Neiman Marcus Group Inc said on Monday its first-quarter operating profit rose 20.1 per cent, beating analysts' estimates, boosted by strong sales in fine apparel, men's sportswear, and jewelry.

The company, whose stores include high-end retailers Neiman Marcus and Bergdorf Goodman, said its net income rose to $50m, or $1.05 a diluted share including a gain on an accounting charge, from $37.4m, or 76 cents a share, in the year-ago quarter.

However, the company said it got off to a slow start in November and it forecast flat earnings for the second quarter.

"It's kind of strange for a company, especially only three weeks into the quarter, to say that the quarter is going to be less than estimates," said Eric Beder, retail analyst with Ladenburg, Thalmann & Co Inc.

"There's something there, but I think they have significant momentum and they're still going to have anywhere from 10 to 15 per cent growth year to year in earnings," Beder said.

The company said in the first quarter it adopted a different accounting method to minimise the impact of foreign currency fluctuations on its inventory purchases.

As a result it recorded a gain of $1.9m, or 4 cents a share for the quarter. Operating earnings rose to $83.5m from $69.6m in the year-ago quarter.

Wall Street analysts on average were expecting the company to post a profit of 90 cents a share, according to research firm First Call/Thomson Financial, which tracks earnings data.

The company said its November sales are running below last year's levels and it expects for the month to post a mid to high single-digit drop in same-store sales, or sales at stores open at least one year.

"Since Election Day... business has remained well below our expectations, particularly at Neiman Marcus Stores," Neiman Marcus' co-chief executive Robert Smith said in a statement.

"We look for our customers to resume more normal spending patterns during the second quarter," he said. "At this point, we are cautiously optimistic about the upcoming holiday season."

Neiman Marcus said same-store sales are expected to rise in the low single-digits for the second quarter, while earnings for the second-quarter are seen flat against what it said was a "strong" year-ago quarter when it earned 84 cents a share.

Analysts polled by First Call are expecting the company to post a profit of 97 cents for the second quarter.

"Looking ahead, we continue to plan for more normalised mid-single digit comparable revenue growth for the full year, which would keep us on track to reach our goal of mid-teens growth in earnings per share in fiscal 2001," Smith said.

Sales for the quarter rose to $739.7m from $668.3m in the year-ago quarter. Same-store sales, or sales at stores open at least one year, rose 10.7 per cent for the quarter, the company said.

Shares of Neiman Marcus, which have surged almost 35 per cent from their near 52-week low in May, fell 0.34 per cent to close at $36-5/16 on the New York Stock Exchange on Monday. The company reported its earnings after the market close.

Neiman Marcus said it saw strong sales on both the East and West coasts with double-digit revenue increases in the fine apparel, jewelry and men's sportswear categories.

Analysts said Neiman Marcus' first-quarter results may have been significantly boosted by the company's "Butterflies" full-price sales promotion at its Neiman Marcus stores, which was shifted to September this year from its normal late October or early November slot in previous years.

"Our exceptional earnings growth was primarily due to strong execution of our operating and merchandising strategies in a full-price selling quarter," Smith added.

The company's said its specialty retail stores segment, which includes Neiman Marcus stores and Bergdorf Goodman, saw revenues rise 10.2 per cent to $624.5m.

Same-store sales at Neiman Marcus stores grew 9.3 per cent while Bergdorf Goodman sales grew 17.1 per cent. Operating earnings for the segment rose 22 per cent to $82.7m.

The company's direct-to-consumer catalog business saw revenues rise 8.5 per cent to $93.5m. Operating earnings at the catalog business rose 31.8 per cent to $6.6m on higher gross margins on higher revenues, the company said.

(C) Reuters Limited 2000.