Saks Connections: Luxury Reset and Industry Shake-up

Any good controversy has two, maybe three players squaring off, repositioning for a future that is usually coming much sooner than later.

And then there’s a focal point — some kind of friction or worry — that animates it all, forcing a kind of forward momentum.

The state of Saks Global is not just a good controversy — it’s a great one.

Instead of only a few players, there’s a kaleidoscope of interests all coming together, looking to merge Saks and Neiman Marcus, build the future of luxury shopping, continue to ship their goods — or just get out with a return on their investment.

At the center of it all are Saks’ executive chairman Richard Baker and its chief executive officer Marc Metrick.

It was Baker who realized his years-long dream to buy Neiman’s, closing a hard-fought $2.7 billion deal last year. But it’s Metrick who has the day-to-day responsibility for making it work. Their attempt to reset the luxury model has included longer payment terms for vendors, a new organizational structure with a commercial team instead of chief merchants, cost cutting and more.

Each step of the way there has been something noteworthy — a ton of angst, some strategic pivot, strange bedfellows or big-time money.

• Early investors like Insight Partners, who gave the company $500 million in 2021 to establish a stand-alone Saks e-commerce business, needed to flex with the changing market and strategy.
• New investors and partners had to be brought onboard, including Amazon, which just launched a Saks e-commerce storefront.
• Brands that kept shipping to Saks even as past-due bills piled up needed to accept a delayed repayment schedule.
• Factors, like Hilldun’s Gary Wassner, had to navigate between brands and the retailers, deciding which shipments to secure.
• The workforce at Saks and Neiman’s weathered cuts and some store closures.
• And all the while competitors like LuxExperience, the new Mytheresa and Net-a-porter mashup, have have been angling for advantage.

Now it’s the bondholders who have surged to the fore.

Even though it was just five months ago that Saks sold $2.2 billion in bonds to finance the combination, the investors holding that debt are nervous, trading it for less than 58 cents on the dollar.

Metrick said the company has nearly $400 million in liquidity.

But talk of liquidity is rarely all that reassuring and the market — made up of the hundreds of investors who now hold the bonds — is looking ahead to a roughly $120 million interest payment due at the end of June. That comes on top of the bills to vendors for spring merchandise and the back payments to brands that are promised to start in July.

Bondholders are now waiting to see how the luxury reset will play out. They have plenty of company.

The Bottom Line is a business analysis column written by Evan Clark, deputy managing editor, who has covered the fashion industry since 2000. It appears periodically.