Buyers place high-end bet

Luxury retailer Neiman Marcus Group Inc. yesterday agreed to be purchased for $5.1 billion by two investment firms that will help it expand and better cater to a growing number of affluent consumers.

''This is a total bet on the continued strength of the luxury market," said James Chung, president of the Belmont consulting firm Reach Advisors. ''If you look at the demographics of wealth in America, the rich are getting richer."

Analysts said Neiman's new owners, Texas Pacific Group and Warburg Pincus LLC, could help grow the Dallas chain known for its extravagant Christmas catalog from its current 37 stores. One area for potential expansion is going overseas.

''I can see them getting up to 50 stores," said Touk Sinantha, an analyst with Ariel Capital Management.

The proposed purchase shows there's still life in the department store business, especially at the high end.

At a time when middle-market department stores such as Macy's and Filene's are forced to merge to fight off competition, and discount chains complain that their blue-collar customers are getting squeezed by high energy prices, upscale stores such as Neiman Marcus, Nordstrom, and Saks Fifth Avenue have enjoyed better sales.

The customers of these stores are so well off that they don't have to sweat $2.25-a-gallon gas prices or minor ups-and-downs in the stock market, said John Macht, founder of a Chestnut Hill retail consulting firm called the Macht Group.

''These consumers appreciate good service and quality and aren't so much concerned about price," he said.

Results at Saks Inc. of Birmingham, Ala., illustrate the divide between the spending habits of affluent and middle-class shoppers. The company division that includes Saks Fifth Avenue luxury stores reported a 10.8 percent rise in same-store sales in 2004, while same-store sales at the company's middle-market chains were up 1.6 percent. Same-store sales are a key measure of a retailer's strength, measuring performance at stores open at least a year.

Last week, Saks agreed to sell two of its regional department store chains to privately held retailer Belk Inc. for $622 million so it could focus on its luxury business.

There has been a flurry of recent mergers. Earlier this year, Kmart Corp. and Sears Roebuck and Co. completed their merger, and Federated Department Stores Inc. disclosed plans to buy rival May Department Stores Co., parent of the local Filene's chain. That proposed merger was prompted in part by department stores losing customers to the likes of Target Corp. and specialty chains. What could result is a retail behemoth with nearly 1,000 locations.

High-end chains are much smaller and, partly as a result, have different strategies. Aiming at much broader audience, national mid- and low-priced chains will sometimes invade new territory with a saturation strategy, opening several stores at once.

Three years ago, for example, the Midwestern retailer Kohl's opened 13 stores in and around Greater Boston. Kohl's, which operates about 670 stores, recently disclosed plans to open 95 new stores nationwide this year.

Smaller luxury chains, in contrast, focus on creating ''destination stores" with typically only one or two in a market.

Nordstrom Inc. of Seattle, for example, opened two stores last year, one in North Carolina, the other in Florida, bringing the chain's total of full-line department stores to 95, said Deniz Anders, a spokeswoman for the chain. Nordstrom plans to open its first Massachusetts store in Natick in 2007.

Locals will get a chance to shop at another luxury retailer next year when Barneys New York plans to open a store in Boston's Copley Place. The chain currently operates six Barneys New York stores, said spokeswoman Dawn Brown.

''We're in an expansion mode," said Brown, who declined to elaborate.

Luxury chains can enjoy sales growth without opening many stores. That's because as the baby boom generation ages, the number of affluent US consumers increases, meaning that luxury retailers have more potential customers, analysts said.

Opening too many stores could be a problem.

''You have to be careful not to dilute the exclusivity of the brand," said Stephen Stephanou, executive vice president of Madison HGCD, a retail consulting firm in New York.

Neiman, which once had its headquarters in Chestnut Hill, had previously said it would open seven stores, including one in Natick, over the next few years.

In March the chain reported its sixth consecutive quarter of double-digit same-store sales increases. Neiman also operates two Bergdorf Goodman stores.

In a statement, Texas Pacific partner Jonathan Coslet said of Neiman Marcus: ''We hope to build on their exceptional track record of performance."

The buyers have agreed to pay $100 a share for Neiman. Neiman shares closed at $92.96, down $5.36 on concerns that the buyers may have trouble financing the deal.

Some analysts wonder whether the acquisition agreement was made at the peak of the market.

Chris Reidy can be reached at reidy@globe.com. Material from Globe wire services was used in this report.