In a move that would further consolidate the luxury retail market, the parent company of Saks Fifth Avenue has agreed to acquire Neiman Marcus in a $2.65 billion deal, creating the ultimate high-end department store giant, the companies announced Wednesday.
The deal, which has been rumored since Neiman Marcus filed for bankruptcy protection during the pandemic, comes just over four years after Saks bought the license for the Barneys name following that group’s bankruptcy. It also follows a wave of luxury email failures, including those from FarFetch and Matches.com. Saks is owned by HBC, a retail conglomerate that bought the American chain in 2013 – the year after HBC also acquired Lord & Taylor.
“Customers like to go to a store,” Richard Baker, CEO and chairman of HBC, told The New York Times. “They love touching a product and spending time with their personal shoppers.”
Mr. Baker said he had been envisioning this deal since he bought Saks. “Part of what made us excited about acquiring Neiman Marcus was acquiring their world-class sales force,” he said. “People have forgotten how important people are. If you sell luxury products, you need beautiful stores and salespeople that customers trust.”
The acquisition of Neiman Marcus will make Saks Global, as the new group will be called, the dominant player in its market, with a total of 75 stores (including two Bergdorf Goodman locations) and 100 off-price outlets. The new group’s only real rivals in the United States will be Macy’s, which also includes Bloomingdale’s, and Nordstrom. It will be led by Marc Metrick, the current CEO of Saks and Saks.com.
The companies said they planned to invest in technology, including artificial intelligence, as well as both existing and emerging brands.
“Saks has remained steadfast in our commitment to leading the way in luxury fashion and meeting customers not only where they are, but where they are going,” said Mr. Metrick. “Along with our continued focus on innovation, we are poised to fuel the growth of our brand partners and create career development opportunities for the incredible talent at Saks Global.”
The deal is also a vote for the future of brick-and-mortar retail and a sign of the importance of trophy real estate as luxury conglomerates like LVMH scour prime retail properties to snap up. Mr. Baker, who has a background in real estate, will now lead a company with retail space that includes the Saks flagship store in Midtown Manhattan and Bergdorf Goodman on Fifth Avenue. The companies said this new portfolio of companies would be worth $7 billion.
The two retailers have long been seen as potential matches, given their overlapping customer base of high-end customers. But both have struggled financially, creating significant complications for their combining efforts over the years.
What may have helped close the deal was some help from Amazon, which is taking a minority stake in Saks Global. HBC, which also owns Canadian department store chain Hudson’s Bay, is financing the acquisition with $2 billion it raised from existing investors, while subsidiaries of investment firm Apollo Global Management are providing $1.5 billion in debt.
Mr Baker said the company had “no intention of closing any stores or digital businesses or reducing services in any way”, even though both operate in many of the same markets.
Analysts said they expected the retailers could save other costs by combining.
“There will undoubtedly be efficiencies,” said Robert Burke, the founder of a luxury retail consultancy. “Retail has been sluggish recently and perhaps both stores will see more investment than in the past. The real question will be: how do brands respond to this? Especially the LVMH and Kering brands.”
LVMH is the luxury conglomerate that owns Dior, Louis Vuitton and Fendi, among others; Kering owns Gucci, Balenciaga and Saint Laurent. Both groups sell their goods in Saks and Neiman Marcus, but are increasingly focused on driving consumers to their own stores and e-commerce sites.
In contrast, smaller independent brands, which have long relied on department stores to reach consumers across the country, will have even less choice and power in their negotiations with stores.
The Federal Trade Commission has been keeping a close eye on consolidation among fashion retailers. It’s in April moved to block the planned acquisition of Capri (the group that owns Michael Kors, Versace and Jimmy Choo) by Tapestry (which owns Coach, Kate Spade and Stuart Weitzman). The agency argued that the planned consolidation would affect competition between the different brands. This case is expected to go to trial in September.
When it comes to the Saks-Neiman deal, Mr. Burke said, “I’m sure they’ll look at it closely.”
