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The parent company of Saks Fifth Avenue has signed a deal to buy upscale rival Neiman Marcus Group, which owns Neiman Marcus and Bergdorf Goodman stores, for $2.65 billion, with online behemoth Amazon holding a minority stake.
The new entity would be called Saks Global, which will comprise the Saks Fifth Avenue and Saks OFF 5TH brands, Neiman Marcus and Bergdorf Goodman, as well as the real estate assets of Neiman Marcus Group and HBC, a holding company that purchased Saks in 2013.
HBC has secured $1.15 billion in financing from investment funds and accounts managed by affiliates of Apollo, and a $2 billion fully committed revolving asset based loan facility from Bank of America, which is the lead underwriter, Citigroup, Morgan Stanley, RBC Capital Markets, and Wells Fargo.
The deal comes after months of rumors that the department store chains had been negotiating a deal. But the twist is Amazon’s minority stake, which adds “a bit of spice” to an otherwise anticipated pact, according to Neil Saunders, managing director of GlobalData, a research firm.
The pact was announced Thursday after months of rumors that the department store chains had been negotiating a deal.
The Wall Street Journal first reported the impending deal Wednesday.
“For years, many in the industry have anticipated this transaction and the benefits it would drive for customers, partners and employees," said Richard Baker, HBC executive chairman and CEO in a statement. “This is an exciting time in luxury retail, with technological advancements creating new opportunities to redefine the customer experience, and we look forward to unlocking significant value for our customers, brand partners and employees."
Both Saks and Neiman Marcus have struggled as shoppers have been pulling back on buying high-end goods and shifting their spending toward experiences, like travel and upscale restaurants. The two iconic luxury purveyors have also faced stiffer competition from luxury brands, which are increasingly opening their own stores. The deal should help reduce operating costs and create more negotiating power with vendors.
Saks Fifth Avenue currently operates 39 stores in the U.S., including its Manhattan flagship. In early 2021, Saks spun off its website into a separate company, with the hopes of expanding that business at a time when more people were shopping online.
Current Saks.com CEO Marc Metrick will become CEO of Saks Global, leading Saks Global’s retail and consumer businesses and driving the strategy to improve the luxury shopping experience.
Neiman Marcus filed for bankruptcy protection in May 2020 during the first months of the coronavirus pandemic but emerged in September of that year. Like many of its peers, the privately held department store chain was forced to temporarily close its stores for several months.
Meanwhile, other department stores are under pressure to keep increasing sales.
Storied Lord & Taylor announced in late August 2020 it was closing all its stores after filing for bankruptcy earlier that month. It's operating online. Macy’s announced in February of this year that it will close 150 unproductive namesake stores over the next three years including 50 by year-end.
Consumers have proven resilient and willing to shop even after a bout of inflation, though behaviors have shifted, with some Americans trading down to lower-priced goods.
A deal between the two luxury retailers does not resolve all the issues, especially when high-end shoppers are looking to buy luxury goods online or at luxury brands' own stores, Saunders said.
“As a larger entity, negotiating power will be a little better with the brands, but even a combined chain would not match the heft and power of the global luxury conglomerates, which would still hold most of the cards,” Saunders said. “As such, there is a risk that the deal might end up creating an even bigger headache for Saks.”
Saunders noted that Amazon's stake in the business makes sense, as it has ambitions to play more heavily in the luxury arena. The release noted that Amazon will work with Saks Global in innovating the shopping experience. Saunders said Amazon could use its ability to streamline logistics and e-commerce and create an advantage for the new entity in a market where online shopping has become more important to shoppers — especially younger ones, which both chains need to do more to attract, he said.
Saks Global will also include HBC’s U.S. real estate assets and Neiman Marcus Group’s real estate assets, creating a $7 billion portfolio of retail real estate assets in top-tier luxury shopping destinations. Ian Putnam, currently president and CEO of HBC Properties and Investments, will become CEO of Saks Global Properties and Investments, which will manage the company’s portfolio of assets.
Both Metrick and Putnam will report to Mr. Baker, who will serve as executive chairman of Saks Global.
