By saks off fifth avenue parent company is purchasing competitor Neiman Marcus.
saks off fifth avenue
Saks off fifth avenue parent company has agreed to pay $2.65 billion to acquire the upscale rival Neiman Marcus Group, which operates the Bergdorf Goodman and Neiman Marcus retail brands, with a minority stake held by online giant Amazon.
At a time when the market is becoming more and more fragmented with various players, from online marketplaces that sell luxury goods to upscale fashion and accessory brands opening up their own stores, Saks Global, the new entity, will create a luxury powerhouse.
The new company will include the real estate holdings of HBC, a holding company that acquired Saks in 2013, Neiman Marcus, Bergdorf Goodman, and the Saks Fifth Avenue and off saks fifth avenue 5TH brands.
The stores will carry on doing business under their individual brand names.
In addition to a $2 billion fully committed revolving asset based loan facility from Bank of America, which is the lead underwriter, Citigroup, Morgan Stanley, RBC Capital Markets, and Wells Fargo, HBC has also secured $1.15 billion in financing from investment funds and accounts managed by affiliates of Apollo.
After roughly a year of negotiations, the two department store chains announced the deal on Thursday. However, the twist is Amazon’s minority stake, which, in the words of Neil Saunders, managing director of research firm GlobalData, “adds a bit of spice” to an otherwise expected agreement. Saks Global and Amazon will collaborate to provide Amazon’s logistics and personalisation technology know-how. Powerhouse cloud-based software provider Salesforce will also invest at closing.
The upcoming deal was first reported by The Wall Street Journal on Wednesday.
HBC executive chairman and CEO Richard Baker said in a statement, “For years, many in the industry have anticipated this transaction and the benefits it would drive for customers, partners, and employees.” “With technology breakthroughs opening up new possibilities to redefine the customer experience, this is an exciting time in luxury retail. We look forward to unlocking significant value for our customers, brand partners, and employees.”
The CEO of Saks’ online store, Marc Metrick, will take over as CEO of Saks Global. In a phone interview with The Associated Press on Thursday, he stated that customers are calling for easier access to designer goods, more individualised shopping experiences, and more.
“Putting Saks, Neiman Marcus, and Bergdorf Goodman where they need to be for the consumer required this kind of combination,” he stated.
Saks and Neiman Marcus have both suffered as consumers have been spending less on luxury products and more on experiences like dining at fine restaurants and travelling. As more luxury brands open their own stores, the two venerable purveyors of luxury goods are up against fiercer competition.
The agreement should strengthen negotiating leverage with suppliers and lower operating expenses. Customers will also have easier access to a greater selection of designers, especially emerging ones, thanks to the new company’s greater financial flexibility. Additionally, Metrick stated that customers will notice a more tailored experience due to the enhanced application of artificial intelligence.
Saks Fifth Avenue currently has 39 locations across the United States, including its flagship location in Manhattan. Saks separated its website into a distinct business at the beginning of 2021 in an attempt to grow it during a period when more people were shopping online.
In May 2020, during the initial months of the coronavirus pandemic, Neiman Marcus filed for bankruptcy protection; however, the company resurfaced in September of the same year. The privately held department store chain was forced, like many of its competitors, to temporarily close its stores for a few months.
In the meantime, pressure is mounting on other department stores to maintain sales growth.
After declaring bankruptcy earlier in the month of August 2020, Storied Lord & Taylor declared in late August 2020 that it was closing all of its stores. It runs through the internet. During the course of the following three years, Macy’s plans to close 150 unproductive namesake stores—50 of which will close by year’s end—were revealed in February of this year.
Even after a period of inflation, consumers have shown to be resilient and eager to shop; however, some Americans have changed their purchasing habits and are now willing to settle for less expensive products.
According to Saunders, a deal between the two luxury retailers does not address every problem, particularly in the case of affluent consumers who wish to purchase luxury goods at the physical stores of luxury brands or online.
Even with a combined chain, Saunders noted, “negotiating power will be a little better with the brands as a larger entity, but the global luxury conglomerates would still hold most of the cards.” Therefore, there’s a chance Saks will have even more headaches as a result of the deal.
According to Saunders, Amazon’s investment in the company makes sense given its goal of expanding its presence in the luxury market. Amazon, according to Saunders, could take advantage of its capacity to expedite e-commerce and logistics to give the new company an advantage in a market where online shopping has grown in importance for consumers, particularly younger ones, whom both chains must do more to draw in.
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Saks off fifth avenue Saks Global will also acquire the real estate holdings of HBC in the United States and Neiman Marcus Group in the United States, resulting in a $7 billion portfolio of retail real estate holdings in upscale luxury retail locations. The CEO of Saks Global Properties and Investments, which will oversee the company’s asset portfolio, will be Ian Putnam, who is currently president and CEO of HBC Properties and Investments.
Putnam and Metrick will answer to Baker, who will take on the role of executive chairman at Saks Global.
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