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Buy or Sell: Whither Neiman Marcus?

NeimanmarcusWhile luxury is alive and well, nevertheless Neiman Marcus Group late yesterday announced it has retained Goldman Sachs to explore strategic opportunities - possibly a sale.

If so, this is a 180 degree turn from previous statements by chief executive Burton M. Tansky, who earlier said that the company is "always looking for opportunities" when asked about the chain's growth prospects. The Neiman Marcus Group had announced plans to open seven new stores over the next three years with a combined total of 790,000 square feet.

Neiman Marcus later announced the closing of its location at the Town and Country Mall in Houston and the transition plan for 160 associates at that property, which has limped along for years. This reflects the fate of many second-tier malls, who suffer in the proximity of so-called fortress malls such as the Houston Galleria.

Analysts don't believe that Neiman's board would fold the company into a department store chain because of the experience of rival Saks Fifth Avenue. Saks has struggled since they were acquired by Birmingham, Ala.-based Profitts Inc. in 1998. While industry watchers have speculated that the Smith family might be looking to make a financial play using the stock's current high value, VP of investor relations Stacie Shirley rebuffed that notion (registration required), indicating the Boston family only owns a 12.7 percent stake.

Neiman's specialty retail segment, including department and outlet stores, represents 81% of Neiman's total business. The direct to consumer is 16% and brand development represents the remaining 3%. Higher luxury sales may be impacted by the ascendance of local media in marketing luxury goods, high operating costs, greater consumer demands, and the looming challenge of the China Price.  Certainly Neiman Marcus is in a position to turn all of these potential negatives into strong positives, both domestically and overseas.

It's as Einstein once said: In the middle of difficulty lies opportunity.

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