NEW YORK — 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 will be called Saks Global, creating a luxury powerhouse in an arena that has become increasingly fragmented, with different players, from online marketplaces that sell luxury goods to upscale fashion and accessories brands, opening up their stores.
The organization will comprise the Saks Fifth Avenue and Saks Off 5th brands, Neiman Marcus and Bergdorf Goodman, and 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 Apollo affiliates and a $2 billion fully committed revolving asset-based loan facility from Bank of America, the lead underwriter, Citigroup, Morgan Stanley, RBC Capital Markets and Wells Fargo.
The deal was announced July 4 after the department store chains had negotiated for about a year. However, 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. Amazon will work with Saks Global to offer expertise in logistics and personalization technology.
“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. “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.”
Marc Metrick, CEO of Saks’ e-commerce business, will become CEO of Saks Global. In a phone interview, he told The Associated Press that consumers increasingly demand more access to designer products, easier ways to shop and more personalized experiences.
“This type of combination was the next move to make to put Saks, Neiman Marcus and Bergdorf Goodman where they need to be for the consumer, “ he said.
The deal should help reduce operating costs and create more negotiating power with vendors. The new entity will also give shoppers better access to more designers, particularly up-and-coming ones, as it will have more financial flexibility. Metrick said that shoppers will also see their experiences more personalized through improved use of artificial intelligence.
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, hoping to expand that business at a time when more people were shopping online.
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 close its stores temporarily for several months.
Other department stores are under pressure as well. Lord & Taylor announced in late August 2020 that it was closing all its stores after filing for bankruptcy earlier that month. Macy’s announced it will close 150 stores over the next three years, including 50 by year-end.
Saunders said a deal between the two luxury retailers only resolves some of the issues, especially when high-end shoppers want to buy luxury goods online or at luxury brands’ stores.
“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 create 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. Saunders said Amazon could use its ability to streamline logistics and e-commerce to 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.
Saks Global will also include HBC’s U.S. real estate assets and Neiman Marcus Group’s assets, creating a $7 billion portfolio of retail real estate assets in top-tier luxury shopping destinations. Ian Putnam, 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.
