The Neiman Marcus Group Reports First Quarter Earnings; Net Earnings Increase 28.5 Percent on 10.7 Revenue Gain
CHESTNUT HILL, Mass.–(BUSINESS WIRE)–Nov. 20, 2000
The Neiman Marcus Group, Inc. (NYSE:NMG/A, NMG/B) today reported a 28.5 percent increase in net earnings before an accounting change on a 10.7 percent revenue gain in the first quarter of fiscal 2001 versus a year ago.
For the 13 weeks ended October 28, 2000, the Company reported total revenues of $739.7 million, a double-digit increase from $668.3 million in the year-ago period. Comparable revenues rose 10.7 percent, essentially a repeat of the 10.8 percent comparable revenue increase achieved in the year-ago quarter. Operating earnings rose 20.1 percent to $83.5 million from $69.6 million last year. Net earnings before an accounting change related to certain hedging activities increased 28.5 percent to $48.1 million. Including a $0.04 gain on an accounting change, diluted net earnings per share were $1.05.
“Growth was geographically balanced in the quarter with particular strength on the East and West coasts, and we continued to see double-digit revenue increases in areas of merchandising focus, such as fine apparel, jewelry, and men’s sportswear,” said Robert A. Smith, co-chief executive officer.
“Our exceptional earnings growth was primarily due to strong execution of our operating and merchandising strategies in a full-price selling quarter,” Mr. Smith continued. The Specialty Retail Stores segment, which includes Neiman Marcus Stores and Bergdorf Goodman, also benefited from calendar shifts that further enhanced regular price sales in the quarter.
Specialty Retail Store Earnings Climb 22.0 Percent
First quarter revenues in the Specialty Retail Store segment rose 10.2 percent to $624.5 million, with Neiman Marcus Stores up 9.3 percent and Bergdorf Goodman up 17.1 percent. Operating earnings in the segment increased 22.0 percent to $82.7 million from $67.8 million in the year-ago quarter.
“The Butterflies game, which is a full-price promotion at Neiman Marcus Stores, was shifted to September of this year from late October/early November last year,” said Brian J. Knez, co-chief executive officer. “This shift transferred a modest level of comparable revenues and earnings into the first quarter from the second quarter of this year,” Mr. Knez continued.
In addition to strong ready-to wear sales, Bergdorf Goodman experienced strong gains in women’s shoes, jewelry, handbags, cosmetics and men’s luxury sportswear. Bergdorf also benefited from the opening of its Plaza level last November and Sunday store openings that began on September 9, 2000.
Direct Marketing Earnings Rise 31.8 Percent
Neiman Marcus Direct reported record quarterly revenues of $93.5 million, up 8.5 percent from $86.1 million in the year-ago period, with sales gains in both apparel and home furnishings in the core NM and Horchow catalogue business. “The direct marketing division continues to focus its efforts on serving the affluent customer, and on aligning its merchandising mix and positioning more closely with Neiman Marcus Stores as part of our multi-channel strategy,” Mr. Knez said.
Operating earnings rose 31.8 percent to $6.6 million from $5.0 million a year ago, primarily due to higher gross margins on higher revenues.
Strong Brand Portfolio Performance
“The Kate Spade and Laura Mercier brands — in which we hold majority stakes – continued to post good revenue growth in the quarter,” said Mr. Knez.
Also included in the Other segment were approximately $6.0 million in expenses related to the Company’s e-commerce business. Those expenses are reflected in higher selling, general and administrative expenses for the year.
Outlook: Full Year on Track Despite Weak November
“Despite our strong first quarter performance, November revenues are currently running below last year. We had anticipated a soft first week in November due to the shift of the Butterflies event into September. Since Election Day, however, business has remained well below our expectations, particularly at Neiman Marcus Stores. At this point, therefore, we expect a mid-to-high single digit decline in comparable revenues in November from a year earlier, and low single-digit comparable revenue growth in the second quarter,” said Mr. Smith.
“Having planned a strong first quarter and exceeded our expectations in delivering it, we currently expect second quarter earnings to be flat compared to a strong year-ago quarter. Looking ahead, we continue to plan for more normalized mid-single digit comparable revenue growth for the full year, which would keep us on track to reach our goal of mid-teens growth in earnings per share in fiscal 2001,” continued Mr. Smith.
“We believe we are well positioned competitively, and we’re continuing to pursue the strategies that contributed to profitable growth last year. Although we are off to a slow start in November, we look for our customers to resume more normalized spending patterns during the second quarter. At this point, we are cautiously optimistic about the upcoming holiday season,” Mr. Smith concluded.
Inventories at the end of the quarter were $735.0 million, compared to $683.1 million a year ago.
In the first quarter of fiscal 2001 the Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging.” The Company enters into forward foreign currency exchange contracts to minimize foreign currency exposure related to forecasted purchases of inventory. Under the new standard, such contracts are accounted for as hedges. The cumulative effect of the accounting change resulted in a net gain of $1.9 million or $0.04 per share.
The Neiman Marcus Group includes the Specialty Retail Stores segment, which consists of Neiman Marcus Stores and Bergdorf Goodman, and the Neiman Marcus Direct segment, which is the Company’s direct marketing operation.
A live webcast of the conference call on earnings will be available on Tuesday, November 21 at 8:30 a.m. on www.neimanmarcusgroup.com.
The figures are as follows:
Statements in this release referring to the expected future plans and performance of the Company are forward-looking statements. Actual future results may differ materially from such statements. Factors that could affect future performance include, but are not limited to: changes in economic conditions or consumer confidence; integration of acquired businesses; changes in consumer preferences or fashion trends; delays in anticipated store openings; adverse weather conditions, particularly during peak selling seasons; changes in demographic or retail environments; competitive influences; significant increases in paper, printing and postage costs; and changes in the Company’s relationships with designers and other resources. For more information, see the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands except for For the Thirteen Weeks Ended
per share data) October 28, October 30,
2000 1999 (1)
Revenues $ 739,721 $ 668,344
Costs of goods sold
including buying and
occupancy costs 448,897 416,392
Selling, general and
administrative expenses 203,012 178,840
Corporate expenses 4,287 3,548
Operating earnings 83,525 69,564
Interest expense 4,278 6,786
Earnings before income
taxes and minority interest
and cumulative effect of
accounting change 79,247 62,778
Income tax expense 30,114 23,856
Earnings before minority
interest and cumulative
effect of accounting change 49,133 38,922
Minority interest in
net earnings of
subsidiaries (1,004) (1,479)
Earnings before cumulative
effect of accounting change 48,129 37,443
Cumulative effect of
accounting change, net 1,860 —
Net earnings $ 49,989 $ 37,443
Weighted average number of
common and common
Basic 46,987 49,042
Diluted 47,555 49,122
Earnings per share:
accounting change $ 1.02 $ 0.76
Accounting change 0.04 0.00
Basic net earnings $ 1.06 $ 0.76
accounting change $ 1.01 $ 0.76
Accounting change 0.04 0.00
Diluted net earnings $ 1.05 $ 0.76
(1) Amounts restated for leased department sales.
COPYRIGHT 2000 Business Wire
COPYRIGHT 2000 Gale Group