In a move that will 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 department store conglomerate, the companies announced Wednesday.
The deal, which has been rumored since Neiman Marcus filed for bankruptcy protection amid 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 spate of luxury e-tail failures, including those of FarFetch and Matches.com. Saks is owned by HBC, a retail conglomerate that bought the U.S. chain in 2013 — the year after HBC acquired Lord & Taylor.
“Customers love going to a store,” Richard Baker, HBC’s CEO and chairman, told The New York Times. “They love to touch a product and spend time with their personal shoppers.”
He added: “Part of what excited us about acquiring 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 who trust customers.”
The Neiman Marcus acquisition makes 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 are Macy’s, which also includes Bloomingdale’s, and Nordstrom. It is run by Marc Metrick, the current CEO of Saks and Saks.com.
The companies said they plan to invest in technology, including artificial intelligence, and in both legacy and emerging brands.
“Saks has remained steadfast in our commitment to leading the way in luxury fashion, meeting customers not only where they are, but where they’re 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 the incredible talent within Saks Global.”
The deal is also a vote for the future of brick-and-mortar stores and a sign of the importance of trophy real estate as luxury conglomerates such as LVMH scour the best retail properties for them. Mr. Baker, who has a background in real estate, will now control a company that includes Saks’ flagship store in Midtown Manhattan and Bergdorf Goodman on Fifth Avenue. The companies said the new portfolio of holdings would be worth $7 billion.
The two retailers have long been seen as potential matches, given their overlapping high-end customer bases. But both have struggled financially, posing significant complications to their attempts to merge over the years.
What may have sealed 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 affiliates of investment firm Apollo Global Management are providing $1.5 billion in debt.
Mr Baker said the company “has no plans to close stores or digital businesses or reduce services in any way”, even though both companies operate in many of the same markets.
Analysts expect that the merger will allow retailers to save other costs.
“There will undoubtedly be efficiencies,” said Robert Burke, founder of a luxury retail consultancy. “Retail has been slow recently and perhaps there will be more investment in both stores than in the past. The real question is how do the brands respond to that? Particularly 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.
Smaller, independent brands, on the other hand, have long relied on department stores to reach consumers across the country, and have even less choice and power in negotiating with retailers.
The Federal Trade Commission has been keeping a close eye on consolidation among fashion retailers. In April, it decided to block the planned acquisition of Capri (the group that owns Michael Kors, Versace and Jimmy Choo) by Tapestry (owner of Coach, Kate Spade and Stuart Weitzman). The agency argued that the proposed consolidation would harm competition between brands. The case is expected to go to trial in September.
As for the Saks-Neiman deal, Mr. Burke said, “I’m sure they’ll look at it very closely.”