In the days surrounding the grand reopening of Tiffany’s flagship in New York, last May, Fifth Avenue was practically crawling with LVMH executives. After all, it’s common practice for retailers to shop the competition, and their own stores, when in town. So it wasn’t surprising to hear that LVMH paid multiple visits that week to Bergdorf Goodman, the historic luxury department store.
Both of Bergdorf’s buildings—including the prized women’s store on the corner of 57th and Fifth—are right down the street from the landmark that houses Tiffany & Co., the American jeweler that LVMH bought for $15.8 billion in 2021. Bergdorf executives were understandably on edge: Not just because of LVMH’s importance to the store, but also due to the group’s imperial power over the industry, itself.
It was also noteworthy, of course, because LVMH founder and C.E.O. Bernard Arnault has repeatedly flirted with the idea of buying Bergdorf Goodman from the Neiman Marcus Group. It’s a complicated arrangement, and one the Goodmans—one of the last of the department store families to have any connection whatsoever to the original business—may not wish to give up. The late Andrew Goodman sold the trademark in 1972 to the company that owned Neiman Marcus, and the two stores have been linked ever since. But the Goodman family still owns the women’s building, one of the most coveted properties in Manhattan. They also make a tidy profit off the lease, I’m told, in addition to earning a percentage of top-line revenue on sales each year—a pretty incredible deal. (A Neiman representative declined to comment on the group’s relationship with the landlord representing the Goodman family.)
Nevertheless, there have been rumors of talks between the two for years, especially after Neiman emerged from bankruptcy in 2020. Neiman denied that they were “looking to sell” Bergdorf at the time. But LVMH’s conversations with the Neiman Marcus Group over Bergdorf Goodman have intensified in recent months, I’m told by multiple people connected to both NMG and LVMH. And Arnault typically gets what he wants. (A spokesperson for the Neiman Marcus Group said that the company does not comment on rumors or speculation. A spokesperson for LVMH did not get around to responding to my request for comment.)
The Paris Test
Arnault’s interest in multi-brand retail—what we used to just call department stores—dates back at least to his acquisition of Paris’s Le Bon Marché, known as the world’s first department store, in 1984. As depicted in Émile Zola’s The Ladies’ Paradise, Le Bon Marché is a multi-tiered temple of commerce, the core of the main building covered by a Gustave Eiffel-designed paned glass roof that illuminates the zig-zagging escalators. From the second floor up, shopping takes place on the balconies where you can peer over the edge, watching people moving through the store, buying diamond necklaces and perfume and ballet flats. It’s mesmerizing, unlike any store in America, except for maybe Marshall Field’s in Chicago, which is now a Macy’s.
Unlike many of his luxury brands, including Dior and Louis Vuitton, which are now multi-billion dollar properties, Arnault has not pushed to expand Le Bon Marché beyond the Left Bank. In 2017, the store rebranded its lagging website as 24 Sèvres in an attempt to compete against the likes of Net-a-Porter and MatchesFashion, as well as Saks.com and Bergdorfgoodman.com. It subsequently shortened the name to 24S so that Americans wouldn’t have to awkwardly think about how to pronounce the “re.”
Even after the launch, however, Arnault expressed skepticism about the prospects of multi-brand retail online, and it’s clear it’s not a leading priority for the group. Chief digital officer Ian Rogers, who spearheaded the project, left in 2020 to join a French cryptocurrency startup. “Because [24S] is small it doesn’t lose that much money,” Arnault said at the time. “But hopefully we can figure out a way to make it profitable at some point.”
Still, Le Bon Marché remains a jewel: the best department store in the world, a local institution, and a globally recognized name in an era when there are fewer and fewer department stores that manage to be both beloved and heavily trafficked, especially in the West. In 2021, the group also reopened La Samaritaine, a historic Right Bank-department store with a gorgeous Art Nouveau facade and a Cheval Blanc hotel (another LVMH brand) on the premises. Its selection, heavy on the Jacquemus and Axel Arigato, is more targeted toward younger tourists staying in Airbnbs in Le Marais than the still-fairly traditional Le Bon Marché, but it’s a gorgeous space nonetheless, and another example of Arnault’s real estate dominance.
There is simply nothing like Le Bon Marché or La Samaritaine in the United States. Bergdorf Goodman, with its 50 shades of grey interiors and pristine selection of goods, is perhaps the only thing that comes close in a country where department stores have been dying a slow, drawn-out death since the 1970s. It never expanded beyond Fifth Ave, despite overtures from foreign entities and an internal push by certain executives over the years to take those lilac shopping bags to Japan, or the Middle East, or anywhere else where they could make a lot of money and not irrevocably damage the brand’s value. If anyone could do it, it would be Arnault.
Back on the Block
So why are the conversations about selling Bergdorf heating back up now? To start, there could be outside pressure: Earlier this summer, there were rumblings that Davidson Kempner and Sixth Street Advisors, two of the three investors who bailed Neiman Marcus Group out of mid-pandemic bankruptcy and helped erase $4 billion in debt, were disappointed in recent results, including a dip in EBITDA, which was down 25 percent from last year. A person on the Neiman side with direct knowledge argued that the lead investors have simultaneously agreed to putting profits back into the business, which goes against the idea that they are all not on the same page. (A representative for Davidson Kempner declined to comment. Sixth Street Advisors could not be reached for comment. Pimco, the third investor in the NMG restructuring, had no comment.)
To be fair, when you really drill down on the Neiman Marcus numbers, they’re generally reflective of the overall market and not all that bad. Multi-brand retailers, especially ones with a large online presence, saw a huge boost at the end of 2020 and for all of 2021, even going into 2022. Things have gotten more difficult in the U.S. as people start spending money on travel and other things once again, but they’re still up from 2019 both online and in stores. What’s changed about the U.S. luxury market since before Covid is that more types of consumers are shopping at the high end—particularly men and people with less money. Right now, they’re pulling back because of uncertainty, inflation, exhaustion, etcetera, but now that they’ve had a taste of it, it’s likely they’ll return. (It’s like business class: Once you’ve flown a few times, it’s really tough to go back.)
In any case, selling off Bergdorf—the portfolio’s prime asset—could be the beginning of a broader unwinding of NMG, with investors pushing to offload other assets or even sell the whole thing. But Bergdorf is unique in that it could command a much higher price than it is actually worth, especially from someone like Arnault, who appreciates its value like no one else. The deal would be tricky, however—likely a three-way transaction between NMG, the Goodman family, and LVMH or any other prospective buyer. According to PropertyShark, the women’s building across from The Plaza Hotel has a current value of $237 million, but would likely fetch far more on the open market. The business itself generates less than a billion dollars a year in sales. LVMH would be forced to pay a premium for the business and the trademark and the renegotiation of the lease, which is up in 2050, according to the most recent public filings, unless they buy the building outright. (A rep for Neiman Marcus declined to comment on this, too.)
Anyway, would it be worth it to Arnault if he couldn’t own the building? Most people with whom I spoke, who know the Goodman family, said they have no incentive to sell it: “It’s like trying to get the Hermès gang together,” was how one executive described it. Another, however, said it’s not out of the question.
The Cultural Trophy
It’s certainly in line with the Arnault playbook. On a recent call with investors, LVMH C.F.O. Jean-Jacques Guiony described the group’s retail strategy as such: “Renting is fine. In pure financial terms, owning and renting are exactly the same thing, as the value of a property is the discounted value of its rent…”
However, there are exceptions, where rental fees are growing faster than the implied property value. “So then it makes sense to own it because there is an opportunity in the market to buy it at a certain price, which is usually extremely high,” Guiony continued. “There are not many places like that. You can mention Paris, London, New York and Fifth Avenue and probably Rodeo Drive in Los Angeles. And that’s about it. We just buy exceptional buildings in very safe and stable locations.”
LVMH already owns the Tiffany building on Fifth, as well as a building across the street, which it plans to demolish in order to build a new Louis Vuitton flagship. But snagging Bergdorf would be, I’d argue, less of a business imperative and more of a cultural trophy. Bergdorf is just another part of consumer culture for LVMH to cultivate and control. There are few people with the acumen to manage a brand like this. And from a strategic point of view, owning the Bergdorf experience—including online, where it has a much larger presence than, say, 24S—would offer a new layer of intel on the American consumer, one the group certainly doesn’t need, but could use to its advantage.
How other outside brands would react to LVMH owning the store depends on how much leverage they feel the group currently possesses. In all likelihood, Bergdorf’s relationships with most of its brands would stay the same; Le Bon Marché works with plenty of outside labels, mostly on a concession basis. There is certainly a chance the presence of say, Chanel, would be diminished—and that’s not ideal.
Regardless of how it plays out, the speculation further burnishes the Bergdorf Goodman brand, a boon to anyone set to profit from it. Yes, for Neiman Marcus Group, there’s no denying that selling Bergdorf would mean losing a prized possession. On the other hand, it may make the most business sense, setting the group up for a merger that players on both sides have been anticipating for more than a decade.
