Neiman Marcus, the luxury department store is hoping to regain its lustre post-bankruptcy. After four months of court proceedings, the Dallas-based luxury retailer will have shed the bulk of its $5 billion debt load and gained new owners, including Davidson Kempner Capital Management, Sixth Street Partners and Pacific Investment Management, the largest shareholder controlling three of the company’s seven board seats. Investors traded debt for equity, erasing much of the debt Neiman accumulated through two separate leveraged buyouts, in 2005 and 2013.
“I feel really good,” says Geoffroy van Raemdonck, Neiman Marcus’s chief executive since 2018. He will stay on in the role and continue as a member of the company’s board. “It’s an important moment for the industry, because we generate so much revenue for the thousands of brands that we represent. Not only do we have business continuity, we now have the best balance sheet in the business. The rest of this year will be challenging, but it’s a really high moment.”
Van Raemdonck contends that the retailer would not have filed for bankruptcy if it were not for the virus, but Neiman Marcus’s troubles predate the pandemic. It reported a net loss of $31.2 million in July 2019, compared with a net loss of $19.9 million the year before. While the company generated $4.5 billion in sales in 2019, Neiman Marcus was not on sturdy enough ground to withstand the blow, prompting the bankruptcy as well as the shuttering of its first New York City store, a flashy location at Manhattan’s Hudson Yards development, just opened in 2019.
To regain its position as a leading luxury retailer, Neiman Marcus, led by Van Raemdonck, plans to tighten up its retail footprint, perfect digital clienteling for its most valuable customers, reach elusive younger millennial and Gen Z audiences, and keep most of the management team intact while hiring for key roles that will propel the business forward.
Major brands like Prada and Gucci are increasingly pulling back on wholesale accounts and focusing on their direct-to-consumer channels. Smaller brands, meanwhile, are looking very carefully at who they want to give inventory to, and the terms on which they sell.
Specific insights on selling performance will be shared to help brands place better performing products into stores at the right time. In April, the company shared what was selling during the pandemic with brand partners, and the brands were able to react quickly, to get better-placed products in stores by the August delivery, says Van Raemdonck. The retailer plans to continue this practice, as it’s also useful for brands thinking about expanding into new product categories, he adds
“My view is that you have open communication, and so we are very forthcoming and transparent with our brand partners,” says Van Raemdonck, who adds that the company maintained relationships and business with every one of its 50 top-selling brands throughout the Chapter 11 process, which make up 60 per cent of revenue
Neiman Marcus also needs to rebuild the relationship with its high-spending customers; 40 per cent of the retailer’s business is made from customers spending more than $10,000 per year, says Van Raemdonck. At the centre of the strategy to bring these customers back is NM Connect, a digital tool for sales staff to provide high-touch customer service online. Employees will be able to source products, give styling and fit advice and prepare items for pickup in store or home delivery through the portal.
“We are taking a relationship that exists with a customer in-store and strengthening it digitally,” Van Raemdonck says. Since the technology was fully rolled out in July, nearly 5,000 sales associates have had 1.5 million interactions with customers. This has resulted in $60 million in incremental sales, in addition to the revenue from NeimanMarcus.com, according to the company.
Success at Neiman Marcus will ultimately come down to retaining its loyal customers as well as acquiring new millennial and Gen Z consumers, which together represent around $350 billion of spending power in the US alone, according to data from McKinsey.
Van Raemdonck says that the company is successfully marketing to millennials and Gen Z, which account for 48 per cent of its customer base. “We’re very focused on being present for the customer, however and whenever they want,” he says.
Merchandise won’t cut it alone as the role of the store is changing. “Stores are still really important. It’s where the relationship gets created with the customers. But we recognise that people are engaging more from home, therefore we want to make sure we’re able to connect with people on digital devices,” says Van Raemdonck. “Our business model is flexible enough that we can serve you the way you want.”
adapted from Vogue Business
Neiman Marcus Beverly Hills
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