Neiman Marcus Co. Business Information, Profile, and History
Dallas, Texas 75201
History of Neiman Marcus Co.
The name Neiman Marcus is practically synonymous with upscale retailing in the United States. In the mid-1990s, Neiman Marcus Co. operated as a division of the Neiman Marcus Group, which included Bergdorf Goodman, another high-end retail operation, and Contempo Casuals, a 247-store chain catering to the needs of younger working women. The Neiman Marcus division included both the 27 stores bearing the famous Neiman Marcus name, and NM Direct, which sells through the Neiman Marcus and Horchow specialty catalogs. For much of the twentieth century, Neiman Marcus has been the clothing store of choice for many of the nation's most fashion-conscious people.
From the very beginning, the founders of Neiman Marcus aimed high. The original store was opened in Dallas in 1907. Its proprietors were Herbert Marcus, his sister Carrie, and Carrie Neiman's husband, A. L. Neiman. All three were working in various retail positions in the Dallas area around the turn of the century. Frustrated by their dead-end jobs, Marcus and Neiman decided to strike out on their own. The pair moved to Atlanta in 1905 to start a sales promotion and advertising business. The venture was quite successful, and they were offered a lucrative buy-out deal after only two years of operation. Given the choice between $25,000 cash or the Missouri franchise for Coca-Cola and some stock in that young company, they opted for the cash. In retrospect, that decision cost them a fortune, as Coke went on to become the Real Thing. In taking the cash, however, they acquired the seed money to launch the first Neiman Marcus store.
Neiman and Marcus returned triumphantly to Dallas in 1907, and immediately set out to open a store that sold the finest women's clothing money could buy. The store was lavishly furnished and stocked with clothing of a quality that was not commonly found in Texas. Within a few weeks, the store's initial inventory, mostly acquired on a buying trip to New York made by Carrie, was completely sold out. Oil-rich Texans, welcoming the opportunity to flaunt their wealth in more sophisticated fashion than was previously possible, flocked to the new store. In spite of a nationwide financial panic set off only a few weeks after its opening, Neiman Marcus was instantly successful, and its first several years of operation were quite profitable.
In 1913 the original Neiman Marcus store, and most of its merchandise, was destroyed by a fire, the first of several in the company's history. Within about two weeks, however, the store re-opened at a temporary site nearby, and construction was quickly begun on a new permanent location. With capital raised through the sale of stock to a handful of manufacturing companies, the new building was ready for business by the autumn of 1914. In its first year at the new building, Neiman Marcus recorded a profit of $40,000 on sales of $700,000, nearly twice the totals reached in its last year at the original location.
Business at Neiman Marcus got better and better over the next several years, as money from oil, cattle, and cotton continued to flow into Texas. Throughout this period, the store maintained its commitment to extravagance, lining the aisles with the fanciest merchandise that could be found. Gradually, the store's reputation expanded beyond the borders of Texas, and soon glamorous types from Hollywood, New York, and even Europe were making special trips to Dallas to shop at Neiman Marcus.
In 1926 Al and Carrie Neiman were divorced, and Neiman's interest in the store was bought out by the Marcus family. The Marcuses remained at the top of the company's management for the next sixty years. Stanley and Edward Marcus, two of Herbert's sons, joined the company in 1926. A big expansion project at the store was completed in 1927, following the acquisition of some property next door. As a result, the store's capacity was nearly doubled. Neiman Marcus added men's clothing to its offerings with the 1928 opening of the Man's Shop. By 1929, the store's net sales had reached $3.6 million.
The onset of the Depression forced Neiman Marcus to shift its strategy. During the 1930s, the company began to include less expensive clothing lines in its inventory in hopes of keeping customers whose fortunes had taken a turn for the worse. At the same time, the store continued to stock the pricier, high-end items that made it famous and it continued to attract wealthy Texans. Company lore from this era tells of a barefoot teenage girl walking confidently into the store and ordering thousands of dollars worth of merchandise. Her father had just struck oil, and her first impulse was to head straight for Neiman Marcus. By striking a balance between upper-crust fashions and more moderate ones, Neiman Marcus was able to maintain its elite reputation while also broadening its customer base. This successful transition to a more democratic clientele enabled the company to sustain its impressive growth rate, and by 1938 annual sales had broken the $5 million mark. Along the way, the store's Man's Shop was expanded, first in 1934 and again in 1941.
The move to include lower-priced merchandise accelerated during the 1940s. World War II brought hundreds of high-paying defense manufacturing jobs to the Dallas area. To the female workers and the wives of their male counterparts, shopping at Neiman Marcus was like a dream come true. The Marcuses were quick to stock their store with merchandise that was affordable to this new wave of middle class customers. Between 1942 and 1944, sales at Neiman Marcus grew from $6 million to $11 million. Still, the company was able to cultivate its special relationship with the super-rich, and the store took on a sort of split personality. This trend increased even further at the war's end, as more companies opened offices in Dallas, and young families with junior executive salaries settled in.
The immediate postwar years saw many changes at Neiman Marcus. Shortly after the war's end Marcus's two other sons, Herbert, Jr. and Lawrence, joined the company. In 1946 Neiman Marcus suffered the second major fire in its history. Despite substantial damage to both the building and its merchandise, the store was closed for only five days. Even with the loss of those peak Christmas shopping days, the store recorded its best season to date that year. Herbert Marcus, Sr. died in 1950, and Carrie Neiman died just two years later, leaving Stanley Marcus in charge of the company's operations.
Stanley Marcus led the company in a period of rapid expansion during the 1950s. In 1951 a second store was opened at Preston Center in the suburbs of Dallas. In 1952 a new service building was opened to handle merchandise for both stores. And in 1953 a major renovation project added a fifth and a sixth floor to the Dallas store. In 1955 Neiman Marcus made its move into the Houston market. Rather than take on the expense of a new building, the company merged an existing store, Ben Wolfman's, into its operation. The company's reputation for lavish display grew along with its stores, as the company inaugurated the annual Neiman Marcus Fortnight in 1957. The Fortnight was a presentation of fashions and culture from a particular country, held in late October and early November of each year. Another popular annual publicity stunt was launched in 1959. Beginning that year, an extraordinary His and Hers gift selection was included in each Neiman Marcus Christmas catalog. His and Hers gifts over the years have included such spectacular items as submarines, dirigibles, and robots.
Another generation of Marcuses came on board in 1963, when Stanley's son Richard Marcus joined the company as a buyer. The following year, fire devastated the main Dallas store, again during the peak Christmas shopping season. Once again, the store was reopened quickly, and the repair work included improvements to the store's appearance. In 1965, with the population of suburban Dallas growing by leaps and bounds, the Preston Center store was closed, and a new store, more than twice as big, was opened at NorthPark Center, also in the Dallas suburbs. Another branch was opened in nearby Fort Worth around that time as well. By 1967 the four Neiman Marcus stores in operation were generating annual sales of $58.5 million, and the company's profit for that year was in excess of $2 million.
Neiman Marcus ceased being a family business in 1968, when the company was merged into Broadway-Hale Stores, Inc., a West Coast retail chain with 46 stores and revenue of $457 million. The merger enabled Neiman Marcus to expand at a much faster pace than would have been possible as an independent entity. Over the next decade-and-a-half, the chain grew at a rate of about one store a year. With the opening of stores in California, Florida, and several other states during the 1970s, Neiman Marcus became a coast-to-coast operation. Atlanta; St. Louis; Northbrook, Illinois; Washington, D.C.; and White Plains, New York were among the other places to receive new Neiman Marcus stores during this period. Although this quick proliferation lessened Neiman Marcus's exclusive image in the eyes of some customers, the major loss of lustre that some feared would accompany its marriage to a less ritzy chain did not occur.
Meanwhile, changes and expansion were taking place at Neiman Marcus's Texas strongholds, too. The Dallas service center was dramatically enlarged in 1973, and in 1977 a new store at Ridgmar Mall replaced the previous Fort Worth location. In 1975 Stanley Marcus became executive vice president of Carter Hawley Hale Stores, Inc. (formerly Broadway-Hale), in charge of its specialty store division, which included Neiman Marcus. Son Richard was named chairman and CEO of Neiman Marcus in 1979. By 1980, the year the company opened its first store in the Northeast, annual sales were in the neighborhood of $350 million.
The nationwide expansion of Neiman Marcus proceeded most quickly between 1979 and 1984, when the chain doubled in size to 21 stores. By 1984, however, it was clear that not all of the new stores were performing as well as expected against rivals like Bloomingdale's and Sak's Fifth Avenue. At that point parent Carter Hawley Hale pulled in the reins on the chain's growth. In 1984 a hostile takeover bid for Carter Hawley was launched by retail chain The Limited, which offered to buy the company for $1.1 billion. In battling against the takeover, Carter Hawley found a white knight in General Cinema Corporation, a company whose $1 billion in revenue came from soft drink bottling and movie theaters. General Cinema bailed Carter Hawley out by purchasing 38.6 percent of the company's voting stock.
Two years later, The Limited teamed up with shopping center magnate Edward DeBartolo to launch a second attempt at Carter Hawley. This time, the defense involved a corporate restructuring that included spinning off Carter Hawley's specialty store division into an independent, publicly traded entity called Neiman Marcus Group. In exchange for its Carter Hawley stock, General Cinema was awarded 60 percent interest in the new company, which consisted of not only the Neiman Marcus stores, but also of exclusive New York retailer Bergdorf Goodman and the 200-store Contempo Casuals chain. Neiman Marcus stores contributed about three-fourths of the Group's sales power.
As General Cinema sought to return Neiman Marcus to its dominant position among upper end specialty retailers, Allen Questrom was named president and CEO of Neiman Marcus Stores, replacing Richard Marcus and drawing the final curtain on the Marcus dynasty. By 1990, the Neiman Marcus Group, led by Neiman Marcus Stores, was General Cinema's most important money-maker, contributing about 90 percent of GC's $92 million in operating profit. Questrom resigned his position in February of that year and was succeeded as president and CEO of Neiman Marcus stores by Terry Lundgren.
A new round of expansion began at Neiman Marcus under Lundgren. New stores were opened in Denver in 1990; Minneapolis and Scottsdale, Arizona in 1991; and Troy, Michigan (a Detroit suburb) in 1992. In 1993 Lundgren was given the title of chairman, while remaining CEO. Gerald Sampson, formerly with The May Department Stores Company, was named president and chief operating officer of Neiman Marcus Stores. For that year, the company recorded revenues of $1.45 billion, a 12.7 percent jump over the previous year. Part of this success during a tough retail climate resulted from an increased emphasis on big-name designer labels, such as Calvin Klein, Georgio Armani, and Donna Karan.
As the 1990s rolled on, Neiman Marcus continued its attempts to attract new, younger customers, while maintaining its commitment to meet the needs of its core, upscale clientele. Toward this end, NM Workshop boutiques that focused on career wardrobes were added at several Neiman Marcus locations. In addition, construction was begun on a new Neiman Marcus store in Short Hills, New Jersey, in 1994, and other stores in New Jersey and Pennsylvania were planned. 1994 also brought another reshuffling among executives. Lundgren left the company for a position at Federated Department Stores Inc. in February. The vacated chairman and CEO spots at Neiman Marcus were filled by Burton Tansky, who formerly held those titles at Bergdorf Goodman.
In his 1974 book Minding the Store, Stanley Marcus asserted that a company's quality standards inevitably decrease as its number of branches increases. Since that time, Neiman Marcus has managed to thwart its longtime leader's axiom through both good and bad economic periods. Despite its geographic spread and the more populist range of its merchandise, Neiman Marcus's reputation as the store of choice for America's elite remains more or less intact.
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