and onto the selling floor, the better to learn from the shoppers.

“Neiman Marcus used to be great at that,” retailing expert Allan Questrom told business analyst David Johnson on Johnson’s CEO Spotlight show on KRLD 1080 Tuesday. “You have to ask, ‘What’s relevant to my customer today?’ It takes a lot of time and effort to do that, and the problem is [people spending] too much time in their office, not on the floor looking at the customer.”

Today’s millennial customer does not relate to Neiman Marcus or the brands it carries, Questrom went on—and that’s a big problem. In contrast to the new Forty Five Ten retail store in downtown Dallas—he called Brian Bolke’s store “of the moment”—the nearby Neiman’s flagship store is “very dated. I don’t feel like there’s any excitement going on,” said Questrom, who served as Neiman’s CEO from 1988 to 1990. In contrast to a renovated Neiman’s he just visited in Los Angeles, “if you go to the Neiman Marcus at NorthPark, it looks just like it did when I was there!” he said. “It’s got no energy at all.”

Alan Shor, president and co-chairman of The Retail Connection brokerage in Dallas, says that while department stores across the board are struggling with a shift in consumer buying habits, Neiman Marcus has “the added burden of what appears to be a tremendous debt load. Part of your cash flow has to be used to satisfy the debt obligations. That adds significantly to the cost of doing business. It makes it hard to grow or maintain your business.”

Questrom agreed about the financial strain, telling Johnson that any potential buyer—Canada’s Hudson’s Bay seemed a likely contender—would benefit from the seller having to “take a markdown on the debt, obviously, because they paid too much money for it to begin with. They bought it at the peak of a hot upscale market,” Questrom said, before sales began to soften for many high-fashion retailers. Neiman Marcus is currently owned by Ares Management LP, an investment firm based in Los Angeles, and the Canada Pension Plan Investment Board.

“It’s a great company,” Questrom concluded about Neiman Marcus. “But they have a huge debt that they have to figure out how to get rid of, so that they can invest in the store.” Besides pumping more money back into the company, he advised eliminating some of its (more than 40) stores that “aren’t in the right location”—or at least shrinking their footprint. And, of course: “Putting a lot of attention on getting [Neiman’s] people out into the stores and their communities, and finding out what relates to this new millennial customer.”

Comments

  • Adam Silber

    Karen Katz has sunk the company into the ground with a long series of mistakes. It does not look promising

    • S. Holland Murphy

      Oooooh, Adam Silber, again. You are persistent, sir.

      • Adam Silber

        Not making money at Christmas is typically a death sentence for retailers. Their sales last two quarters alone are down 178 million. Last financial year Nordstrom increased its 400 million.It has been reported if the sale occurs they do not want Ms. Katz. Thus signifying her performance was lackluster from the owners.Since I report on the company for a blog. These are facts

  • Joe Hunter

    Well. it all comes down to greed. When the firm was bought out, look at how much $ Ms. Katz stuffed in her pillow. Other managers did the same. Now there is a debt that they can’t manage and are destroying not only a company but a Dallas historic institution. They have been ignoring the customer. They are not alone. Lundgren formerly of Neiman’s has destroyed the Macy’s brand and is retiring with an $85M package also look at their other executive’s compensation, yet go into North Park’s Macys and try and find a salesperson to help you on the floor. Look at the store’s merchandise offered. May as well go to TJ Max. Total disregard for the customer unless you sign up for their credit card. Surprised that tthe Mall management hasn’t” kicked them out. Oh, if you work there as a sales staff you can’t accumulate a 30 hr week because they would have to pay you benefits, but they do have their amazing “flex Schedule”, You may not make the 24 hr week and not know what department you will be working in that day. And now they want to make their shoe dept. a self serve one, find your own shoes. Management has lost its way and the company is a sinking ship, but they do have a lot of hot real estate for sale.

    • Happy Bennett

      You actually cited two problems, one being a knowledgeable sales staff that even cares if you exist…

  • Happy Bennett

    Not enough attractive clothes in plus sizes—just sayin’….

    • Adam Silber

      they have plus size. but they are late in that market too

      • Happy Bennett

        The “market” is very fluid. I hate to admit to being in plus sizes, (sigh-we’re “working on it”) but, one thing that is missing, except in the Coastal markets, is well designed, high quality clothing that doesn’t look like a tent. NM could do this, if they would admit that every woman is not a size 4-8. Their other problems are specifically, that women are dressing more casually for work (but still like to look well groomed), and use on-line vendors. NM on line site is not very user friendly, IMO. If one goes to a brick and mortar store one would like to accomplish several missions at one time. When brands of other items are not predictable –one is challenged to return to a given store.

        • Adam Silber

          they are famed for discriminating against larger sizes. do not be ashamed to be one… the average man is 40-42 apparently i am below a 36 and that suprises me…. womens arent size 2. thats most of what they sell if not size 4..

  • Jeffery Folse

    I think they are heading in the right direction with the new Fort Worth store at the Shops at Clearfork.
    https://www.youtube.com/watch?v=P0TdM9HqJGQ