$5B Neiman Marcus Sale Closes

On the day the deal closed, Neiman reported a double-digit increase in revenues for September. The September earnings report follows a 67% spike in earnings for fiscal Q4 2005 and a record-breaking full year.

"Investors like to buy into a growing niche like the luxury market represented by Neiman Marcus," Howard Davidowitz, chairman of Howard Davidowitz & Associates Inc., a retail consulting and investment banking firm based in New York City, says. The $5.1-billion price tag for this buy calls for a $100-a-share cash payment for all outstanding Neiman Marcus stock plus assumed debt, which, at the first of this year, was approximately $276.4 million, according to an SEC filing.

The transaction is financed in part by equity contributions from funds of both Texas Pacific, which has headquarters in Fort Worth and San Francisco, and New York City-based Warburg Pincus. Other equity contributions come from unidentified co-investors and members of the partners' management plus cash on hand at Neiman Marcus. Borrowings include a new senior secured loan facility of nearly $2 billion, a new senior secured asset-based revolving credit facility that provides up to $600 million, and the private placement of $700 million aggregate principal amount of senior notes due 2015 and $500 million principal of senior subordinated notes due 2015. A $150-million portion of the new revolving credit facility was withdrawn at the closing of the deal.

In connection with the closing, Neiman Marcus called for the redemption of its 6.65% senior notes due 2008. It also informed shareholders of common stock to await information from a paying agent, appointed by Neiman Marcus, before surrendering their stock.

Since the day the deal was first announced, Burt Tansky, Neiman Marcus' president and CEO, has emphasized that, "following completion of this transaction, it will be business as usual." The Oct. 6 report on September earnings, which followed by a month a report on Q4 and full-fiscal-year 2005, indicates that "business as usual" is pretty good.

For the five-week September period, revenues in the Specialty Retail Stores segment were up 10.5% over the same month the year before, and revenues at Neiman Marcus Direct registered a 10.4% increase. The strongest sales for the brick-and-mortar segment of business came from the Southeast and West and included women's designer apparel, sportswear, designer handbags, home décor and men's. The stores include both Neiman Marcus and Bergdorf Goodman.

Top selling merchandise in the catalog business segment was women's apparel, shoes and handbags and men's. The direct marketing segment includes Horchow and Bergdorf Goodman brands in addition to Neiman Marcus. The company shed Chef's Catalog from this segment in November 2004.

Total combined revenue increases for fiscal 2005 didn't quite reach double digits. They rose to just over $3.8 billion, up from a little more than $3.5 billion the previous year for a 9.9% increase. Net earnings for the year, however, jumped 21% to $249 million, up from $205 million the year before.

"We achieved these record results," Tansky says in a statement, "through our intense focus on full-price selling, efficient inventory management and expense control. We believe this strategy will further strengthen our position in the luxury market. The business model continued to improve as we achieved a record operating margin and sales per sf." In May, GlobeSt.com's affiliate website, GlobeSt.RETAIL, reported that company-wide sales-per-sf were $168, up $14 per sf from the same timeframe the previous year.

Neiman Marcus Group currently operates 35 Neiman Marcus stores, two Bergdorf Goodman units and 15 clearance centers. By year-end it will open Neiman Marcus units in San Antonio and Boca Raton.