Neiman Marcus is a luxury department store owned by the Neiman Marcus Group and is headquartered in Dallas, Texas. Neiman Marcus is on par with other luxury department stores such as Saks Fifth Avenue, Barneys New York, Lord & Taylor, Nordstrom, Bloomingdale's and Von Maur.
In 2015, Neiman Marcus announced its plan to file for an initial public offering (IPO) later in the year under the ticker symbol NMG. The exact IPO date, the number of shares and other details have not yet been made public information.
This eventual IPO marks a successful, yet partial, exit for its owners, private-equity firm Ares Management and the Canada Pension Plan Investment Board, both of which purchased Neiman Marcus for $6 billion in 2013, according to Market Watch.
With the success of Neiman Marcus, its IPO presents an attractive investment opportunity for potential investors. However, there are a few things everyone should know about the company prior to investing. The following are five important factors to take into account when analyzing Neiman Marcus as an investment opportunity.
1. The Company Operates in a Volatile Industry
As many people know, the fashion industry is a fickle one, where trends rise and fall as quickly as the current rate of technological change. To combat this fact, Neiman Marcus needs to stay ahead of the fashion curve to achieve long-term success. Fashion apparel is ordered six to nine months in advance, making inventory management extremely important for the company. This also highlights the company's need to maintain good relationships with designers and market movers.
2. The Company Does Not Plan on Paying Dividends
Market Watch reports the company has no plans to pay a dividend in the foreseeable future. The company already generated a reported $4.8 billion in revenue for the fiscal year 2014 and is profitable year over year. However, Neiman Marcus plans to use those profits to pay down its debt, which is a good thing considering how much debt the company has on its balance sheet.
As of May 2015, Neiman Marcus has $4.7 billion in debt. This large amount of debt could mean the company may have trouble meeting its long-term obligations and affect its dividend payout strategy stated above.
3. The Company Has Loyal Customers Who Like To Spend Money
Neiman Marcus' customers are affluent; roughly 38% of its customers have a median household income of $200,000 or more. Additionally, 70% of its customers are women who enjoy shopping. On top of the high affluence of its customers, the company reports that its Incircle loyalty program was responsible for 40% of its total fiscal 2014 revenues, highlighting the loyalty of its customers.
Neiman Marcus has made a strategic effort to place its stores in high net worth areas so it can receive foot traffic by affluent individuals. This also increases the company's brand equity since it is associated with affluent areas.
4. The Company Plans To Expand Aggressively
The company's prospectus states there are plans to expand the footprint of Neiman Marcus due to the fact more stores fuel company growth. MyTheresa.com, a company acquired in October of 2014, plays a large role in Neiman Marcus's international expansion plans. Regarding the United States, the company has plans to open a 100,000 square-foot location in New York.
5. The Company Is Facing Lawsuits
On the downside, a class-action lawsuit was filed against Neiman Marcus in February of 2015 alleging that employees subject to minimum wage requirements were classified as interns and not properly, per minimum wage laws. This is another lawsuit of many the company has faced since 2007, which could affect the amount of cash it can generate in the future.