Neiman Marcus files for IPO

The company behind one of the most luxurious department stores in America, Neiman Marcus Group, is moving towards an IPO. The supposed reason behind the IPO is to help ease their debt. On Tuesday, August 4, the luxury retail giant filed a registration statement with the Securities and Exchange Commission.

The filing is a placeholder, as a timeline for when they will launch their IPO has not been drawn out, nor has a plan for the number of shares, or the price range for the proposed offering. The company's common stock is expected to trade under the symbol NMG. Neiman Marcus previously filed for an IPO in 2013.

In an attempt to rid themselves of debt, Neiman Marcus prepares for IPO

It's current owners at the time, private equity firms Warbug Pincus and TPG, were pursuing a dual track where they were debating whether to move forward with the IPO or sell the company. In October 2013, the two firms sold the company to Ares Management and Canada Pension Plan Investment Board for 6 billion dollars. However, this raised the company's long term debt from 2.7 billion dollars to 4.5 billion dollars.

Neiman Marcus has taken a hit due to decline in tourist customers shopping at their stores. While international tourism is up, spending on fashion is down because of strength of the dollar making it harder for foreigners to buy as much. If they are going to try and rid themselves of the debt, an IPO seems like the most logical move.

“It seems to me this is a good time for Neiman Marcus to go public,” Craig Johnson, President of Customers Growth Partners, was quoted explaining in WWD. “Their most recent financials showed a slow down from earlier in the year. The tourist trade, whether Chinese, Brazil, Russia or Europe, all of that has been weak, and it’s going to worse before it gets better, particularly from China. With a public offering, the owners want to monetize their investment. This may represent the best opportunity to monetize. The environment may well get worse in the next year or two. Obviously, if things tank too badly, just before you file a registration doesn’t necessarily mean you go public. They want to preserve some flexibility. Basically, it’s a liquidity event. Right now, Neiman’s is overburdened with debt, its fairly low cost debt but interest rates could be going up so if you are going to retire some debt they could be thinking let’s get that done now.”

Despite the debt situation and decline in tourist shopping, Neiman Marcus is still a very profitable and well run company. They currently operate 41 full time stores, two Bergdorf Goodman's in New York City, and e-tail site MyTheresa.com. The combined productivity of all their 43 full-line stores in 589 dollars per-square-foot for the 12 months ended May 2 according to the filing.

The filing also noted that the average age of their customers is 51, with 48 percent of their customers being age 50 and under. 79 percent of their customers are female, and 38 percent of their customers have a median household income above 200,000 dollars. The company's sales figures are still doing well regardless of their debt, with 22 consecutive quarters of positive growth, and 4.8 billion dollars in revenues.

Photo:ifreepress.com