Why is Neiman Marcus shuttering its Last Call off-price business?
One might argue that no retailer does off-price better than TJX Cos. (Marshalls, T.J. Maxx), but Nordstrom (Rack) and Macy’s (Backstage) have also done well with the format. The same, however, can’t be said for Neiman Marcus, which has announced plans to close most of its 22 Last Call stores by October.
The luxury department store operator announced its plans for Last Call along with a reorganization that will see it combine its offline and online staff and put two distribution centers in Texas up for sale.
Proceeds from the sale of the two warehouses will go to purchasing equipment to help increase the speed of online deliveries, which make up about 30 percent of Marcus’s sales, according to a Dallas Morning News report.
Neiman Marcus is presenting the moves as a way to cut costs and free up capital that can be devoted to its core business.
“This is not a pullback,” Neiman Marcus CEO Geoffroy van Raemdonck told The Wall Street Journal. “This is a move forward. We’ve got a strategy that is working. We want to put our effort behind the full-price, luxury customer.”
Mr. van Raemdonck said that 20 percent of Neiman Marcus’s customers spend an average of $50,000 a year with the retailer.
Neiman Marcus has labored under billions of dollars in debt in recent years. The retailer restructured $5 billion in debt to push payments out to 2023, reports The Dallas Morning News, but has payments on most of the $137.3 million in existing bonds due this year and next.
The decision to cut loose its Last Call business could seem incongruous in light of the minority stake Neiman Marcus took in Fashionphile, a reseller of luxury handbags, jewelry and other accessories, last year.
The deal called for Neiman Marcus to set up Fashionphile Studio drop-off spots at up to seven stores. Sellers drop items off, receive an immediate quote and are paid with credits that can be redeemed at the department store.
In an interview with Fortune last April, Mr. van Raemdonck said, “There is a customer who enters the luxury market through re-commerce who one day will graduate into buying products of the season. We see [it as] a recruitment vehicle of the younger customers.”
Apparently, these same younger customers weren’t making purchases from Last Call.
- Neiman Marcus is closing down its Last Call business to focus on full-price luxury selling – The Dallas Morning News
- Neiman Marcus Backs Away From Discount Business – The Wall Street Journal
- Are secondhand sales the right branding move for Neiman Marcus? – RetailWire
- Sell Your Handbag at Neiman Marcus – Neiman Marcus
DISCUSSION QUESTIONS: Do you agree with the decision by Neiman Marcus to close its Last Call business? What is your assessment of the direction the retailer is taking under Geoffroy van Raemdonck?