NEW YORK — An appeal for bankruptcy protection filing of the operator of Saks Fifth Avenue, Bergdorf Goodman and Neiman Marcus has left the luxury department stores’ suppliers with unpaid bills and caused a rift with Amazon, one of Saks Global’s minority investors.
Saks Global said last week it had secured roughly $1.75 billion to help finance the company toward hoped-for profitability. The company said it would honor all customer loyalty programs, compensate vendors and pay employees while seeking approval for its plan to pay off outstanding liabilities, which range from $1 billion to $10 billion, according to court documents.
Many brands stopped shipping their goods weeks ago as Saks Global’s financial distress became more evident and bankruptcy appeared inevitable, experts said. A visit to Saks Fifth Avenue’s flagship store in Manhattan last week revealed noticeable merchandise gaps, including handbags and shoes spread out along shelves.
Neil Saunders of GlobalData Retail, a research firm, noted it’s critical for Saks to have a good assortment, including trendy items from small niche brands.
The bankruptcy occurred a little over a year after the parent company of Saks Fifth Avenue agreed to buy the Neiman Marcus Group, its upscale rival, for $2.65 billion. Amazon took a minority stake in the deal, which saddled the new holding company with significant debt at a time of rising competition and a slowdown in luxury spending.
Many suppliers face unpaid bills
Major brands like Chanel and Kering — the parent of Gucci and Saint Laurent, among others— top the list of creditors owed the most money. But bankruptcy lawyers and industry executives expect that luxury conglomerates will be fine.
“This is very painful,” said Joseph Sarachek, a lawyer who represents roughly 30 brands owed money by Saks. “A lot of these guys are going to go out of business.”
Sarachek declined to name his clients for fear of retribution by Saks but said that they’re owed anywhere from $600,000 to $10 million. He said his clients don’t operate their own stores, and for some, Saks had been their only big retail account.
He said he has recommended to his clients not to ship to Saks unless they get more clarity on payment terms.
Over the past year, that relationship only worsened, with management changing the payment terms for brands that supplied the stores, according to Gary Wassner, CEO of Hildun Corp. which provides credit guarantees to roughly 120 brands that sell to Saks.
Amazon’s ire
Amazon invested $475 million as part of Saks’ purchase of Neiman Marcus in December 2024 in exchange for selling Saks products on the online behemoth’s website under the “Saks at Amazon” shop.
The partnership was supposed to further Amazon’s goal of attracting more luxury brands on its site.
But, as Amazon argued in a court filing to block the financing plan hours after Saks filed for Chapter 11 bankruptcy, “That equity investment is now presumptively worthless.”
“Saks 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,” the court filing said.
Amazon had argued Saks’ financing plan hurts the retailer, and other creditors, because it loads down Saks with additional debt.
Fate of stores
Saks had already revealed plans back in November to close nine Saks Off 5th stores starting this month. That brings the total of Saks Off 5th locations to 70. There are also 33 Saks stores and 36 Neiman Marcus locations, as well as two Bergdorf Goodman stores.
Saks said this week it was evaluating its “operational footprint” to ensure it was well positioned to invest in areas with the best opportunities for growth.
Experts think it will close a bulk of Saks Off 5th stores as well as several Saks and Neiman Marcus stores.
David Tawil, president of ProChain Capital, a cryptocurrency hedge fund and a former bankruptcy lawyer and distressed investor, believes the most vulnerable will be Saks Off 5th locations, which haven’t fared well and have faced stiff competition from the likes of T.J. Maxx.
Discounts for shoppers
Shoppers are seeing generous discounts at Saks, Neiman Marcus and Saks Off 5th.
Saks’ website shows up to 70% off on select designer clothing, while Neiman Marcus is marking down select styles at up to 75% off, according to its website. The Saks Off 5th website is promoting up to 85% off items.
Still, don’t expect to grab a Chanel or Louis Vuitton handbag at 75%, Tawil said. Many of the major iconic brands have clauses triggered by a bankruptcy filing that limit discounts.
