Saks Global, a high-end department store conglomerate, has filed for bankruptcy protection, marking one of the biggest retail collapses in the wake of the pandemic. This move follows a recent merger that aimed to combine Saks Fifth Avenue, Bergdorf Goodman, and Neiman Marcus under one umbrella.
Despite the bankruptcy filing, Saks has reassured customers that its stores will continue to operate as it secured a $1.75 billion US financing package and appointed a new CEO. The luxury brand has faced challenges stemming from the impact of the COVID-19 pandemic, increased online competition, and brands selling directly to consumers, leading to financial struggles and vendor payment issues.
Geoffroy van Raemdonck, former CEO of Neiman Marcus, will now lead Saks Global, taking over from Richard Baker, who initiated the acquisition strategy that burdened the company with debt. The bankruptcy filing estimates the company’s assets and liabilities to be in the range of $1 billion to $10 billion.
The restructuring process aims to facilitate negotiations with creditors or attract new ownership to ensure the company’s survival. Saks Global highlighted that the demand for luxury goods remains strong, attributing its challenges to inventory availability and vendor confidence.
The acquisition of Neiman Marcus added to Saks Global’s debt load at a time when luxury sales were slowing globally. The company, with approximately 17,000 employees, previously raised $600 million US to address financial difficulties but continued to face liquidity constraints due to missed vendor payments and inventory issues.
To address its financial woes, Saks Global recently sold off real estate assets and sought to sell a minority stake in Bergdorf Goodman. The new financing deal includes a $1 billion cash injection through a debtor-in-possession loan and additional funding upon exiting bankruptcy protection. Notable luxury brands such as Chanel, Kering, and LVMH are listed as unsecured creditors in the court filing.
In response to the bankruptcy filing, industry experts predict a shift in the luxury retail landscape, with brands likely to reduce reliance on department stores and prioritize their owned channels and strategic partnerships. Richard Baker’s strategic moves, including the takeover of Neiman Marcus and the creation of Saks Global, have reshaped the American high fashion scene, bringing together iconic names in the industry.