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Saks and Neiman Marcus: More Evidence of Bifurcation

RJ Hottovy
Oct 14, 2022
Saks and Neiman Marcus: More Evidence of Bifurcation

Continuing our discussion about the bifurcation in consumer behavior this holiday season, we've taken a further look at high-end department stores this week. Saks Fifth Avenue saw shopper foot traffic increase 10% YoY in March 2022 and nearly as much in April 2022. As inflationary headwinds began to show in June, traffic was only down slightly, and by August 2022, Saks Fifth Avenue was showing a slight increase in traffic. On the other hand, Saks OFF 5th, which was showing strong growth leading up to April 2022 saw much more pronounced effects as inflation increased in the summer. Its customers have continued to decrease relative to last year as we go into the fall.

Neiman Marcus has also seen similar trends. Per Chain Store Age, the chain had a successful fiscal 2022 (ending July 31, 2022).  The article shared that the top 2% of customers drive 40% of sales and that 80% of top customers have at least $1M net worth. Our Placer.ai data reflects that indeed, Neiman Marcus foot traffic YoY was extremely strong comparatively for the first 9 months of its fiscal year.  Even in the light of inflationary pressures that began affecting retail foot traffic in early summer, Neiman with its base of affluent customers, hardly skipped a beat, with only minimal decrease in foot traffic. As Neiman had earlier trimmed its Last Call portfolio, we see that this streamlined group of stores also managed to weather recent headwinds. (These trends also reflect the improving inventory position that we expected for many off-price retailers as the year progressed.)

While less about the bifurcation in consumer trends and more about efficient inventory management, we believe that this WSJ article was informative in showing how Macy’s was able to avoid the inventory "pileup" issues that many department stores are now facing. Indeed, Macy's has seen its visits outperform the department store category for much of the year (although the outperformance has narrowed in recent months amid macro headwinds).

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RJ Hottovy

Head of Analytical Research, Placer.ai

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for nearly 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank.

R.J. also brings a wealth of experience with early-stage investments as an investment committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he has advised over 50 foodservice and foodservice tech companies on more than $200 million in early-stage capital raises and M&A transactions.

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