Saks Global, parent company of Saks Fifth Avenue, Bergdorf Goodman and Neiman Marcus, filed for bankruptcy protection this week, leaving suppliers with unpaid bills ranging from $600,000 to $10 million and prompting Amazon, a minority investor, to challenge the company’s proposed financing plan. The filing came roughly a year after Saks Global acquired Neiman Marcus for $2.65 billion, a deal that left the merged company heavily indebted at a time when luxury spending has slowed.
The bankruptcy endangers suppliers who depend on Saks for a substantial portion of their business and lack their own retail distribution. At the same time, the filing tests a high-profile partnership between a major luxury retailer and one of the world’s largest e-commerce platforms.
Supplier Impact
At stake for suppliers are hundreds of millions of dollars in unpaid invoices. Joseph Sarachek, a lawyer representing roughly 30 supplier brands, said his clients are owed anywhere from $600,000 to $10 million each. For some, Saks accounted for 40 to 50 percent of their business.
“This is very painful,” Sarachek said. “A lot of these guys are going to go out of business.”
Sarachek declined to name his clients, citing fear of retribution from Saks. He recommended that suppliers withhold shipments until payment terms are clarified. Gary Wassner, CEO of Hildun Corp., which provides credit guarantees to roughly 120 brands selling to Saks, advised his clients to halt shipments starting in December, well before the bankruptcy filing became public.
Market Disruption
Even before the bankruptcy filing, major brands had begun pulling back on shipments, according to industry executives. A visit to Saks Fifth Avenue’s flagship store in Manhattan last week revealed noticeable merchandise gaps—handbags and shoes were spread thinly along shelves that would normally be full.
Many brands stopped shipping their goods weeks ago as Saks Global’s financial distress became more evident and bankruptcy appeared inevitable. Neil Saunders, a retail analyst at GlobalData, noted that the merchandise shortages could drive customers elsewhere.
“If Saks or Neiman Marcus are not offering that, those customers will find somewhere else to shop,” Saunders said, referring to trendy items from small niche brands that luxury customers expect to find at department stores.
Industry experts expect competitors to benefit from the disruption. Luxury department store chains Nordstrom and Bloomingdale’s, as well as luxury brands’ own retail locations and consignment platforms like The RealReal, which specializes in gently used luxury goods, are positioned to capture customers and brands seeking alternatives to Saks.
Amazon’s Objection
Amazon’s objection signals tension between the e-commerce giant and the struggling retailer. In court filings, Amazon argued that Saks had “continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year, and ran up additional hundreds of millions of dollars in unpaid invoices owed to its retail partners.”
Amazon has threatened “drastic remedies” including the appointment of an examiner or trustee if Saks does not resolve the matter. Amazon declined to comment beyond its court filings.
Pricing and Store Closures
Saks has begun aggressive discounting to generate cash. Shoppers are seeing markdowns of up to 70 percent on select designer clothing at Saks Fifth Avenue, up to 75 percent at Neiman Marcus, and up to 85 percent at Saks Off 5th stores.
Saks announced in November that it would close nine Saks Off 5th locations, bringing the total to 70. The company operates 33 Saks stores, 36 Neiman Marcus locations, and 2 Bergdorf Goodman stores. In court filings this week, Saks said it is evaluating its “operational footprint” to determine which additional stores will close, signaling that more closures are likely.