Neiman Marcus Reportedly Plans to Close Major Stores Including Hudson Yards

By Candace Carlisle |  CoStar News  |  June 9, 2020  |  3:24 P.M.

High-end retailer Neiman Marcus reportedly plans to permanently close high-profile locations including Hudson Yards in New York City as part of its reorganization under Chapter 11 bankruptcy protection.

Hudson Yards developers Related Cos. and Oxford Properties have begun marketing Neiman Marcus’ three-story retail space in New York City for office use, according to Business Insider. Industry publication WWD names other locations that could be potentially closed, such as its downtown Dallas store, which is owned by Neiman Marcus, as well as locations in St. Louis; Fort Lauderdale, Florida; Natick, Massachusetts; and Westchester, New York.

Neiman Marcus was the first major department store to file for Chapter 11 bankruptcy protection in May because of the pandemic that forced the temporary closing of brick-and-mortar store locations. With the bankruptcy filing, Neiman Marcus would be able to change its store footprint without financial penalties for exiting real estate leases.

Neiman Marcus did not immediately respond to an emailed interview request. In a June 6 filing with the U.S. Bankruptcy Court for the Southern District of Texas in Houston, the Dallas-based luxury retailer said it intends to file a motion for potential “underperforming or geographically undesirable” store closings in its portfolio.

Neiman Marcus’ locations included 43 Neiman Marcus stores, two Bergdorf Goodman stores and 22 Last Call stores as of May. Neiman Marcus has reopened 13 of its stores with plans to open more in the next few weeks as government mandates allow.

Hudson Yards, built on valuable land on the west side of Manhattan, was developed at a relatively high cost at a time when mall retail sales were declining, said Sid Scheinberg, chair of Godwin Bowman’s bankruptcy and creditors rights section, who is representing one unsecured creditor and some of the jewelry designers on consignment in the Neiman Marcus bankruptcy.

“It’s fascinating they could spend that much money,” Scheinberg said, who recently visited the Neiman Marcus store at Hudson Yards. “Once you got inside Neiman’s, you could roll a bowling ball in the store and not hit anybody.”

Multiple phone calls and emails to Hudson Yards’ developers Related Cos. and Oxford Properties were not immediately returned.

Neiman Marcus expects to emerge from bankruptcy by Dec. 3, according to the June 6 filing, which will need approval from Judge David Jones, a bankruptcy judge who is also presiding over the J.C. Penney bankruptcy process. A hearing for Neiman Marcus’ debtors-in-possession motion is scheduled for June 10.

Neiman Marcus has also proposed a new board with seven directors as part of its reorganization plan, including Neiman Marcus’ CEO, three directors designated by Pacific Investment Management Co. as part of an agreed upon equity exchange with the lender, one director designated by Davidson Kempner Capital Management LP, one director designated by Sixth Street Partners LLC, and one independent director designated by holders of new equity that does not include Pacific Investment Management Co., according to the filings.

Neiman Marcus’ anticipated store closings could be announced in the next month or so, Scheinberg said. Earlier this year, Neiman Marcus announced the planned closure of its Last Call stores and the sale of its two Texas distribution facilities, including one in the Dallas area and one in Longview. The remaining Last Call stores should close by October, according to court filings.

The retailer’s bankruptcy plan has a provision to pay critical vendors, or those vendors Neiman Marcus will have to take care of and pay to keep luxury brands such as Gucci and Jimmy Choo on the shelves in stores upon emerging from bankruptcy, Scheinberg said. Vendors, as well as property owners, want to be on Neiman Marucs’ must-have list, which “they are keeping closely guarded” upon the luxury retailer emerging from bankruptcy, he said.

The move is reminiscent to how Neiman Marcus has conducted its long-time sales in stores with preferred customers making a list for preshopping before a luxury item is even put on the market. The invite-only list is part of the exclusive culture Stanley Marcus, former president and chairman of Neiman Marcus, built from the time he took the reins of the company from his father and aunt through the Texas oil boom times into the current century. At the height of its popularity, wealthy shoppers would fly to Dallas to shop at the flagship Neiman Marcus.

“He had an incredible business style, where he would create these catalogs with his and her planes or a place if someone desperately needed a gift on Christmas Eve, he would take a brandy snifter and stuff it with colorful cashmere scarfs and put jewelry between the scarfs,” Scheinberg said, who attended temple in Dallas with Marcus before his death in 2002. “The customer would walk out happy and Neiman Marcus ended up with a quarter-of-a-million-dollar sale.”

In all likelihood, cities where Neiman Marcus has multiple locations could be the first reviewed for what could be weaker locations based on sales performance and lease negotiations, Scheinberg said.

“They should be taking a serious look at each and every store,” he said, adding bankruptcy protection is the best place to lose a location or two if the numbers don’t work. “Their online presence won’t be enough to survive, they need to sell a younger generation on the panache of Neiman Marcus.”

For the Record

Neiman Marcus has hired the New York City and Chicago offices of Kirkland & Ellis LLP as general bankruptcy counsel, the Houston office of Jackson Walker LLP as local bankruptcy counsel, Berkeley Research Group LLC as restructuring adviser, Lazard Frères & Co. LLC as investment banker and Stretto as notice and claims agent. Mark Weinsten from the Boston office of Berkeley Research Group has been appointed chief restructuring officer, according to court filings.

ccarlisle@costar.com
@ByCCarlisle