Neiman Marcus Profit Hit by Aspirational Pullback as Moody’s Hints at Sale Potential

Dallas, Texas-based Neiman Marcus Group could seek out a possible buyer if investors lose patience in what’s been a rocky stretch for business, according to Moody’s Investors Service. 

The ratings agency said the company, which operates Neiman Marcus and Bergdorf Goodman, fell short of Moody’s expectations for profit in 2023 on account of softening aspirational consumer spending and heavy markdowns.  

While Moody’s Vice President Mickey Chadha wrote in a note Monday the company is expected to see promotional levels return to normal and gross margins improve as this year progresses, the agency changed its outlook for Neiman Marcus from positive to stable.

The rugged stretch of 2023 caused the company’s leverage to jump more than 8 times for the 12-month period ended Oct. 28. 

“The company will need to continue to invest in retaining top customers and attacting a younger demographic, which may prove challenging as competition increases, particularly as the brands offered through Neiman Marcus increase their direct-to-consumer efforts,” Moody’s said. 

The note pointed to the retailer’s loyal consumers, but tempered that sentiment saying “participation remains dependent on the customer’s desire to purchase.”

Exit Strategy?

For the year ended Oct. 28, Neiman Marcus generated revenue of $4.3 billion across its 36 namesake stores, 2 Bergdorf Goodman locations, catalog and online sales, Moody’s said. 

“The risk remains that the company could pursue aggressive financial strategies as its former lenders seek to divest their current ownership of the company,” the research note said. 

Neiman Marcus filed for Chapter 11 bankruptcy in 2020, blaming the pandemic for its filing. It reorganized and exited bankruptcy later that same year with new owners PIMCO, Davidson Kempner Capital Management and Sixth Street Partners. JPMorgan Asset Management is also an equity owner in the business. 

The luxury e-commerce site Mytheresa, which Neiman Marcus bought in 2014,  was not part of the bankruptcy and later spun off and went public in 2021.  

Frustration Bubbling Over

The Moody’s update Monday came the same day the New York Post reported Neiman Marcus hired a third-party firm to look into employee allegations of unfair hiring practices and promotions by CEO Geoffroy van Raemdonck. The Post reported Neiman Marcus said the investigation yielded no evidence confirming the allegations. 

The report followed accusations made in an anonymous December blog post, published through the Telegraph platform, titled “Everyone Belongs.” 

The post accused van Raemdonck of not rewarding internal employees enough through promotions, instead tapping outside candidates with a preference for white and Asian women, along with gay or European men. The writers said their claims are based on a study of the nearly 30 hires and promotions under van Raemdonck. 

“What does diversity, equity and inclusion mean at Neiman Marcus? Is it for everyone or just the groups deemed important by Geoffroy? What can be done to prevent this from happening in the future,” the post said. 

Neiman Marcus reported in its 2023 ESG report vice president level or higher  ranks consisted of 78.6 percent white workers, 2.9 percent Black or African-American, 1.9 percent Hispanic or Latino, 14.7 percent Asian and 1.9 percent American Indian or Alaskan native. 

The employee group said they filed an anonymous complaint to a hotline. The group said they were later told to refile through a platform they said did not ensure their anonymity. 

“Then all communication stopped,” the blog post alleged. “Geoffroy and his team want this to just go away. But this is different than the carefully crafted articles that are done in partnership with WWD or BoF. This is data. This is the truth.”