Saks bankruptcy filing creates uncertainty for iconic stores, suppliers and shoppers

NEW YORK (AP) — Application Saks Fifth Avenue operator Bergdorf Goodman and Neiman Marcus file for bankruptcy protection It left suppliers to luxury stores facing unpaid invoices, causing a dispute with Amazon, a minority investor in Saks Global.

Saks Global said last week it had secured about $1.75 billion to help finance the company toward hoped-for profitability. The company said it would honor all customer loyalty programs, compensate vendors and pay employees, while also seeking approval for a plan to pay outstanding debts ranging from $1 billion to $10 billion, according to court documents.

Although the retailer’s stores remain open for now, the bankruptcy and restructuring could likely impact the assortment of designer brands customers can find online or at their local Neiman Marcus or Saks, industry experts say.

Experts said many brands stopped shipping goods weeks ago as Saks Global’s financial troubles became more evident and bankruptcy became inevitable. A visit to Saks Fifth Avenue’s flagship store in Manhattan last week revealed visible product gaps, including handbags and shoes, cluttering the shelves.

Neil Saunders of GlobalData Retail, a research firm, said it was critical for Saks to have a good assortment that included trendy products from smaller niche brands.

“If Saks or Neiman Marcus doesn’t offer it, those customers will find somewhere else to shop,” he said.

The bankruptcy comes just over a year after Saks Fifth Avenue’s parent company. agreed to buy acquired luxury rival Neiman Marcus Group for $2.65 billion. Amazon taking a minority stake in the deal has placed a significant debt burden on the new holding company at a time when competition is increasing and luxury spending is slowing down.

Here’s a look at some of the ripple effects of filing for bankruptcy, including the retailers that could potentially benefit:

Major brands such as Chanel and Kering, the parent company of Gucci and Saint Laurent, top the list of creditors with the most debts. However, bankruptcy lawyers and industry executives think that luxury holdings will not have any problems.

The biggest concern is the small and medium-sized brands that Saks is already financially squeezing. Some may close their businesses if bills are not paid.

“This is very painful,” said Joseph Sarachek, an attorney who represents about 30 brands that Saks owes money to. “A lot of these guys are going to go bankrupt.”

Sarachek declined to name his customers for fear of retribution from Saks, but said they owed them between $600,000 and $10 million. He said his customers don’t operate their own stores, and some of them have Saks as their only major retail account.

He said he advises customers not to ship to Saks unless more clarity is provided on payment terms.

Even before the merger with Neiman Marcus, suppliers were grappling with skipped payments from Saks, creating anger and distrust.

That relationship worsened last year when management changed payment terms for brands that supply stores, according to Gary Wassner, chief executive of Hildun Corp., which provides credit guarantees to about 120 brands that sell to Saks.

For some, Saks Global accounts for 40% to 50% of their business, he said.

Wassner advised customers not to ship to Saks starting Dec. 19. It said Wednesday it hopes to confirm the shipment next week after acceptable payment terms are negotiated.

Amazon invested $475 million as part of Saks’ acquisition of Neiman Marcus in December 2024 in exchange for selling Saks products under the “Saks at Amazon” store on the online giant’s website.

The partnership was supposed to further Amazon’s goal of attracting more luxury brands to its site.

But as Amazon claims a court file “This equity investment is now probably worthless,” he said, hours after Saks filed for Chapter 11 bankruptcy, to block the financing plan.

“Saks has consistently failed to meet its budgets, spending hundreds of millions of dollars in less than a year, on top of hundreds of millions of dollars in unpaid invoices owed to its retail partners,” the court filing said. The statement was included.

Amazon argued that Saks’ financing plan harmed the retailer and other creditors because it burdened Saks with additional debt. He also argued that the financing plan could unfairly favor other creditors to the detriment of Amazon.

Amazon threatened more “drastic remedies” in the court filing, including the appointment of a superintendent or trustee, if Saks fails to resolve the matter.

A week ago, Saks Global won in court, receiving an initial $500 million tranche from the $1.75 billion financial package.

Amazon declined to comment further.

Saks had already announced plans in November to close nine Saks Off 5th stores starting this month. Thus, the number of Saks Off 5th locations increased to 70. It also has 33 Saks stores and 36 Neiman Marcus locations, as well as two Bergdorf Goodman stores.

But shoppers can expect more store closures.

Saks said this week it was assessing its “operational footprint” to ensure it was well positioned to invest in areas with the best opportunities for growth.

Experts think that most Saks Off 5th stores, as well as many Saks and Neiman Marcus stores, will be closed.

David Tawil, president of cryptocurrency hedge fund and ProChain Capital, a former bankruptcy lawyer and distressed investor, believes the most vulnerable will be Saks Off 5th locations, which are not doing so well and face stiff competition from the likes of TJ Maxx.

Rivals that could benefit include luxury department store chains Nordstrom and Macy’s upscale sister Bloomingdale’s, Saunders said. He added that other beneficiaries could be luxury brands’ own stores, as well as online luxury players such as The RealReal, which sells gently used luxury goods.

Shoppers are seeing generous discounts at Saks, Neiman Marcus and Saks Off 5th.

Saks’ website shows up to 70% off select designer clothes, while Neiman Marcus is marking select styles at up to 75% off, according to its website. Saks Off 5. website offers discounts of up to 85% on products.

Saunders said the retailer hopes to generate interest and sales, but once the court approves a plan for store closures and vendor payouts, it will likely reduce discounts unless the store in question is liquidated.

Don’t expect to get a Chanel or Louis Vuitton handbag 75% of the time, though, Tawil said. Many of the big iconic brands have provisions that limit discounts, triggered by filing for bankruptcy.