In its self-proclaimed “luxury reset,” Saks Global has cleared some hurdles but significant challenges remain.
After purchasing the Neiman Marcus Group for $2.7 billion in December, Saks Global in June made a crucial $120 million interest payment on bonds financing the deal; in July began to catch up on some long overdue bill payments to vendors, and in August completed a debt restructuring, leading to a $600 million financing package.
To cut costs and enhance efficiencies, management has been consolidated and centralized so one team oversees the merchandising and marketing of both Neiman Marcus and Saks Fifth Avenue; hundreds of workers have been laid off this year alone, and a new chief financial officer, Brandy Richardson, formerly at Neiman Marcus and Tailored Brands, was hired. Saks Global anticipates cutting $600 million in annual costs over the next few years.
In other initiatives, Saks Fifth Avenue opened a luxury shop on Amazon, with a handful of major brands and a few dozen smaller ones, and the company is getting deeper into AI and service, launching a personalized homepage on the website, and a virtual voice assistant, “Sophie,” who can answer questions from customers about orders, returns, gift cards and other subjects.
Saks Global appears to have turned a corner for now, at least financially, with the wherewithal to get through 2025. Richard Baker, the group’s executive chairman, also is said to have deep pockets. Baker’s investment firm, NRDC Equity Partners, along with BB Kapital SA, last year acquired Galeria Karstadt Kaufhof, the department store in Germany, and, according to Standard & Poor’s, Saks Global’s real estate portfolio is worth $4.4 billion, suggesting there are potential assets that could be monetized if further financing is needed. Also, Amazon, Authentic Brands Group and Salesforce are among the companies that have invested in the NMG purchase.
But all that has left many small and medium-sized vendors dumbfounded as to why Saks has not kept its promise to pay its bills, while larger vendors and luxury conglomerates — LVMH Moët Hennessy Louis Vuitton, Richemont and Kering — have been getting paid.
“The Saks situation is better, but they’re still not current,” claimed one vendor in late August. “They have sent out some of those monthly installments as promised. But we may be doing better than others. People want to ship without worrying about it. We need more comfort and assurances that there’s a plan they’ll stick to. Just pay the bills. Do what you are supposed to.”
Aside from the money owed them, vendors want clarity on how Saks Fifth Avenue and Neiman Marcus will evolve — how they will differentiate their merchandising and messaging. Saks Global is comprised of the Saks Fifth Avenue, Neiman Marcus, Bergdorf Goodman and Saks Off 5th stores and e-commerce operations.
“Since the deal for Saks to buy Neiman’s was finalized, there’s been an expectation that a strategic vision detailing what Neiman’s represents and what Saks represents gets articulated. As far as I can tell, that hasn’t happened yet,” said one financial source close to the situation. “There hasn’t been any intentionality about what Neman’s is going to look like, and what Saks is going to look like. So now you just have two parts of the same body essentially competing, really head-to-head in about a dozen markets, and not coming to market with any clear strategy.”
It could come down as follows: Saks and Neiman’s continue to carry many of the same brands — one ex-Saks executive said there’s about 65 percent overlap — but Neiman’s doubles up on “super luxury,” meaning the higher and most luxurious items in the designer collections. Saks, which has several stores in secondary markets, could tackle “opening price point luxury” and seize a tier of fashion above what Nordstrom and Bloomingdale’s carry, but below Neiman’s.
“Any significant reset costs money and takes time,” the financial executive said. “You have to cycle out the product that you’ve had and bring in new product. You have to educate the consumer with advertising and influencers and events. All this stuff costs money.”
Still, through its acquisition of NMG, Saks Global gains significantly more buying power that could sharpen the merchandising of its retail divisions. Scale is important in the market, providing greater leverage over brands, but Saks Global went into the NMG deal assuming more debt, behind on payments to vendors and dealing with softness in the luxury sector in general.
There have been reports that fall goods have been slow to get into the stores. Saks is prepaying for goods, lacking credit. Competitors, notably Bloomingdale’s and Nordstrom, are taking advantage of Saks’ vulnerabilty by advancing their presentations of designer and contemporary brands. Saks has been reducing its vendor matrix by the hundreds, some being forced out, others voluntarily leaving because they’re owed money or limiting their exposure by shipping fewer doors.
Watch for store closures. Marc Metrick, chief executive officer of Saks Global, has said he sees just under 10 locations going dark. Saks in Palm Beach, Fla., recently closed, and some other closings could happen where Saks and Neiman’s have stores in the same centers. The historic Neiman Marcus flagship in downtown Dallas nearly closed for good last March, but an 11th-hour arrangement was reached between Dallas city officials and Saks Global to keep the store open at least through the end of this year. A plan for further extending the life of the store could be formulated by possibly downsizing it and redeveloping the site with additional uses. Neiman Marcus has 36 stores; Saks Fifth Avenue operates 38, and Bergdorf Goodman operates a men’s store and a women’s store, which the company lists as one location.
Saks executives have said Saks has the wherewithal and is generating enough cash to support operational needs and its debt load, though uncertainty in the market persists. But as one fashion executive said, “I am optimistic. I’ve seen so many companies on their heels find a way to get an injection and then gain some momentum in the business. Saks did lose that aspirational customer in this uncertain economy, but they still have a luxury base to hold them up.”
The rebounding stock market supports that. “As long as Saks doesn’t discount their way to sales, they will be fine. They’ll have enough liquidity to meet the next quarter for holiday, right when they’re flush with cash, and they did close this new refinancing. For me, what we need to watch is really what happens after the year ends. What happens in the first quarter? Will they be making those vendor payments?” the executive said.
“It’s about product, promotion and people,” Tom Ott, the former Saks Fifth Avenue senior merchant turned off-price consultant, said in a recent WWD article. “If those elements are recreated, rather than being sidetracked by all the conversations about money, the customer will come in. It doesn’t have to take years and years. It could be 18 months. I was at Saks for 24 years. It’s a lot about rallying around initiatives and getting the people in the stores and the merchants focused and delivering something that’s differentiated and special. The brands would rally around that and help drive sales.
“Leadership is so preoccupied on just trying to stay alive. They need to poke their heads out from under the sand and look at driving business. Gen Z is really interested in brick-and-mortar shopping in particular. You don’t have the luxury as a retailer to think just about e-comm. You also need to be proficient at the stores. Many have forgotten about the art of brick-and-mortar.”