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Neiman Marcus CEO details ‘very energizing’ luxury retail momentum

Neiman Marcus Group CEO Geoffroy van Raemdonck joins Yahoo Finance Live to discuss how business has changed, distribution expansion, consumer needs, sales momentum, inventory levels, and the outlook for luxury consumers.

Video Transcript

BRIAN SOZZI: Neiman Marcus emerged from bankruptcy in September 2020, boasting billions-- or cutting billions of dollars in debt, and with a goal to invest hundreds of millions into stores and e-commerce operations. I talked to Neiman Marcus CEO Geoffroy van Raemdonck about the company's turnaround plan and the state of the luxury market at the Goldman Sachs annual retail conference.

GEOFFROY VAN RAEMDONCK: Well, we're seeing a lot of great faces that we've not seen recently. So that feels very energizing, as energizing as the state of Neiman Marcus Group. Our momentum is really tremendous. We closed our fiscal year in July, reported comp sales up 30% compared to the prior year, with quality growth of our customers, expansion of distribution with top brands, and also full price selling. And so that's the business from a business standpoint.

But the business has changed, and we've redesigned it to be really tailored to the needs of the customer. I look at it as an integrated luxury platform that operates 36 market locations at Neiman Marcus. Obviously, Bergdorf in the most iconic corner of--

BRIAN SOZZI: I've heard of that place.

GEOFFROY VAN RAEMDONCK: --of retail in North America. We have two digital properties that have 300 million visits a month. And then we have 3,500 plus sales associates who, in average, have 10 years of tenure with us, and 1,000 of them have a book of business of more than $1,000,000 of revenue. And so that's our business today.

BRIAN SOZZI: 30% sales increase for the year ended in July, that's huge. That is a big number. I'm not seeing that-- I didn't see that anywhere else from your competitors. What is driving that? What drove that?

GEOFFROY VAN RAEMDONCK: I think what drives it is a unique business model we have. We are a relationship business. We have a relationship with the real luxury customer. So if you look at our customers, 2% of the customers make 40% of our sales. They spend on average $27,000 a year, and we retain 90% of them. So these are customers who are committed into luxury and are coming back to their lifestyle. And as they're coming back to a normal lifestyle, are spending in fashion, jewelry, and beauty. So that's one big driver.

The other driver is our relationship with the brands. The top 20 brands that we have are all the top 20 luxury brands, and they account for 50% of our sales if you look at it for the last year. And they're growing at a disproportionate rate. And so I think the combination of talking to the luxury customer and offering them unique elements from the luxury brands, that's what's driving our growth.

And then obviously, we've seen an expansion of the market with a lot of new customers who are coming at a higher rate than before COVID. And we retain one out of six of them come back within three months. And so I think there's health coming in the new customer as well.

BRIAN SOZZI: I've gone to some of your competitors. As soon as I walk in the door, I'm hit with discounted inventory. This industry is awash in things that didn't sell in the second quarter. Is that hurting your business are you seeing high levels of inventory?

GEOFFROY VAN RAEMDONCK: So we have been very prudent in the inventory we've bought. We've had actually record highest full price selling, which I think reflects the fact that we bought cautiously, but this also reflect the fact that our customers are buying full price because they love the brands. These brands tend to not discount. And we have a lot of exclusive where the price is not the matter. It's more of having the product while it's available.

I do think that some of our full priced selling is not there forever. But I fundamentally believe that we can retain a lot of the increase in full price margin in the future.

BRIAN SOZZI: How are you planning for the holiday season?

GEOFFROY VAN RAEMDONCK: So right now, we're going into the holiday season cautiously optimistic. And I think we in a business where we always need to be agile. We've planned a holiday with a lot of newness. We've just-- we launched our holiday book at the end of October. And there's a lot of excitement about a holiday where people can gather together and when they can celebrate love.

BRIAN SOZZI: Perhaps you could bust this myth for us, that luxury shoppers are only people over the age of 60. Are you seeing that at all?

GEOFFROY VAN RAEMDONCK: So we see that 70% of our customers are below the baby boomers. And 30% of them are millennials. So there is a wide array of customers who participate in luxury. What's been interesting during the pandemic is to see two things-- younger customers engaging in luxury and men engaging in luxury.

And that-- if I look at other geographies, men have been in luxury in Europe and in Asia at a higher rate than in the US. And that's changing. And it's changing across all age and demographic, which is part of why I think luxury is there to continue to grow because intrinsically, there's more participating forces in the market.

BRIAN SOZZI: You're leading a very different company than what it was a couple of years ago. Post restructuring, you were able to take a lot of debt off the books. And now how are you spending those savings? And what are you positioned to do over the next three years?

GEOFFROY VAN RAEMDONCK: So we're in a great position. Our liquidity is above a billion dollars. Our net debt ratio--

BRIAN SOZZI: Great place to be in.

GEOFFROY VAN RAEMDONCK: --is around 1. So we're in a place where we can invest in the luxury experience. Our investments are going in different places. So investing in stores, about 200 million, half of it is funded by the landlords. And that's going to touch about 1/3 of our stores and half of our top stores. And it's about making the experience more interesting, but also improving the productivity by giving more brands more space, reflowing to the better category. So that's a big part of our investment.

Another part of the investment is in our digital properties. We just partnered with FARFETCH to re-platform bergdorf.com on their technology. We still operate our business, but we have the benefit of being on their technology. And we can then scale globally and leverage their services of translation, taking money in a different currency. And that's going to allow us to bring Bergdorf Goodman overnight in multiple geographies. We are also investing in our supply chain, which is--