Hudson's Bay may have a new target in its sights.
Following recent speculation that the Canadian department store operator was exploring an acquisition of Macy's, sources tell Dow Jones that it is now in discussions to buy Neiman Marcus.
The chain is seeking a deal that would not include Neiman Marcus' $5 billion in debt, those people told Dow Jones.
Earlier Tuesday, Neiman Marcus said that it was looking into potential strategic alternatives that could include a sale of the company or other assets. The announcement came on the heels of a 6.8 percent decline in the retailer's comparable sales during the recently ended quarter.
Neiman's total revenue fell 6.1 percent during that period, to $1.4 billion, as it recorded adjusted earnings of $126.8 million. That compares with a $183 million profit last year
Like many of its department store competitors, Neiman Marcus has struggled to bring shoppers into its stores, pressuring sales and profitability. The Dallas-based chain has also been hurt by a prolonged period of low fuel prices, which has hurt the spending power among consumers in Texas, where many of its stores are concentrated.
Neiman Marcus, which was saddled with debt from a $6 billion leveraged buyout in 2013, canceled in January its plans for an initial public offering. It wasn't the first time the chain had done so. Neiman first filed paperwork to go public back in June 2013, before it was purchased by Ares Management and the Canada Pension Plan Investment Board.
Last month, S&P Global Ratings downgraded its corporate credit rating on Neiman Marcus, calling the retailer's capital structure "unsustainable" in the long term. The agency cited Neiman's deteriorating operating performance, including mid- to high-single-digit declines in same-store sales and "meaningful margin erosion."
"Trends such as weak mall traffic, highly promotional retail apparel environment, and cautious consumer spending continue to weigh heavily," credit analyst Helena Song said at the time.
A Neiman Marcus spokeswoman wasn't immediately available to comment.
However, a spokeswoman for Hudson's Bay, which owns Saks and Lord & Taylor, said, "As a matter of company policy, we do not comment on rumors or market speculation. Generally speaking, as we have previously stated, we selectively evaluate opportunities to accelerate the company's strategic growth while maintaining or enhancing its credit profile."