/>iOn December 23, 2024, Hudson’s Bay Company, the parent company of Saks Fifth Avenue, completed its acquisition of Neiman Marcus Group, the parent company of Neiman Marcus and Bergdorf Goodman, for $2.7 billion following years of on-and-off negotiations.
The acquisition combines the luxury retail brands under the newly formed Saks Global, with the goals of creating a US-luxury retail empire and reviving the department store model. Each retailer will continue to serve customers under their individual brands, with consolidation taking place at the executive level under a structure unlike anything else in the industry. The acquisition will impact both customers and vendors of each of the brands, improving the shopping experience and providing a much-needed cash infusion into the Saks brand.
Finally Making Good?
It’s no industry secret that Saks had mounting tensions with its vendors as a result of long delays in making payment and in some cases, no payment at all, to its vendors. Saks Global executives used the announcement of the merger to provide assurances that these vendors will finally be paid. The intent (and hope) is that the financial boost resulting from the merger will stabilize Saks’ cash flow and allow for timely payments to its vendors moving forward. In fact, Saks Global CEO Marc Metrick stated in an interview that the process of working through delayed payments will “begin the first week of January [2025].”
Location, Location, Location?
Under the terms of the merger, Saks Global will operate 38 Saks Fifth Avenue stores, 95 Saks OFF 5TH outlets, 36 Neiman Marcus stores, five Neiman Marcus Last Call stores, and two Bergdorf stores. Although plans for store closures have not been announced, a consolidation of retail space in markets where each brand operated individually pre-merger would not be surprising, as there will be opportunities to optimize store locations and reduce redundancies. As a whole, the fashion industry has witnessed the closure of many brick and mortar retail locations as the department store model has suffered due to high inflation and a shift in consumer shopping habits. Recently in 2023, Saks itself took advantage of certain real estate transactions to better its cash flow and pay back some of its vendors, so it is not out of the question that Saks Global may utilize similar strategies again.
One in the Same?
Industry experts are predicting that, as a result of the merger, Saks Fifth Avenue and Neiman Marcus will restructure their market visibility, relative to one another. With both brands sharing many of the same customers, as well as the same inventory of brands and goods, and with many of their current brick-and-mortar locations being walking distance from each other, there is an expectation that these two primary brands will eventually have to differentiate their positions in the luxury market.
The prediction is that Neiman Marcus will maintain its role as a top tier luxury destination, while Saks will evolve towards a more accessible luxury destination aimed at a younger demographic, which would give Saks Global substantial influence over luxury consumers’ tastes, options, and brand acceptance at various levels of the luxury market, which may lead to a better overall shopping experience for the luxury consumer. But, while consumers may be for the better, the same may not be said for brands that sell to Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman, as they may see pressure to reduce their prices on products sold to the now combined brand and provide longer credit terms. As a combined entity, Saks Global’s greater negotiating power could lead to pressure on vendors to meet its supply and demand requirements, especially smaller vendors that rely on wholesaling to Saks and Neiman Marcus. Brands will also now have fewer buyers, as those who formally sold to both Saks and Neiman Marcus individually will now sell to Saks Global.
Conclusion
Now that the merger is complete and Saks Global has been formed, brands that sell to Saks Fifth Avenue and Neiman Marcus may be impacted in several ways depending on the size of the brand and whether it previously sold to both Saks and Neiman Marcus pre-merger. And with Saks Global’s greater negotiating power, brands will need to look at other avenues to protect their interests and bottom lines, such as shop-in-shops, exclusive collaborations, and other strategies to even the playing field. One expected benefit of the merger is that Saks’ vendors can finally expect to be paid, and if what Saks Global executives say comes to fruition, the department store model could be revitalized.
