Saks Global Files for Chapter 11 Bankruptcy

The company went into federal bankruptcy court in the Southern District of Texas with more than 10,000 creditors who will now have to go through a judge to collect what they are owed. Initial court filings put the company’s assets and debt at between $1 billion and $10 billion, but those figures would be refined. The retailer’s debt includes the company’s $2.2 billion in bonds that funded the Neiman deal, as well as an additional $600 million in new capital brought in during a refinancing in August.

Top fashion industry names on the list of unsecured creditors include:

• Chanel Ltd. – owes $136 million.

• Kering Group – $59.9 million

• Rosen-X – $41.4 million

• Capri Holdings – $33.3 million

• Mehurah – $33.2 million

• Compagnie Financière Richemont – $30 million.

Vince Holding Corp., the 30th largest unsecured credit company, owes $9.1 million.

While the much-anticipated bankruptcy filing has arrived, the ripple effects of the company’s failure are only beginning to spread.

The combination of Saks + Neiman was the brainchild of Baker, who spent years using his real estate savvy and creative dealmaking to build an empire that eventually succumbed to the laws of retail gravity.

It was somewhat of a miracle that Saks Global was able to actually acquire Neiman Marcus, a dream of Baker’s for more than a decade, because at the time Saks was already unable to pay its bills, thus damaging relationships with suppliers who were hoping the new debt from the deal would be enough to get the business back on its feet.

While larger brands turn to the retailer’s franchise model and retain ownership of their inventory, smaller designers have been repeatedly disappointed by Saks Global.

Marc Metrick, who served as the retailer’s chief executive until shortly after the new year, worked tirelessly to merge the two companies – trying to calm supplier nerves, make painful layoffs, reduce staff and create a structure without major merchants.

Major rifts at Saks Global began to show last February, when Metrick told suppliers the company would start paying bills for new orders in 90-day terms instead of a 30-day turnaround period, and would repay past-due balances in 12-month increments starting in July 2025.

“We expect this will provide the clarity and certainty you have been seeking,” Metrick wrote at the time. “To that end, we look forward to seeing merchandise flow return to normal levels so that we can begin to focus on driving our business together. In the absence of normal merchandise flow, we anticipate that we will have to make changes to our brand partner matrix.”

Saks Global did cut the number of brands it owned — some of which left the retailer and vice versa — but merchandise never started flowing freely enough for the retailer to boost sales.

Suppliers who have been waiting for payment will likely never get much money – a devastating outcome, especially for smaller designers who have spent more than a year chasing Sacks for payment. Secured lenders were the first to go bankrupt, while suppliers owed trade payables often found themselves in a loss-making position.

The focus now shifts to what happened next. Retailers often close stores during bankruptcy because leases are easier to break and the rest of the business must be reevaluated.

Amazon helped Saks Global acquire Neiman’s and powers Saks stores on its platform. The e-commerce giant has been trying to really break into the luxury market for years, and when it joined the Neiman’s deal, it was seen as a long-term battle to solidify its position and possibly control a stake in the retailer. If so, the game is now coming to an end.

Authentic Brands Group, which owns a luxury goods joint venture with Saks Global, is also said to be keen on some of the business and could play some role in bankruptcy court.

Saks Global’s business remains uncertain. But the fashion world — tired, angry, surprised, even with some brands now on the brink of bankruptcy — is still trying to understand exactly how the core of the American luxury department store world collapsed.

Many people will recall the day in 2013 when Baker’s Hudson Bay Co. acquired Saks Fifth Avenue.

Even so, Baker made it loud and clear that he was determined to one day acquire Neiman Marcus Group and create a retail empire in the United States that would dominate the luxury goods market.

Even more alarming is the fact that Saks Fifth Avenue is already on shaky ground and unable to survive as an independent business in the future. Saks can only survive through mergers, expense cuts, and the increased purchasing power of Saks’ merger with the NMG entities. Ultimately, Saks Fifth Avenue’s woes and the debt from the acquisition weighed on both companies’ businesses.

Saks Fifth Avenue and Neiman Marcus will at least be cut, while Bergdorf Goodman may be sold. The worst-case scenario is for the entire business to be liquidated, which sources said could happen due to the complexity of the bankruptcy process and the widening scope of bondholders, investors, landlords and suppliers, all of whom will fight in court for some compensation.

In addition to its recent problems — massive debt, souring supplier relationships and a weakening luxury goods industry — Sachs has suffered setbacks since the 1990s due to increased competition, overexpansion, excessive management turnover and strategic reversals.

When Baker arrived, the retailer was losing ground to competitors, primarily Neiman Marcus but also to Bloomingdale’s, Nordstrom and designer brands opening their own stores.

Saks and Neiman’s have been selling many of the same brands, but Neiman’s is better at it, especially the more expensive items. Neiman has the advantage of stronger service, a talented team of salespeople with lasting customer relationships, and a stronger image of luxury consistent with a deeper designer presence door-to-door.

Saks Fifth Avenue’s store count is inconsistent. In the nineties, it began to expand aggressively, opening smaller “high street” and “resort” stores to cover more areas, primarily Florida, California, and Texas, and to take advantage of specialty store closures.

The strategy didn’t work, and in 2004, Saks decided to close 11 stores, including five Saks Fifth Avenue stores in California. Saks still has several underperforming stores, a situation exacerbated by merchants’ inability to stock enough fresh merchandise in stores as supplier relationships soured.

More store closures are expected in the near future, possibly in markets where Neiman Marcus operates. The two luxury retailers have stores in Chicago, Atlanta, Boston, Las Vegas and Beverly Hills. Over the past year or so, Saks did close stores in San Francisco, Palm Beach, Florida. In 2019 and 2020, Saks closed its women’s and men’s stores in Brookfield Place in lower Manhattan.

In March 2021, HBC split Saks Fifth Avenue’s website and stores into two independent companies, allowing the company to attract a $500 million investment from Insight Partners, accelerate e-commerce growth and potentially take the online business public. However, a few years later the website and store were put back together.

While turnover is not uncommon in the retail industry and can happen quickly, Saks has experienced a disproportionate number of management changes, leading to fluctuations in merchandising and marketing strategies. Jeanne Daniel left Saks in 1998, just seven months after serving as executive vice president of merchandising. Christina Johnson served as CEO from February 2000 to October 2003. Fred Wilson became president and CEO of Saks in January 2004 and resigned in January 2006. Steve Sadove served as CEO from January 2006 to November 2013, bringing some continuity to the business and preparing it for sale to HBC.

Marigay McKee, Harold’s former chief businessman, became Saks president in December 2013 but left in April 2015. She will be replaced by Saks veteran Metrick, who will become global CEO of Saks in 2024. But in October, Metrick’s No. 2, Emily Essner, who had been president and chief commercial officer of Saks Global for about nine months, left the company as part of a management shakeup that shifted her responsibilities to other executives on the team. Yumi Shin, who had been chief merchandising officer at Bergdorf Goodman, left the store in October and was hired by Nordstrom. Shin was sued by Saks for allegedly violating non-compete restrictions in the contract and sharing proprietary data.

It is worth noting that Saks Global’s acquisition of Neiman’s comes at a time when the businesses of these two luxury brands are being affected by the downturn in the global luxury goods industry. Merging two retailers always carries risks, involving resetting management structures, integrating systems, and melding different corporate cultures—all of which take time away from day-to-day operations. This can even be fatal when neither player is playing their best. Sears and Kmart merged in 2005 when both chains were in trouble, ultimately leading to the bankruptcy of both companies.

Saks Global’s strategy last year revolved around “resetting” the luxury customer experience through increased personalization and enhanced customer service, inventory sharing between Saks and Neiman, rich data, deeper customer insights and smoother interactions with consumers, and greater use of artificial intelligence.

Now, the luxury department store is getting a new look — and everyone in the fashion world will be waiting to see.

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