In a move to further consolidate the luxury retail market, the parent company of Saks Fifth Avenue has agreed to acquire Neiman Marcus for $2.65 billion, creating the ultimate luxury department store behemoth, the companies announced Wednesday.
The deal, which has been rumoured since Neiman Marcus filed for bankruptcy protection during the pandemic, comes just over four years after Saks licensed the Barneys name following the group's collapse. It also follows a wave of luxury online retail collapses, including Farfetch and Matches.com. Saks is a retail conglomerate owned by HBC, which bought the US chain in 2013. The year before, HBC also bought Lord & Taylor.
“Customers love going to the stores,” HBC CEO and Chairman Richard Baker told The New York Times. “They love touching the products and spending time with personal shoppers.”
Baker said he had envisioned this deal when he bought Saks. “One of the reasons I was excited about buying Neiman Marcus was that we were getting a world-class sales force,” he said. “People forget that people matter. To sell luxury goods, you need beautiful stores and salespeople that customers trust.”
With the Neiman Marcus acquisition, the new group will be called Saks Global and will have a market-leading presence with a total of 75 stores (including two at Bergdorf Goodman) and 100 discount outlets. In the United States, the new group's only rivals will be Macy's, which also owns Bloomingdale's, and Nordstrom. The new group will be run by Mark Metrick, current CEO of Saks and Saks.com.
The two companies said they plan to invest in technology, including artificial intelligence, as well as in both established and emerging brands.
“Saks has remained steadfast in its promise to be at the forefront of luxury fashion and meet customers not only where they are, but where they are going,” Metrick said. “With our continued focus on innovation, we are poised to foster growth for our brand partners and create career development opportunities for incredible talent across Saks Global.”
The deal is a vote in favor of the future of brick-and-mortar retail and a sign of the importance of trophy real estate as luxury conglomerates like LVMH scout for prime retail properties. Baker, a real estate veteran, will oversee retail properties that include the Saks flagship store in Midtown Manhattan and Bergdorf Goodman on Fifth Avenue. The companies said the new portfolio of companies is valued at $7 billion.
The two retailers have long been considered a potential merger given their overlapping luxury customer bases, but both companies have been in financial trouble, complicating the years-long merger effort.
Helping the deal get done may have been the backing of Amazon, which is taking a minority stake in Saks Global. HBC, which also owns the Canadian department store chain Hudson's Bay, is financing the acquisition with $2 billion raised from existing investors and an affiliate of investment firm Apollo Global Management is providing $1.5 billion in debt.
Baker said that despite the two companies operating in many of the same markets, “we have no plans to close any stores or digital operations or reduce any services.”
Analysts said they expected the retailers to save on other costs by merging.
“There will definitely be efficiencies,” said Robert Burke, founder of a luxury retail consultancy. “Retail has been struggling recently, so there may be even more investment in the stores than there has been in the past. The real question is how brands will respond to this, particularly those from LVMH and Kering.”
LVMH is a luxury-goods conglomerate that owns brands such as Dior, Louis Vuitton and Fendi, while Kering owns Gucci, Balenciaga and Saint Laurent. Both groups sell at Saks and Neiman Marcus but are increasingly focusing on driving consumers to their own stores and e-commerce sites.
Meanwhile, smaller, independent brands that have long relied on department stores to deliver their goods to consumers across the country will have even less choice and leverage in negotiating with the stores.
The Federal Trade Commission is keeping a close eye on consolidation among fashion retailers. In April, it moved to block Tapestry's (which owns Coach, Kate Spade, and Stuart Weitzman) planned acquisition of Capri (the group that owns Michael Kors, Versace, and Jimmy Choo). The commission argued that the proposed merger would affect competition between the different brands. The case is set to go to court in September.
As for the Saks-Neiman deal, “They're definitely looking at it closely,” Burke said.
