From luxury powerhouse to the brink: how Saks big merger bet failed
The merger saddled Saks with billions of dollars in debt and led to financial difficulties
Saks delays vendor payments, impacting product availability and sales margins
Saks’ real estate worth $4 billion, Fifth Avenue flagship’s future uncertain
Written by: Juveria Tabassum and Arriana McLymore
NEW YORK, Jan 8 (Reuters) – The $2.7 billion marriage of Saks and Neiman Marcus was aimed at creating a powerhouse in the world of luxury department stores and helping it fend off competition from online players and rivals such as Bloomingdale’s and Nordstrom.
A year later, the growing company was forced to seek court protection due to mounting debt and stagnant store traffic. Canada-based conglomerate Hudson’s Bay Co, which has owned Saks since 2013, acquired rival Neiman Marcus along with New York retailer Bergdorf Goodman in July 2024 and combined its U.S. luxury assets to form Saks Global; It crowned previous merger attempts and brought together three names that have defined American high fashion for over a century.
Amazon and Salesforce blessed the deal as equity investors. But the merger, led by HBC chairman and NRDC Private Equity founder Richard Baker, was built on shaky ground. Saks took out nearly $2.2 billion in debt to finance its acquisition of Neiman Marcus, raising some concerns given that the company is losing money amid a slowdown in the global luxury industry.
Meanwhile, leading brands have begun selling more aggressively in directly controlled stores, according to a consumer and retail banker; This gave consumers less reason to go to Saks and Neiman, exacerbating an already weak debt structure.
“While the deal was built on assumptions of aggressive earnings and unachievable cost reductions, additional leverage has proven difficult to sustain in a structurally shrinking retail industry,” said Tim Hynes, head of global credit research at financial intelligence firm Debtwire.
Saks has targeted annual cost savings of $600 million over the next five years thanks to the combined company’s scale, according to media reports citing the company’s October investor call.
However, the luxury sector could not recover in 2025 and the debt became difficult to pay, and the holding had to receive another $ 600 million from investors in June. “I don’t believe they put enough capital into the company post-acquisition to get through the time it would take to realize the initial dispositions. So they started to run out of cash,” said Gary Wassner, CEO of Hilldun, a New York-based factoring firm that buys outstanding invoices from retailers and for which Saks Global is several million in debt.
As of October, Saks Global had lowered its full-year adjusted core earnings target from $275 million to $325 million to $160 million from $140 million, according to a Bloomberg report, citing an investor call at the time. Saks did not respond to Reuters requests for comment for this story. Amazon declined to comment on Saks’ financial troubles, while Salesforce did not immediately respond. The company was in talks for a $1 billion loan to help keep things going, Bloomberg reported last week.
EMPTY SHELVES, PAYMENTS WILL BE MADE
Without sufficient cash, Saks delayed payments to vendors and received products nearly a month later than competitors, impacting the company’s ability to sell products at full price, Wassner and former vendors told Reuters.
Over the past year, retailers began pushing orders back to Saks, Wassner said, and as of January, more than 100 brands had stopped shipping products to the company, and Hilldun paused approving orders in early December.
A source at the ready-to-wear women’s fashion brand, who asked not to be named due to privacy issues, said the brand stopped sending products to Saks in December and has not received a six-figure payment from the company since August. A watch company that sold at Saks on Fifth Avenue told Reuters it ended the relationship because Saks was behind on paying at least $70,000.
Eventually, cash ran out despite Bergdorf Goodman trying to sell a minority stake in September, and Saks missed a $100 million interest payment in December, raising the possibility of a Chapter 11 filing.
Debtwire’s Hynes said the company has 30 days to make those payments and can work with creditors during that time to create a plan to restructure its finances.
Wassner said he would file a request with the bankruptcy court trustee to have Hilldun sit on the Committee of Creditors if the company files for bankruptcy protection.
Real estate mogul Baker replaced veteran Marc Metrick as Saks Global’s new CEO in late December. He also owned Canada’s 300-year-old department store chain Hudson’s Bay and Manhattan-based Lord & Taylor. Both have closed, joining the long list of luxury retail chains that have disbanded over the past decade. Baker also owns Galeria Karstadt Kaufhof in Germany.
Despite the challenges in the industry, investors continue to value premium real estate. Saks Global’s real estate portfolio, which includes approximately 13 million square feet of gross leasable area in the United States, is worth approximately $4 billion, according to S&P Global estimates.
“The big question will be the future of the iconic Fifth Avenue flagship. While it may survive the initial redevelopment, the highest value for this land is certainly not as a retail store,” Debtwire’s Hynes said. (Reporting by Juveria Tabassum in Bengaluru and Arriana McLymore in New York, additional reporting by Abigail Summerville in New York, Editing by Lisa Jucca and Nick Zieminski)
