Luxury Institute News

Dallas Business Journal
Kerri Panchuk, Staff Writer

Incoming Neiman Marcus CEO Karen Katz says she is committed to building a consistent pattern in sales and merchandising – two staples of the Neiman Marcus brand. For the moment, that’s about all she is saying.

Katz is quietly plotting her course and spending the summer conducting research leading up to her Oct. 7 start date.

A three-decade veteran in the retail industry, Katz spent 25 years at Neiman’s before being named CEO in late spring.

“We have this amazing culture at Neiman Marcus,” Katz, who is currently executive vice president of Neiman Marcus Group said. “We still operate the business on the founding principles of merchandise excellence and high levels of customer service … Those things will not change, but the way you do those things could very well change as we move forward.”

Milton Pedraza, CEO of The Luxury Institute in New York, believes change is needed at Neiman’s.

Neiman Marcus saw its sales rebound in the first part of the year, but Pedraza says double-digit sales gains in the first part of 2010 subsided with the company reporting only single-digit sale increases in the most recent period.

Many analysts had expressed concern about how the high-end retailer would weather a storm that sent all shoppers – including those at the luxury end of the spectrum – running. In response, retailers like Neiman’s rolled out some discounting that had not previously been part of their sales plans.

Katz admits 2009 was a rough year.

“Luxury retail in general took the hardest hit during this recession,” she said. “Our customers pulled back dramatically from spending, so I think some of the nice increases we’ve seen these last number of months are because a year ago we were in the depths of the depression.”

She added “that being said, we are very happy to see that business is coming back. The customer is definitely back in the stores.”

Katz remains confident the brand was protected as Neiman’s kept its focus on exclusive merchandise while trying to make sales in 2009.

Pedraza says some of the discounting he saw at Neiman’s did have some short-term impact on the brand’s reputation for exclusivity, but he believes the Neiman Marcus brand remains intact overall.

“I think the brand clearly survived,” he said, “but it needs to reinvent itself in terms of the customer’s experience.”

Brian Sozzi, retail analyst with Wall Street Strategies, said Neiman’s wasn’t alone in efforts to create price points needed to make up for anemic sales. He agrees Neiman’s brand remains strong.

“I don’t think they are overexpanding along the lines of other retailers,” he said. “I don’t think they have as unfavorable a debt position as Saks.”

He does, however, see room for improvement.

“I think Neiman’s probably stands above Saks,” he said, while adding that the company may be below Nordstrom in terms of the upscale industry’s standard for customer experience.

Katz recognizes that change is inevitable, noting that e-commerce and online technology have changed the face of retail. She said those factors will continue to reshape how shoppers buy and retailers sell. While she remains coy about what the future holds, she hints that online will be an integral part.

“I believe that the intersection of traditional retailing, e-commerce retailing and social networking … all of that is going to come together in a very different way than we can see it today,” she said. “We are just starting to understand how powerful that intersection can be, so we’ll see where it evolves to.”

Pedraza said Neiman’s actually hit the online platform as one of the first to meet early expectations on the e-commerce side, but said other high-end retailers, such as Nordstrom, eventually pushed the online standard a bit higher. He, too, sees online as a major component of future retail, and one Neiman’s cannot ignore.