Neiman Marcus Mulls Sale, With Hudson's Bay Seen as SuitorBy , , and
Company says it’s working with advisers to assess options
Wall Street Journal reports that Hudson’s Bay is in talks
Neiman Marcus is in talks with Hudson’s Bay Co., the owner of Saks Fifth Avenue, about a buyout of the upscale retailer, according to the Wall Street Journal. The deal would exclude Neiman Marcus’s nearly $5 billion in debt, the newspaper reported.
The takeover speculation follows Neiman Marcus’s announcement Tuesday that it’s working with financial advisers on a review of its strategic options, which may include selling part or all of its business. The company also wrote down its brand and other assets by $153.8 million last quarter and rejiggered its corporate structure to give it more financial flexibility.
Hudson’s Bay has also held talks about acquiring Macy’s Inc., people familiar with matter said earlier this year. With Neiman Marcus now available, the suitor has redirected its attention, according to the Journal.
An acquisition of Neiman Marcus would fulfill a long-held dream by Hudson’s Bay Chairman Richard Baker, according to Steven Salz, an analyst at M Capital Partners Inc. Baker, who was chief executive officer until early 2015, has signaled his interest in the upscale retailer many times, Salz said.
“He’s talked about buying Neiman on and off every couple of months,” Salz said. So investors may not have confidence that it’s actually going to happen this time, he said.
Hudson’s Bay, based in Toronto, declined to comment on possible talks with Neiman Marcus.
“Generally speaking,” spokeswoman Jen Vargas said in an email, “we selectively evaluate opportunities to accelerate the company’s strategic growth while maintaining or enhancing its credit profile.”
Shares of Hudson’s Bay fell as much as 2.4 percent to C$11.61 on Tuesday, a sign the prospects of a deal didn’t excite investors.
Neiman Marcus is reeling from slower mall traffic and a broader consumer shift away from department stores. Sales at stores open for at least a year fell 6.8 percent in the second fiscal quarter, which ended Jan. 28. The company posted a net loss of $117.1 million in the period, dragged lower the writedown of its brand. It had reported a profit of $7.9 million in the year-earlier quarter.
The developments whipsawed Neiman Marcus’s debt, with its $960 million of 8 percent bonds due 2021 initially dropping to a record low and then rising more than 6 cents to trade above 62 cents on the dollar on Tuesday morning, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The notes were quoted at 57.4 cents at 2:49 p.m. in New York.
Neiman Marcus’s credit rating was cut deeper into junk territory last month by S&P Global Ratings, which said the retailer’s debt was unsustainable.
The company has about $4.9 billion of debt outstanding, some of it tied to its $6 billion acquisition in 2013 led by Ares Management LLC and the Canada Pension Plan Investment Board. They bought the chain from TPG Capital and Warburg Pincus LLC, which acquired Neiman Marcus for about $5 billion in a 2005 leveraged buyout.
Neiman Marcus’s customer base is aging, with many younger shoppers making more of their purchases online. But it’s attempting to freshen its image: Last year, Neiman Marcus teamed up with e-commerce startup Rent the Runway in a bid to attract more millennials. The company has been opening in-store boutiques that let customers rent clothes and accessories.
Millennials currently account for 15 percent of Neiman Marcus’s shoppers, with 36 percent coming from Generation Xers. That means it’s still highly reliant on baby boomers for sales. The company also has been hit by a decline in tourism spending.
The overall industry is coming off a difficult holiday season. Gordmans Stores Inc., a century-old department-store chain in the Midwest, filed for bankruptcy on Monday. It plans to liquidate its inventory and assets.
Neiman Marcus, based in Dallas, also owns the Bergdorf Goodman luxury stores and the off-price Last Call clearance centers.
Buying Neiman Marcus instead of Macy’s wouldn’t bring Hudson’s Bay as much real estate -- an asset it typically craves when pursuing past deals. But Neiman Marcus’s high-end reputation could fit well with Saks.
“Neiman is a different brand from Macy’s,” Salz said. “It’s luxury versus kind of midmarket. It would have different strategic reasons. There’s less real estate at Neiman, but it’s more for the actual retail portfolio -- the actual brand.”