Department Stores

The Neiman Marcus Group, Inc.

The Company

It has been estimated that someone is turning 50 years old every 7.5 seconds, and this will continue for another seventeen years. As everyone is well aware, this shift in the percentage of the population over fifty will have profound effects upon consumer spending for many years to come. Neiman Marcus Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NMG)") else Response.Write("(NYSE: NMG)") end if %> stands to benefit from this trend because female consumers in the 45-60 age bracket represent the company’s most important customer group. This group is also estimated to grow at triple the rate of the normal population until the year 2005. The company has a large and loyal customer base that will consolidate going forward. The company’s greatest asset is its sole focus on the “high-end” segment, creating a well-understood merchandise offering.

The Neiman Marcus Group consists of three operating units: Neiman Marcus Stores, NM Direct, and Bergdorf Goodman. (Harcourt General owns approximately 53% of the outstanding common equity in The Neiman Marcus Group). The company runs 30 Neiman stores in 17 states, with the largest concentration in Texas. No one store accounts for more than 7% of total revenues, which helps to minimize exposure to calamity. The company has reinvested over $350 million in its store base over the past five years -- it now has one of the most updated, technologically sound order and distribution systems. Remodeled stores have averaged 4% to 5% better comp sales than the rest of the chain.

Neiman Marcus is expected to grow at a compound annual growth rate (CAGR) of 14% over the next five years, significantly higher than the average in the department store segment. The fragmented nature of the “luxury” market makes Neiman Marcus stand out all the more, especially if it can continue to meet or exceed expectations. With respectable profit margins that will continue to benefit from technology improvements, the company should garner a more respectable multiple than 17 times trailing earnings. The company’s balance sheet shows excellent working capital and easily manageable interest requirements (as exhibited by the highest times interest earned of the group). If the company can manage to trade at 0.75 of its closest competitors' (Saks and Nordstrom) price-to-sales and forward earnings, Neiman Marcus should do well.

Latest Financials

Earnings for the third quarter ended May 3, 1997, rose to a record $0.41 per share, up from $0.30 per share after preferred dividends a year earlier, led by strong gains at NM Direct and Bergdorf Goodman. The company reported revenues of $506.5 million, up 6.8% from $474.1 million a year ago. Comparable revenues in the quarter rose 4.5%. Operating earnings increased 6.3% to $41.2 million from $38.7 million in the third quarter of fiscal 1996. Net earnings in the current year period were a record $20.7 million, up 10.2% from $18.8 million in the prior-year period. The company redeemed all of its preferred stocks in November 1996, thereby eliminating preferred dividend requirements after that date.

(Go to next snapshot.)

© Copyright 1995-2000, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. The Motley Fool is a registered trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us
..

..

..

..

..

....

...

...

...

...