Financial Roundup: Neiman Marcus Sets Digital Plan, as Levi’s Hit by Down Dollar

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photo credit: Levi Strauss

Neiman Marcus rolls out digital strategy to curb losses, while Levi Strauss scores revenue gains but currency woes put a drag on profits.

Neiman Marcus Group

In a Nutshell: Neiman Marcus Group said financial results for the fourth quarter and fiscal year showed growing online sales, greater sales stability at full-line stores and improved inventory alignment, even as revenues fell and the company’s net loss narrowed in the quarter but widened for the year.

Neiman’s is also introducing a new strategy called “Digital First” to enhance its position in the luxury retail space by anticipating customers’ needs and engaging them more deeply to drive traffic online and in stores.

Sales: Neiman’s reported total revenues for the fourth quarter ended July 29 fell 0.5% to $1.12 billion from the fourth quarter of fiscal year 2016. For fiscal year 2017, the company reported revenue decreased 5.2% to $4.71 billion from $4.95 billion in fiscal 2016.

Earnings: The company reported a net loss of $366.3 million for the fourth quarter compared to a net loss of $407.3 million in the prior-year period. Adjusted earnings before interest, taxes, depreciation and amortization declined 25 percent to $48.2 million in the quarter compared to $64.5 million in the prior year. For the full year, Neiman’s reported a net loss of $531.8 million compared to a net loss of $406.1 million in the prior year. Adjusted EBITDA was $433.8 million compared to $584.9 million in the prior year.

CEO’s Take: Karen Katz, chief executive officer, speaking about the “Digital First” strategy that includes new technology for sales staff to better use customer data and analytics, said, “Our online business will continue to outperform our store business, and at 30 percent of total sales, it will continue to grow in importance.”

“Digital First strengthens our position as a leader in luxury retail by engaging the customer at every point in the shopping journey, including styling services and personalized shopping experiences,” she said, noting that Neiman’s is using proprietary digital clientele management tools to drive the business.

In addition, Katz said the Digital First strategy includes a focus on “product differentiation and innovation.”

[Read more about online sales: Could E-Commerce Solve the Store Problem?]

As for overall business Katz said, “Fiscal 2017 was a challenging one, but I would like to stress two key points. First, we completed the inventory management system review and resolved all operational issues. The good news is that it has already begun delivering benefits by providing us with new data-driven insights into the business and allowing us to manage inventory through auto-replenishment and subsequently merchandise and sales in a more disciplined, focused and nimble way. Second, we are seeing improvements in our business and positive momentum for the future.”

Levi Strauss & Co.

In a Nutshell: The jeanswear giant scored revenue gains around the globe, but a weak dollar hit the bottom line in the third quarter. In the Americas, excluding favorable currency effects of $3 million, net revenues grew 2 percent, primarily reflecting strong performance in the Levi’s Signature and Denizen brands, as well as performance and expansion of the company-operated retail network, including e-commerce.

In Europe, revenues grew 20 percent, reflecting broad-based growth across all markets and channels, while in Asia, revenues rose 2 percent, reflecting direct-to-consumer expansion, partially offset by lower franchise revenue due to continued pressures in the China franchise channel.

Sales: Net revenues grew 7 percent to $1.27 billion compared in the third quarter ended August 27 compared to $1.19 billion in the year ago quarter. Direct-to-consumer revenues increased 16 percent on performance and expansion of the retail network, as well as e-commerce growth. Wholesale revenues rose 4 percent, primarily reflecting growth in Europe.

Earnings: Net income in the quarter declined 10 percent to $88 million from $98 million in the year-ago period, reflecting foreign exchange losses on hedging contracts of $19 million, primarily driven by the weakening of the dollar against most foreign currencies, Levi’s reported. Adjusted earnings before interest and taxes grew 1 percent, as higher revenue and gross margins were offset by an $11 million non-cash stock-based compensation expense recorded during the third quarter and the recognition of a $7 million benefit from the resolution of a vendor dispute settled in the prior-year period.

CEO’s Take: Chip Bergh, president and CEO, said: “We are pleased with our progress this quarter and year-to-date. Our strategies are working and, despite the challenging retail environment, we are achieving profitable growth. Based on the strength of our increasingly diversified business and confidence in our brands, we are investing in incremental advertising and media across both the Levi’s and Dockers brands in the fourth quarter.”

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