Neiman Paces Expansion

The corporate playbook has two stores opening in the fall: 120,000 sf at the Shops at La Cantera in San Antonio and 136,000 sf in Town Center Mall in Boca Raton, FL. The game gets particularly interesting in 2006 when doors swing open on its first slimmed-down version, 80,000 sf in Charlotte, NC. Austin follows suit in spring 2007 with the same size store, a format that allows the company to add locations in cities that four years ago couldn't make the Neiman Marcus dance card. The 2007 calendar holds openings in Oyster Bay, NY and Natick, MA while 2008 brings a West Los Angeles ribbon-cutting for the first Neiman Marcus store to open in two decades in Southern California.

"We are observing the landscape very carefully to see which cities are turning in our direction," Burton M. Tansky, Neiman Marcus president and CEO, last week told shareholders and analysts. He says another round of upcoming locations will be announced in four to six months. "We have a very well thought out expansion program," he added.

Katherine R. Galligan, VP of Dallas-based Aperion Group, says the indication from the conference call is Neiman Marcus could be ready to veer from a longtime road map for 50 to 55 stores. "I think in Neiman Marcus' case, it's a very delicate balance for them to maintain the name and still expand," she tells GSR.

After one year without any openings, Neiman Marcus now is pushing its most aggressive play in decades as it jumps from 35 to 42 locations in the next three years. "We're not a 100-store chain," says Stacie Shirley, Neiman Marcus' VP of investor relations, "but as markets continue to evolve, there are opportunities for us although they aren't open-ended." Seattle, for example, wouldn't have made the radar screen five years ago. Now, Shirley says, "we all feel very confident that Seattle will support one of our stores."

It's not enough to just tweak the inventory or scout for more locations. The corporate chiefs are carefully massaging some test concepts to boost sales even further both in-store and online. Coming up soon is the fourth opening of an Internet cafe-style "showroom" that allows customers to browse off-site inventory. The existing 2,000-sf showrooms are inside the store's four walls in Plano, TX, Oak Brook, IL and Minneapolis, but the new one in Scottsdale will be tested in mall space outside the store's entrance. A fifth showroom will be added this year, according to Shirley.

Stores with showrooms have reflected higher production numbers although the concept is not intended for every location or even a marriage to an 80,000-sf format. "We are taking a slow, prudent approach," Shirley says about the showroom concept development. "It's not a growth strategy, but it does support the continued growth of our business." The decision about where to place showrooms is being made "market by market" and "store by store," she emphasizes.

Online strategies, though, delivered 50% of the last quarter's total sales, up 15% from a year ago. Neiman Marcus' home portal, showroom traffic and "sitelets" are driving the numbers. The "sitelet" strategy is a cutting-edge, Internet tool that has vendors like Salvatore Ferragamo and Horchow closing their online sales as Neiman Marcus transactions. The telling is on the last page of the transaction.

But, the key for Neiman Marcus, which recorded six consecutive quarters of gain, is to find ways to expand the brand without diluting the name. Galligan says she doubts published reports that Neiman Marcus will court a merger suitor. As for Neiman Marcus, it's not company policy to comment on market rumor.

Galligan believes it's far more likely that the chain will acquire or invest in specialty retailers, much like it did with Kate Spade, rather than ink a merger. "I see them as laying the groundwork and feeling out small investments, like Kate Spade, to expand without diluting the Neiman Marcus name," she says.

And yes, Shirley says, the team's always looking for opportunities like that, but "we would have to own a lot of them to make a big impact."

Shirley confirms the 11-store Kate Spade will add six more locations this year. Meanwhile, Katy, TX, is getting a Last Call, the 15th location for the clearance outlet portfolio. And then there are the two Bergdorf Goodman stores, a name that shouts New York, NY, and all that goes with it, but one that's not ventured outside its Manhattan bounds, except in catalogs and an Internet store that launched last fall. Shirley admits it's been discussed about opening Bergdorf Goodman stores in other cities, but then nipped because every spot that's right already has a Neiman Marcus footprint. "We would be competing against ourselves," she says. "Today, it's a landmark in Manhattan and that is where it will continue to be."

Neiman Marcus is focused on "consistently providing increased experiences for our customers," Shirley says. "Our success is we haven't changed who we are. It's more of a tweaking kind of the model."