Neiman Marcus, Saks Sales Send Ripples through Industry

Even though an investment group last month agreed to buy The Neiman Marcus Group Inc. for approximately $5.1 billion, with the deal slated to close by fourth quarter 2005, it was the recent sale of 47 Saks retail outlets--and more possibly to come--that had some industry insiders buzzing.

"The Neiman Marcus sale is the meekest of all the changes in the retail market," said Randy Woodle, managing director at CB Richard Ellis Inc. "It's a major deal in terms of dollar value, but ... I don't see this having a major effect on the real estate end." A Neiman Marcus spokesperson confirmed that there are no plans to consolidate.

Meanwhile, Sperry Van Ness vice president of retail investments Gwen MacKenzie paid special note to Saks Inc., which last month sold 22 Proffitt's and 25 McRae's department stores in the Southeast to Charlotte, N.C.-based retailer Belk Inc. for $622 million. The deal is slated to close next month. "Saks realizes they can't be everything to everybody," MacKenzie said. "Selling those mid-price department store chains makes sense, as it allows Saks to focus on their core upscale customers."

The luxury retailer will continue to operate its 38 Parisian stores and its 100-plus-store Saks Fifth Avenue Enterprises business segment, but more deals may be on the horizon. There has been speculation that Saks will sell its Club Libby Lu specialty store and its northern department store division, which consists of 143 retail stores throughout 12 Midwestern and Great Plains states.

"Companies are repositioning themselves, but it appears that the buyers think there is value in the retail market," said Mark Gibson, senior managing director at Ernst & Young L.L.P. "This includes the ability to sell from assets, (gain) profitability from ongoing business or a combination of both. The retail market is in flux."

In fact, rumors of a J.C. Penney acquisition are circulating, while others suggest that Neiman Marcus may open retail outlets overseas, in particular in Mexico, Canada and Western Europe.