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 high-end department store behemoth, the companies announced Wednesday.
The deal, which has been rumored since Neiman Marcus filed for bankruptcy protection during the pandemic, comes just 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 group that bought the American chain in 2013 — the year after HBC bought Lord & Taylor.
“Customers like to go to a store,” Richard Baker, HBC’s chief executive and president, told The New York Times. “They like to touch a product and spend time with their personal shoppers.”
Mr. Baker said he envisioned this deal since he bought Saks. “Part of what excited us about acquiring Neiman Marcus was getting their world-class sales force,” he said. “People have forgotten how important people are. When you sell luxury goods, you need beautiful stores and sellers that customers trust.”
The acquisition of Neiman Marcus 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), as well as 100 off-price stores. 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 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 associates and create career development opportunities for the incredible talent across Saks Global.”
The deal is also a vote for the future of retail and a sign of the importance of trophy real estate as luxury conglomerates such as LVMH eye prime retail real estate. Mr. Baker, who has a background in real estate, will now control a company with a retail footprint that includes 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 a potential match given their overlapping customer base of high-end customers. But each has struggled financially, creating significant complications for their efforts over the years to get together.
What may have helped seal the deal is 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 takeover with $2 billion 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 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 could save other costs by combining.
“There will be efficiencies, no doubt,” said Robert Burke, founder of a luxury retail consultancy. “Retail has been sluggish of late 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 includes Dior, Louis Vuitton and Fendi, among others. Kering owns Gucci, Balenciaga and Saint Laurent. Both groups sell their products at Saks and Neiman Marcus, but have increasingly focused on driving consumers to their own stores and e-commerce sites.
Smaller independent brands, on the other hand, 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, he moved to block the planned takeover 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 merger would affect competition between the various brands. The case is expected to go to court in September.
When it comes to the Saks-Neiman deal, Mr. Burke said, “I’m sure they will look at it carefully.”
