March 11 (Bloomberg) -- Neiman Marcus Group Inc., the U.S. luxury retailer owned by Warburg Pincus LLC and TPG Inc., posted a second-quarter loss after cutting prices during the holiday shopping season and writing down its assets by $560.2 million.

The net loss was $509.3 million in the quarter ended Jan.31, compared with net income of $44.3 million in the same period a year earlier, the Dallas-based company said today. The writedown was driven by the reduced value of Neiman’s trademarks and goodwill as the economy suffers. The retailer said more writedowns may occur if its targets aren’t met.

Neiman has announced 825 job cuts and is curbing expenses, inventory and capital spending to enhance cash flow. Wealthy people have trimmed purchases of luxury goods since the U.S. economy slowed and the financial markets plunged in September, pressuring the chain to step up discounts. The rest of the year will be “very difficult,” Chief Executive Burton Tansky said.

“The luxury consumer has definitely pulled back,” Carla Casella, a fixed-income analyst at JPMorgan Chase & Co. in New York, said in a phone interview today. “They are still buying but they are buying less because they don’t need anything and they are watching their equity portfolios go down and they are watching their housing prices go down.”

Earnings before interest, taxes, depreciation and amortization, excluding the writedown, fell to $24.6 million from $187.3 million a year earlier.

‘Extended’ Weakness

“We expect retail demand and revenues will remain weak for an extended period,” the company said. “We will continue to reduce our inventory levels and spring-season purchases to align them with anticipated lower customer demand.”

The retailer is canceling orders, returning goods to vendors and cutting more expenses, and it may push store openings back further, Tansky said today on a conference call with analysts.

“Core” customers will return when the financial markets stabilize, he predicted. “Aspirational” clients have become more discerning, he said.

Neiman Marcus is working with vendors to add a layer of goods in the fall season priced slightly below designer merchandise to attract customers looking more for value, company executives said on the call.

Gross margin, the fraction of sales left after subtracting the cost of goods sold, narrowed to 23.9 percent from 33.5 percent, Neiman reported. That missed Casella’s 26 percent estimate as well as the 27 percent projection of Grant Jordan, an analyst with Wachovia Corp. in Charlotte, North Carolina.

Revenue fell 21 percent to $1.08 billion in the three months ended Jan. 31, the company said Feb. 3. Sales at stores open at least a year plunged 23 percent. The drops were steepest at its Neiman Marcus stores, followed by Bergdorf Goodman locations and the company’s online division, the retailer said.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

Last Updated: March 11, 2009 11:13 EDT