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Neiman Marcus Eyes an Exit

Private equity firms TPG and Warburg want to get paid


Neiman Marcus is reportedly considering some type of cash-out, though whether it’ll be an initial public offering, sale or dividend recap is up in the air.

The high-end retailer went private — with the help of TPG Capital and Warburg Pincus — back in 2005 in a transaction valued at $5.1 billion. Since then, Neiman Marcus has worked aggressively to create a “shop any time, anywhere and any place” platform, with a variety of e-commerce sites and mobile apps to connect with customers. Online sales came to about 20.2% of total revenues in 2012.

Even in stores, all employees have Apple (NASDAQ:AAPL) iPhones, and each department includes iPad lookbooks.

Neiman Marcus offers many of the world’s top luxury brands, including Chanel, Gucci, Prada, Estee Lauder (NYSE:EL), David Yurman, Vince, Giorgio Armani, Theory, Akris, Ermenegildo Zegna and Christian Louboutin.

While the world economy is on somewhat shaky ground right now, Neiman Marcus is in decent shape. That’s because affluent populations — especially those in Asia — are thriving and growing, and Neiman has been aggressive in expanding into those markets.

In the latest quarter, Neiman Marcus posted sales of $1.36 billion, up from $1.28 billion in the same period a year ago. Comparable revenues increased by 5.3%, and operating earnings rose by 14.5% to $124.4 million.

Still, while Neiman Marcus looks attractive as an IPO candidate, it’s no slam-dunk. Luxury operators, while in an enviable position with high margins and somewhat financially protected clientele, have had a mixed track record for investors. Tiffany’s (NYSE:TIF), for instance, has returned an annual average of 17% for the past three years to beat the S&P 500‘s 10% average; Saks (NYSE:SKS), however, has only returned just under 5%.

Of course, all this conjecture might be moot. Neiman Marcus’ other options include selling out to another large retailer — perhaps even Saks — or a group of private equity operators. Or it could initiate a large dividend payout (which would be easy to pull amid rock-bottom interest rates).

Either way, it’s a good bet that at the very least, TPG and Warburg will find a way to monetize their investment.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/neiman-marcus-eyes-an-exit/.

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