Neiman Marcus Direct Activity More Profitable In Quarter, Half

Margins for Neiman Marcus’s direct response activity boomed during the first half of its fiscal year, jumping by 70% for the first six months and more than doubling during its second quarter.

First, the big picture. Neiman Marcus racked up just over $1.1 billion during its second quarter, up slightly from $1.08 billion during its second quarter 2009. But for the first half of the year, sales slipped from $2.07 billion in 2009 to $1.97 billion during the most recent half.

Neiman Marcus had taken $560.2 million in writedowns during its second quarter of 2009, resulting in a net loss of $509.3 million for the quarter and $496.4 million for the half. Absent similar writedowns this year, the company posted $4 million in net income or the quarter, and $12.5 million in income for the half.

Direct marketers can take some pride in that much of the income came from increased operating margins within its direct marketing operations. For the most recent quarter, specialty retail sales amounted to $881.2 million, up from $870.6 million a year ago. But specialty stores took a $9.6 million operating loss last year, and managed only $66.5 million in operating income during the most recent quarter – roughly 7.5% of sales.

In contrast, direct sales ticked up from $208.8 million to $221.2 million between the quarters. But while direct marketing operating income was a respectable $17.2 million, or 8.3%, of sales a year ago, it jumped to $40.7 million, or 18.4% of sales, for the quarter just ended.

The first half followed this pattern. Specialty store revenue slipped from just under $1.7 billion for first-half 2009 to $1.6 billion, while retail operating income rose from 5% ($84.8 million) to 9.7% ($154.9 million) during the same period.

But direct marketing operations in the first half pulled in $368.5 million, only slightly off the $367.5 million they generated a year ago. And operating income jumped from 10% a year ago ($36.7 million) to 16.9% ($62.4 million).

The company did not detail what changes, if any, it had made to its marketing mix. Neiman Marcus does not break out marketing expenditures in its financial statements.