Neiman Marcus’s third-quarter earnings declined as the retailer was forced to offer more promotions to contend with weaker demand for luxury goods, according to people with knowledge of the closely held firm’s financial results.

Earnings before interest, taxes, depreciation and amortization were $124 million for the quarter ended April 29, said the people, who asked not to be identified because the performance is private. That’s down 25% from the same period last year, the people said.

Meanwhile, revenue dropped roughly 9% year-over-year to $1 billion, the people said.

Investor interest in luxury companies has fizzled as aspirational consumer spending in the US is weakening.

The luxury department store’s comparable store sales increased 11% relative to the third quarter of 2019, but was down 5% from last year when the company benefitted from pent-up demand as pandemic disruptions receded, the people said. Margins shrunk as the company offered more promotions to reduce inventory, they added.

“Gross margins are challenged due to the highly promotional environment and our own levels of excess owned inventory, which will be back in balance by the end of the fiscal year. This impact is being partially offset by strong cost management,” a Neiman Marcus spokesperson told Bloomberg.

During an earnings call on Tuesday, management said the company’s gross margin for the fourth quarter will likely decline at the same pace seen during the second quarter, the people said. Accounting for incremental liquidations in the second quarter, that would mean a roughly 740 basis points decline compared to a year earlier, they said.

Given worse-than-expected gross margins, the company will likely end the year with a net debt to Ebitda ratio of roughly 4 times, the people said. At quarter end, its gross leverage stood at 3.5 times, while net leverage was at 3.2 times, they said.

Neiman had more than $1 billion in liquidity, the people said.

Neiman’s 7.125% first-lien notes due 2026 last traded at 90.4 cents on the dollar, according to Bloomberg-compiled data. The Dallas-based company filed for bankruptcy protection in May 2020, citing pandemic pressures, and emerge from court protection later that year.