The Neiman Marcus Group Reports Second Quarter Earnings

February 21, 2001 at 12:00 AM EST

CHESTNUT HILL, Mass.,--(BUSINESS WIRE)--Feb. 21, 2001 --- The Neiman Marcus Group, Inc. (NYSE: NMG/A, NMG/B) today reported diluted earnings per share of $0.84, comparable to a year ago, on a 2.6 percent total revenue gain in the second quarter of fiscal 2001.

For the 13 weeks ended January 27, 2001, the Company reported that total revenues rose to $900.8 million from $878.1 million in the year-ago period. Comparable revenues for the quarter rose 1.5 percent. Operating earnings decreased 6.0 percent to $70.1 million from $74.6 million in the year-ago quarter. Diluted net earnings per share were $0.84 on net earnings of $39.9 million with fewer shares outstanding compared to net earnings of $41.3 million, equal to $0.84 diluted earnings per share in the prior-year period.

For the 26 weeks ended January 27, 2001, total revenues rose 6.1 percent to $1,640.6 million from $1,546.4 million in the first half of fiscal 2000. Comparable revenues increased 5.5 percent. Operating earnings for the first six months were $153.6 million, up 6.6 percent from $144.1 million a year ago. Net earnings before cumulative effect of an accounting change were $88.1 million, equal to $1.85 per diluted share compared with net earnings of $78.7 million, or $1.60 per diluted share in the prior-year period.

''As we expected, this year's challenging holiday retail environment led to low single-digit top-line growth in the quarter, while higher markdowns put pressure on our operating margins,'' said Robert A. Smith, co-chief executive officer. ''With our exceptional earnings growth in the first quarter, we are pleased to have met our financial goal of mid-teens growth in earnings per share for the first half of the year.''

Specialty Retail Store Revenues Up 0.6 Percent

Second quarter revenues in the Specialty Retail Store segment rose 0.6 percent to $750.9 million. Total revenues at Neiman Marcus Stores rose 0.4 percent in the quarter, with comparable revenues down 0.6 percent. Bergdorf Goodman posted a 1.9 percent gain in total and comparable revenues.

Operating earnings for the segment declined 9.1 percent to $65.5 million from $72.1 million a year ago primarily due to higher markdowns taken at Neiman Marcus Stores and Bergdorf Goodman.

Direct Marketing Revenues Up 9.1 Percent

Second quarter revenues at Neiman Marcus Direct were $125.6 million, up 9.1 percent from $115.1 million in the year-ago period. Strong sales gains in the Chef's Catalog and Horchow businesses were partially offset by weaker sales in apparel.

Operating earnings of $7.5 million were comparable to a year ago, reflecting flat gross margins and planned higher expenses primarily due to increases in postage and handling as well as costs associated with a new distribution center for Chef's Catalog.

Strong Revenue Growth in Brand Portfolio, E-Commerce

The Kate Spade and Laura Mercier brands posted strong revenue growth in the quarter. Also included in the Other segment were NeimanMarcus.com revenues, which more than tripled compared to last year. E-commerce expenses totaled approximately $4.5 million in the quarter and were included in selling, general and administrative expenses.

Outlook

''We remain cautiously optimistic in our outlook for the year,'' said Mr. Smith. ''Given the current challenging retail environment, we are now planning for a 3 to 5 percent comparable revenue growth rate for the balance of fiscal 2001. However we may not achieve that rate of growth every month,'' said Mr. Smith. ''In addition we face the challenge of cycling against double-digit comparable revenue gains in last year's third and fourth quarters.''

''The third quarter is a full-price selling quarter,'' said Brian J. Knez, co-chief executive officer. ''Although February is off to a slow start, we expect to drive profitable growth in the quarter through stepped-up marketing initiatives and full-price promotions, such as Neiman Marcus Stores' Butterflies game which begins today.''

Inventories at the end of the quarter were $614 million compared to $538 million a year ago, reflecting lower than planned second quarter sales, a planned shift in receipt flow, and inventory for the new Palm Beach store.

''SG&A in the quarter was essentially flat as a percentage of revenues versus last year, and we expect to gain greater benefit in the second half from cost-cutting measures implemented in the second quarter,'' Mr. Knez continued. ''We currently believe that these initiatives, combined with a 3 to 5 percent comparable revenue growth rate, will enable us to reach our earnings target of mid-teen earnings per share growth for the year.''

The Neiman Marcus Group includes the Specialty Retail Stores segment, which consists of Neiman Marcus Stores and Bergdorf Goodman, and the Neiman Marcus Direct segment, which is the Company's direct marketing operation.

A live webcast of the conference call on earnings will be available on Wednesday, February 21 at 11:30 a.m. (EST) on www.neimanmarcusgroup.com.

Statements in this release referring to the expected future plans and performance of the Company are forward-looking statements. Actual future results may differ materially from such statements. Factors that could affect future performance include, but are not limited to: changes in economic conditions or consumer confidence; integration of acquired businesses; changes in consumer preferences or fashion trends; delays in anticipated store openings; adverse weather conditions, particularly during peak selling seasons; changes in demographic or retail environments; competitive influences; significant increases in paper, printing and postage costs; and changes in the Company's relationships with designers and other resources. For more information, see the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

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                     THE NEIMAN MARCUS GROUP, INC.
                  CONSOLIDATED STATEMENTS OF EARNINGS

                           For the Twenty-Six      For the Thirteen
                               Weeks Ended            Weeks Ended
(In thousands except      Jan. 27,     Jan. 29,   Jan. 27,  Jan. 29,
  for per share amounts)    2001         2000       2001      2000
                                      (Restated)           (Restated)

Revenues                 $1,640,557   $1,546,426  $900,836  $878,082
Cost of goods
 sold, including
 buying and
 occupancy costs          1,062,576    1,005,757   613,679   589,365

Selling,
 general and
 administrative
 expenses                   416,151      388,757   213,139   209,917

Corporate expenses            8,220        7,767     3,933     4,219

Operating earnings          153,610      144,145    70,085    74,581

Interest expense             (8,351)     (12,789)   (4,073)   (6,003)

Earnings before
 income taxes,
 minority interest
 and cumulative
 effect of
 accounting change          145,259      131,356    66,012    68,578

Income taxes                (55,198)     (49,915)  (25,084)  (26,059)

Earnings before
 minority interest
 and cumulative
 effect of
 accounting change           90,061       81,441    40,928    42,519

Minority interest
 in net earnings
 of subsidiaries             (1,998)      (2,742)     (994)   (1,263)

Earnings before
 cumulative effect
 of accounting
 change                      88,063       78,699    39,934    41,256

Cumulative effect
 of accounting
 change, net                  1,860         --        --        --

Net earnings             $   89,923   $   78,699  $ 39,934  $ 41,256

Weighted average
 number of common
 and common
 equivalent shares
 outstanding:
Basic                        47,032       48,844    47,119    48,610
Diluted                      47,538       49,035    47,621    48,888

Earnings per share:

Basic:
  Earnings before
   accounting change     $     1.87   $     1.61  $   0.85  $   0.85
  Accounting change            0.04         --        --        --
  Basic net earnings     $     1.91   $     1.61  $   0.85  $   0.85

Diluted:
  Earnings before
   accounting change     $     1.85   $     1.60  $   0.84  $   0.84
  Accounting change            0.04         --        --         --
  Diluted net earnings   $     1.89   $     1.60  $   0.84  $   0.84


Contact:
     The Neiman Marcus Group, Inc.
     Jonna Manes, Director
     Corporate Relations
     (617) 232-0760