In a move that would further consolidate the luxury retail market, Saks Fifth Avenue’s parent company has agreed to buy Neiman Marcus in a $2.65 billion deal, creating the ultimate high-end department store giant, the companies announced. on Wednesday.
The deal, which had been rumored since Neiman Marcus filed for bankruptcy protection during the pandemic, comes just over four years after Saks bought the license to the Barneys name following that group’s bankruptcy. It also follows a wave of luxury e-tail failures, including those of FarFetch and Matches.com. Saks is owned by HBC, a retail conglomerate that bought the US chain in 2013 – a year after HBC also bought Lord & Taylor.
“Customers want to go to a store,” Richard Baker, HBC’s chief executive and chairman, told the New York Times. “They live to touch a product and spend time with their personal shoppers.”
He added: “Part of what excites us about the acquisition of Neiman Marcus was acquiring their world-class sales force. People have forgotten how important people are. When you sell luxury products, you need beautiful stores and salespeople that customers trust.”
The purchase of Neiman Marcus makes Saks Global, as the new group will be called, the dominant player in its market, with a combined 75 stores (including two Bergdorf Goodman locations), as well as 100 freestanding 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 chief executive of Saks and Saks.com.
The companies said they planned to invest in technology, including artificial intelligence, as well as legacy and emerging brands.
“Saks has remained steadfast in our commitment to being at the forefront of luxury fashion, meeting customers not only where they are, but where they are going,” said Mr. Metrick. “Together, with our continued focus on innovation, we are poised to drive growth for our brand partners and create career development opportunities for exceptional talent across Saks Global.”
The two retailers have long been seen as potential matches, given their overlapping customer bases of high-end customers. But each has struggled financially, causing significant complications for their efforts over the years to combine.
What may have helped seal the deal is a boost 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 purchase with $2 billion it has raised from existing investors, while affiliates of investment firm Apollo Global Management are providing $1.5 billion in debt.
Mr Baker said the company was “not planning to close any stores or digital businesses or reduce services in any way”, even though both operate in many of the same markets.
Analysts said they expected retailers would be able to save other costs by combining.
“There will be efficiencies, no doubt,” said Robert Burke, founder of a luxury retail consulting firm. “Retail has been slow recently, and there will probably be more investment in both stores than in the past. The real question will be how do brands react to this? Especially the LVMH and Kering brands.”
LVMH is the luxury conglomerate that owns Dior, Louis Vuitton and Fendi, among other brands; Kering owns Gucci, Balenciaga and Saint Laurent. Both groups sell their goods at Saks and Neiman Marcus, but have increasingly focused on driving consumers to their stores and e-commerce sites.
On the other hand, smaller independent brands, which have long relied on department stores to reach consumers across the country, will have even less choice and leverage in their negotiations with stores.
The Federal Trade Commission has paid close attention to consolidation among fashion retailers. In April, it 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 different brands. This case is expected to go to court in September.
When it comes to the Saks-Neiman deal, Mr. Burke said, “I’m sure they’ll be looking at it closely.”