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Neiman Marcus files for bankruptcy


At the end of March the coronavirus pandemic temporarily forced the closure of all 43 Neiman Marcus stores as well as its two Bergdorf Goodman stores and Last Call outlets, all but stopping sales and crushing revenue. But while that may have been the immediate cause of Neiman’s filing, its problems had been building for years. The company took on an untenable amount of debt as part of two leveraged buyouts by private equity firms, and Neiman’s did not respond quickly enough to changes in shopping habits. Together, those developments left the group in a precarious position even before the virus hit.

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Neiman Marcus listed in filings about $US5 billion in long-term debt as of April 2019. The company was sold in 2013 to a group led by Ares Management, a private-equity firm, and the Canada Pension Plan Investment Board in a $US6 billion deal.

The pandemic has been disastrous for the already weakened retail industry. In March, sales of clothing and accessories fell by more than half. Those numbers are only expected to be worse for April because many stores were open for at least some of March (e-commerce, a relatively small contributor to total sales for most store chains, is not enough to save them). Retailers have furloughed employees, slashed corporate salaries and hoarded cash in a desperate attempt to make it to the end of the shutdown. Earlier this week, mass-market clothing company J. Crew filed for bankruptcy, the first major retail casualty during the pandemic. John Varvatos, the menswear brand, also declared Chapter 11.

The company said it would “continue to assess store closure decisions” for Neiman Marcus, Bergdorf Goodman and Last Call and reopen once it is safe to do so. Ten Neiman Marcus stores are now offering curbside pickup, and some temporary store closures will continue through May 31.

William Susman, managing director at Threadstone Advisors, said he expected the retailer to use bankruptcy to shed some of its leases and reduce its physical footprint, a situation that could make it more attractive to a potential buyer.

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“Neiman Marcus has a bad balance sheet, but it’s still a luxury brand,” Susman said. “They still have a reason to exist.”

Neiman Marcus was founded in Dallas in 1907, just in time to become a magnet for new oil money. It built its reputation on an unabashed embrace of the trappings of luxury — and the dreams of those who aspired to own them or experience them for a moment. It became famous for its extravagant Christmas catalogue, which over the years offered items like an only-at-Neiman’s authentic Guinness pub-in-your-home for $US250,000 and a $US20 million submarine.

The company’s mastermind was Stanley Marcus, son of one of the founders — Herbert Marcus. (The other founders were Herbert’s sister, Carrie Marcus Neiman, and Carrie’s husband, A.L. Neiman). Under his guidance Neiman Marcus became the first department store to hold a weekly fashion show for customers. On the occasion of the Texas Centennial Fair the store held a special extravaganza it called “100 years of Texas fashions,” and Edna Woolman Chase, editor of Vogue and a guest, said, “I dreamed all my life of the perfect store for women. Then I saw Neiman Marcus, and my dream had come true.”



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