Neiman Marcus on IPO Rumors: “No Comment”

Eighteen months ago, an investor group led by Texas Pacific Group and Warburg Pincus took luxury goods merchant Neiman Marcus Group private in a $5.1 billion deal. Now rumors are circulating that the luxury merchant may be preparing to file for an initial public offering (IPO).

When asked on April 17 about a potential filing, Ginger Reeder, vice president of corporate communications for Dallas-based Neiman Marcus Group, said, “We have no comment to make on this rumor.”

But Craig Battle, managing director of Princeton, NJ-based investment bank Tucker Alexander, hopes the rumors are true. “It certainly would make sense if the company has done well,” he says. “It’s a world-class name. Private equity firms talk to underwriters on the street and find out what interest there is. It would be a positive thing for the industry to have a successful IPO.”

Annual sales for Neiman Marcus Group, which mails the Neiman Marcus and Horchow apparel and home decor catalogs, increased 9%, to nearly $4.11 billion for the fiscal year ended July 29, 2006. Despite the revenue increase, earnings for the fiscal year fell 20%, to $328.1 million from $409 million the previous year. Direct marketing sales rose 11%, to $655.3 million from $592.1 million, and same-store sales increased nearly 7%. In addition to the flagship retail chain, the company owns New York’s high-end Bergdorf Goodman store.

Typically, Battle says, there is a disparity between valuations for public companies and private firms, with public companies commanding higher multiples. “If you can leverage a deal into the public market, from the point of view of a valuation you can do very well,” he says. “The market has been very selective about which multichannel marketers are going to have success. But with positive feedback from underwriters, it’s a great way to cash out some of your holdings.”

Stuart Rose, managing director for Wellesley, MA-based investment bank Tully & Holland, says the IPO market “right now is very strong. It’s a way for private equity investors to cash out after only a couple of years. Without any insider knowledge, I assume they are doing well, otherwise they would go to another private equity group. Luxury retail has been a segment that has remained strong, as incomes at the high end have been strong.”

Battle says there isn’t any “set timetable” regarding how long a company needs to perform at a certain level before it should file an IPO. “It’s a function of company performance and market conditions,” he says. “If they perceive a window in the market, they’re going to take it provided they’re getting the right feedback from the underwriters and they can summarize growth prospects in the market.”

Neiman Marcus is “a premier name in the retail marketplace,” Battle continues. “If the numbers were good, it would make a nice IPO. And it would further establish that this is a good market to be in and lift values across the board. I hope they do it and are successful with it.”