The parent corporation for Saks Fifth Avenue to buy Neiman Marcus for $2.65 billion

Saks Fifth Avenue’s parent firm Saks Fifth Avenue has signed an agreement to buy the an upscale competitor Neiman Marcus Group, which has Neiman Marcus, as well Bergdorf Goodman stores, for $2.65 billion the online giant Amazon holding an interest in a minority

By ANNE D’INNOCENZIO AP retail writer

Jul 04, 2024 09:10 PM

 

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 company will be known as Saks Global, creating a luxurious powerhouse at a moment that the marketplace has been increasingly splintered by various players, from online marketplaces selling high-end goods to clothing and accessories brands creating boutiques of their own.

The new company will include those brands, including the Saks Fifth Avenue along with the Saks Off 5TH brand names, Neiman Marcus, and Bergdorf Goodman along with the real property properties of Neiman Marcus Group as well as HBC Holding Company, a holding company that bought Saks in the year 2013.

Stores will remain under brand names of their own.

HBC has obtained $1.15 billion of financing from investment funds as well as accounts run by Apollo’s affiliates Apollo and an investment of $2 billion that is fully committed revolving asset-based loans facility offered by Bank of America, which is the primary underwriter. Citigroup, Morgan Stanley, RBC Capital Markets, and Wells Fargo.

The announcement came on Thursday, after the two department stores were in talks for around one year. The twist is that Amazon owns a minor stake, which adds “a bit of spice” to a deal that was not expected as per Neil Saunders, managing director of GlobalData which is a research company. Amazon will collaborate together with Saks Global to offer its expertise in personalization and logistics technology. Salesforce is a cloud-based software giant is also expected to become an investor after the closing.

The Wall Street Journal first announced the deal on 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 an announcement. “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, who is the chief executive officer of Saks E-commerce and will be the CEO of Saks Global. Metrick spoke to The Associated Press on Thursday in a telephone interview that consumers are seeking more designer products, faster methods of shopping and more customized experiences.

“This type of combination was the next move to make in order to put Saks, Neiman Marcus and Bergdorf Goodman where they need to be for the consumer, ” the official said.

The two stores Saks as well as Neiman Marcus have faced challenges since shoppers have pulled away from buying expensive goods and shifting their focus to experiences like dining out and travel. These two iconic luxury retailers are also facing stiffer competition from luxury brands who are opening more and more stores.

The acquisition should lower operating expenses and give the company more negotiation capability with vendors. The new entity will allow shoppers to access new designers, including emerging ones, as it will have greater financial flexibility. Customers will also get their experiences become more personalized thanks to the an improved use of artificial Intelligence, Metrick said.

Saks Fifth Avenue currently operates 39 stores across its stores across the U.S., including its Manhattan flagship. In the early 2021s Saks separated the site to form a distinct entity with the intention to expand the business during an era when more customers were purchasing on the internet.

Neiman Marcus applied for bankruptcy protection in May of 2020 during the early stages of the coronavirus pandemic, but it it was discovered during September the same year. Similar to many of its competitors privately owned department chain was forced temporarily shut down its stores for a number of months.

While others departmental stores face pressure to continue selling more.

Storied Lord & Taylor announced in August that it would be closing its stores following declaring bankruptcy earlier that month. It’s still operating online. Macy’s revealed in the month of February this year that they would shutter 150 of its namesake stores that are not productive in the next three years, including 50 by year’s end.

Consumers have shown resilience and are eager to purchase in spite of a period of inflation. However, consumer behavior have changed, with some Americans switching to cheaper goods.

A agreement between the two luxury retailers doesn’t solve all problems, particularly when high-end customers are seeking to purchase high-end goods online or at boutiques owned by luxury brands, 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 stated. “As such, there is a risk that the deal might end up creating an even bigger headache for Saks.”

Saunders said that Amazon’s involvement in the business is sensible because it is aiming to expand its presence in the world of luxury. Saunders added that Amazon could leverage its power to improve logistics and e-commerce, and provide an advantage for the new company in a world in which online shopping has increased in importance to consumers particularly younger shoppers that both retailers need to be able to draw more the younger crowd, he noted.

Saks Global will also include HBC’s U.S. real estate assets and Neiman Marcus Group’s property assets, resulting in an investment portfolio worth $7 billion of real estate assets for retail located in luxury shopping centers of the highest quality. Ian Putnam, currently president and CEO of HBC Properties and Investments, will be appointed the chief executive officer of Saks Global Properties and Investments which will oversee the portfolio of assets owned by the company.

The two Metrick Putnam and Metrick Putnam will be reporting to Baker who will also serve as the executive chairman for Saks Global.