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Neiman Marcus is Exploring a Sale of Online Luxury Retailer MyTheresa

Neiman Marcus Group Ltd. has begun a process to explore its options for MyTheresa, including a sale of the operation.

The exploration of a sale was disclosed in a regulatory filing with the Securities and Exchange Commission on Tuesday.

Neiman Marcus said in the filing, “No decision has been made to pursue any specific transaction or other strategic alternative, and there can be no assurance that the exploration of strategic alternatives will result in the completion of any transaction.”

The luxury department store disclosed that the MyTheresa operation, a German online luxury retailer, had sales of about 272.1 million euros ($311.5 million). Operative earnings before interest, taxes, depreciation and amortization was reported at 15.3 million euros ($17.4 million).

The filing also disclosed that for the third quarter ended April 27, Neiman Marcus expects to report a decline in comparable revenues of between 1.3 percent to 1.9 percent when compared with the same year-ago quarter in 2018. The luxury retailer also said it expects to report a decline in adjusted EBITDA for the third quarter of fiscal year 2019, to between $119 million to $129 million, versus $143.1 million for the quarter in fiscal year 2018. Neiman Marcus also cautioned that the numbers are “preliminary estimates” based on the most current information available to management.

Neiman’s exploratory process for MyTheresa, which it acquired a little over four years ago, has already garnered some criticism from hedge fund Marble Ridge Capital, which in December filed a lawsuit against the retailer alleging that its move of the online business to a holding company last year was tantamount to a fraudulent transfer.

Such transfers have come under fire by bond investors because the transfer is typically to an entity that is shielded from creditor claims in the event of a bankruptcy or other restructuring. Apparel retailer J. Crew Group Inc. did a similar move, which also drew fire from some creditors.

On Tuesday, Marble Ridge said in a statement, “The Neiman Sponsors today announced the third step in what Marble Ridge contends is a scheme to place the valuable MyTheresa assets beyond the reach of Neiman’s creditors. At the same time, the Sponsors continue to mismanage Neiman Marcus, as underscored by Neiman’s just reported weak financial results. This financial performance for [third quarter 2019] was well below analyst estimates and, alarmingly, is underscored by comparable same-store declines in revenues.”

The hedge fund concluded: “As we have communicated in the past, 100 percent of the valuable MyTheresa assets must be returned to Neiman Marcus.” Marble Ridge is an investor in distressed debt, and holds an interest in Neiman’s senior notes and term loans.

A spokesman for Neiman Marcus declined comment.

Neiman’s has been pressured due to debt leverage from the $6 billion sale of the company in 2013 to Ares Management and the Canada Pension Plan Investment Board. They acquired the luxury retailer from private equity firms TPG Capital and Warburg Pincus. Proceeds from the sale of MyTheresa could help ease some of the financial pressure.

Compounding its troubles has been the shift in consumer spending from brick-and-mortar to online. That said, its troubles hadn’t stopped it from making a minority investment in Fashionphile earlier this month, a business focusing on the resale of used-luxury handbags.

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