Neiman Marcus's owners are hoping to raise $100 million by taking the luxury retail chain public, the company said on Monday (June 24).
Neiman's owners—private equity firms TPG Capital and Warburg Pincus—have been trying to sell the chain, which operates 40 Neiman Marcus and two Bergdorf Goodman stores, for $8 billion. The difficulty is that luxury retail hasn't bounced back quickly since the recession. Neiman's sales have just reached prerecession levels and seem to be slowing. Luxury spending grew only 5 percent in 2012, according to Bloomberg.
Another problem is more competition among retailers for luxury customers. Prime retail space in U.S. cities is increasingly being snapped up by international luxury bands, which means Neiman and its U.S. rivals risk losing share in a slowly growing luxury retail market.
That's trouble for Neiman's private equity owners, who bought the retailer for $5 billion in 2005 at the height of the pre-recession retail buyout boom. Usually such investments would have been resold within five years, but the recession made that unprofitable. TPG and Warburg have now held onto the chain for eight years, and are under increasing pressure to deliver some cash to investors.
In May, there was talk of merging Neiman with Saks NYSE:SKS, but that never happened. TPG and Warburg are reportedly still trying to sell Neiman as an entire company, but an IPO looks like it might deliver cash sooner. However, how much an IPO will actually raise—and whether that will help the private equity firms speed up their long-overdue exit from Neiman—remains unknown.
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