Neiman Marcus Said to Be in Talks Over Sale

Canada's Hudson's Bay Company is reportedly interested in buying the iconic retailer, which has been struggling with the shift to online shopping.
Matthew HellerMarch 14, 2017
Neiman Marcus Said to Be in Talks Over Sale

In another sign of the pressures facing department store chains, Neiman Marcus swung to a second-quarter loss and said it is weighing a possible sale.

The New York Times and other publications reported that Canadian retail giant Hudson’s Bay Company was already in talks with Neiman about acquiring the iconic company.

“The company is undertaking a process to explore and evaluate potential strategic alternatives, which may include the sale of the company or other assets, or other initiatives to optimize its capital structure, as well as a number of other alternatives,” Neiman Marcus said Tuesday in its earnings release.

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According to The Wall Street Journal, Hudson’s Bay was seeking a deal that would give it control of Neiman without having to assume its nearly $5 billion in debt. Neiman has been saddled with debt since it was acquired in 2013 by private-equity firm Ares Management and the Canada Pension Plan Investment Board in a $6 billion leveraged buyout.

Department store chains as a whole have been struggling to compete with online retailers and off-price physical stores like T. J. Maxx. Neiman’s troubles have been compounded, Reuters said, as “affluent Texans have cut back on shopping because of a drop in energy prices.”

For the second quarter, the company reported a net loss of $117 million for the 13 weeks ended Jan. 28, compared with a $7.9 million profit a year earlier, which it blamed in part on an inventory management system that failed to work properly, leaving it unable to fill orders.

“I look at this just as moving the deck chairs around on the proverbial Titanic,” Mark A. Cohen, the director of retail studies at Columbia Business School, said about a potential merger between Hudson’s Bay and Neiman.

Reuters noted that Hudson Bay has pursued a strategy of borrowing against its real estate to finance acquisitions. Neiman’s real estate is valued at roughly $1.2 to $1.5 billion.

“Looking at the Hudson’s Bay playbook … real estate was a key piece of the consideration,” said Helena Song, an analyst at Standard & Poor’s. “I wouldn’t be surprised if we see a similar consideration here, as well.”