“We are thrilled to take this step to bring together these iconic luxury names, Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman,” Richard Baker, HBC Executive Chairman and CEO, said in a press release. “This is an exciting time in luxury retail, with technological advancements creating new opportunities to redefine the customer experience.”
Amazon and Salesforce will hold a minority stake in the company and will provide support in the areas of technology, logistics and artificial intelligence integration.
GET CAUGHT
Stories to keep you informed
Industry experts say the merger could provide stability for two retailers struggling with slow growth. Department stores have lost their relevance as their primary customers skew older and younger shoppers flock to other shopping options. “Usually [merging] “A sign of weakness in retail is a sign of weakness; it is typically not a sign of strength,” said Sucharita Kodali, principal analyst for retail and e-commerce at research firm Forrester.
The union has been years in the making, with Saks — a unit of Hudson’s Bay Company — and Neiman Marcus negotiating on and off since 2017. Last year, Neiman’s walked away from a $3 billion offer after the two sides failed to agree on the terms of the sale, the Wall Street Journal reported. The news of the merger was first reported by the Journal.
The deal brings Saks, which has 41 stores in North America, under the same corporate umbrella as its Dallas-based rival, which has 36 Neiman Marcus and two Bergdorf Goodman stores. There are no plans for store closures.
“This is a real estate transaction, it’s not just about ‘let’s merge,'” said Shawn Grain Carter, a professor at the Fashion Institute of Technology. “It’s about where these leases are, in what areas, in what malls. … The customer won’t know that it’s one holding company that [both Saks and Neiman’s].”
Saks and Neiman’s both sell luxury goods, but they attract different groups of luxury consumers and offer different levels of service.
“Saks under Hudson’s Bay is no longer as exclusive and elegant as it once was, while Neiman Marcus is still regarded as the luxury purveyor of truly extraordinary, exclusive, exciting merchandise that is cultivated and curated for the ultra-high net worth individual,” Carter said.
Both retailers have struggled in recent years. Neiman’s filed for bankruptcy in 2020 but emerged from Chapter 11 protection a few months later after paying down $4 billion in debt and refinancing the rest. In November, New York City-based Saks raised $340 million in real estate deals to pay suppliers after months of late payments. Saks.com, a separate entity but also owned by Toronto-based HBC, announced in April that it had raised $60 million from Pathlight Capital and Bank of America as online sales slumped.
The U.S. luxury retail market has boomed during the pandemic, reaching $145.2 billion in 2022, according to GlobalData. But inflation soared to 9.1 percent that year and has remained high since, leading to higher borrowing costs and a more restrained consumer. In 2023, sales in the category fell 3.7 percent, the analytics and advisory firm reported.
The decline reflects shoppers’ waning interest in department stores and reluctance to spend on discretionary items. While about 60 percent of sales at luxury department stores come from consumers with household incomes of more than $200,000, Carter said, these retailers still need the aspiring luxury shopper to make up the rest.
“That customer is being squeezed,” she said. Inflation, interest rates, gas prices and college tuition “are all eroding their purchasing power.” The geopolitical environment, wars, an upcoming election and news of white-collar layoffs “are also affecting consumer psychology,” she said.
Luxury department stores are defined by exclusivity and experience, a collective that once included brands like Barneys and Henri Bendel in New York, Garfinkel’s in Washington and Marshall Field in Chicago. And for those that remain, such as Neiman’s, Saks and Nordstrom, competition is fiercer. Specialty stores such as Sephora and Ulta have lured cosmetics and fragrance shoppers away with their extensive online offerings and in-store locations, Kodali said.
“You just don’t see as much traffic in department stores anymore,” she said.
There could be obstacles ahead, with the strong likelihood that federal regulators will scrutinize the deal, said John B. Kirkwood, a law professor at Seattle University School of Law. While the likelihood of a lawsuit actually happening is slim, Kirkwood said. “It’s possible, but this doesn’t really stand out as a strong case.”
The Biden administration is cracking down on mega-mergers, including in retail. The Federal Trade Commission voted unanimously this week to block mattress maker Tempur Sealy from buying retail chain Mattress Firm. Federal regulators sued luxury fashion conglomerates Tapestry and Capri Holdings over their $8.5 billion union in April, and supermarket giants Kroger and Albertsons in February.