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Neiman Marcus Temporarily Closing All Stores in Virus Response

Neiman Marcus Posts Lower Sales and Ponders Pandemic Response

(Bloomberg) -- Neiman Marcus Group Inc. is following the precautionary playbook of other retailers across the globe, temporarily closing all stores, including Bergdorf Goodman, in the wake of the coronavirus outbreak.

The luxury retailer closed operations at its Neiman Marcus, Bergdorf Goodman, and Last Call stores, effective Tuesday night, according to a statement. The stores will remain closed for the next two weeks, with a potential extension upon further evaluation of the situation, said the company.

Store associates affected by closures will continue to be paid and receive benefits for the two-week period, the company said.

Like other retailers, Neiman is bracing for a potential slump tied to the virus outbreak. The company said it will continue to serve its customers through online channels, including a new selling and styling tool that will facilitate remote purchasing.

“We are monitoring the effects” of the virus “in real time, and although we expect it to affect our results for the current period, we are not yet in a position to comment meaningfully on its impact,” Chief Executive Officer Geoffroy van Raemdonck said in a statement earlier in the day.

Earlier on Tuesday the retailer reported a quarterly sales decline as the luxury retailer struggled to attract more shoppers, a task that could become more difficult amid the outbreak.

Neiman Marcus Temporarily Closing All Stores in Virus Response

Comparable sales dropped 1.6% from a year earlier during Neiman’s second fiscal quarter, which ended in February, according to people familiar with the results. They asked not to be identified because Neiman no longer reports publicly. Adjusted earnings before interest, taxes, depreciation and amortization rose by $6 million to $140 million from the same period a year ago, the people said.

The results were “in line with expectations” as the company focused on “quality sales and deepening relationships” with high-end, luxury customers, Van Raemdonck said in an emailed statement to Bloomberg. A representative for Neiman declined to elaborate further on the results.

Cash Status

Neiman’s cash balance was $38.3 million as of the quarter ended in February, down from around $40 million at the beginning of November, according to the people. Total debt was around $4.2 billion at quarter-end.

The company stopped releasing its earnings to the public last summer after completing a debt restructuring but still discloses the reports to bondholders and lenders.

The Dallas-based company, which owns its namesake chain and luxury store Bergdorf Goodman, has struggled to find its footing as shopper traffic to malls and department stores declines. It’s spending to retool so it can meet changing consumer tastes, while also carrying a costly debt load.

Liquidity increased throughout the holiday season, as the company had forecasted on an earlier call with investors, providing further financial flexibility. The company ended the three-month period with available liquidity of $439 million, which was at the higher end of Neiman’s projected range and up from $354 million at the end of the first quarter of 2020, the people said.

The company’s roughly $500 million of third-lien bonds due 2024 fell to new lows after the results, according to Trace bond trading data. They traded down about 1 cent to 20.5 cents on the dollar.

Gross Margins

Neiman also reported gross margins of 31.8% during the second quarter, the people said, up 60 basis points from the previous year. The company attributes the increase to an ongoing emphasis on full-price selling, and a shift in sales to higher-margin categories including menswear and women’s shoes.

Last week, Neiman announced plans to close the majority of its Last Call outlet shops and dismiss hundreds of employees as it focuses on selling full-price goods at its department stores.

The move will allow management to focus on big-spending luxury customers and free up resources to invest in its full-line department stores, the company said.

©2020 Bloomberg L.P.