Neiman: The Wealthy Were Hurting Before Madoff

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by: Judy Weil

Hard times for the Bernie Madoff crowd. No sarcasm intended. Below are several key quotes from upscale retailer Neiman Marcus Inc.'s FQ109 conference call. Neiman is not a publicly traded company, but its call sheds light on important trends:

On the “affluent customer” and the “aspirational customer”:

Sales for the quarter were $986.0 million, which is a comparable revenue decrease of 14.5%. The weakness we experienced was in both our specialty retail division and our direct consumer division, across all geographic areas and all merchandise categories.

Sales per square foot for the trailing 12 months declined to $605.00. These results reflect a weakness in both our aspirational shopper and our most loyal customer. Whereas the aspirational shopper’s financial condition has been more directly impacted by the financial crisis, the affluent customer is affected differently.

Our list of planned new stores has not changed, however, in some cases the opening date has shifted slightly

We anticipate that the level of promotions will continue and as a result our margins will be under pressure.

Credit card defaults

Income from our credit card program declined 20 basis points as a percentage of sales. The decline was due to a charge we took for our portion of the estimated credit card losses that we share with HSBC (HBC) as a result of higher delinquencies.

NYC:

For the quarter we experienced a weakness in sales trends in stores across all geographies. Whereas we had been experiencing strong trends in New York City at Bergdorf Goodman, sales for the first quarter dropped off significantly with the many Wall Street lay-offs and market instability.

Malls, General Growth Properties (NYSE:GGP):

Q: We have been hearing anecdotally about malls around the country that are having some challenging times in terms of their profitability. Obviously you are in A malls that are probably doing a little better, but are there any stores at all in malls that might be having significant financial difficulty? Or are you guys worried about closing over the next year or two?

A: No, we have no worries whatsoever. We are not closing any stores… As you said we are in, we consider them AA and AAA malls, working with only the top four or five developers. And we don’t know what the malls themselves are doing, other than what we read in the paper. You know the General Growth [Properties] dilemma… and we are in four or five of their centers and they have no impact on us.

More advertising cuts:

Q: Should we expect the advertising cuts that you utilized in Q1 to continue throughout fiscal year 2009?

A: That is part of our review of all of our expenses and we are looking at advertising as whether how effective it is and how efficient it is and whether that is a place where we want to continue to put our emphasis. And again, we have the ability to pretty quickly shift from any kind of media advertising to direct mail and direct correspondence with our customer, which has been very effective and we do a great deal of it.

We also use the e-mails effectively to communicate with our customers.