The grand $2.7 billion union of American luxury retail titans Saks and Neiman Marcus, intended to forge a dominant force against online rivals, has spiraled into a financial quagmire. Instead of creating a powerhouse, the merger has burdened the newly formed Saks Global with unsustainable debt, leading to severe cash flow problems, delayed payments to vendors, and the looming threat of a Chapter 11 bankruptcy filing.
A Deal Built on Debt and Unmet Assumptions
In July 2024, Hudson's Bay Co (HBC), led by chairman Richard Baker, completed the acquisition of Neiman Marcus Group, which included the iconic Bergdorf Goodman. This move spun off U.S. luxury assets to create Saks Global. Despite backing from major investors like Amazon and Salesforce, the deal was financed with approximately $2.2 billion in debt. This aggressive leveraging occurred as the global luxury sector was slowing down and the company was already loss-making.
Financial experts point to flawed foundations. "The deal was built on aggressive earnings and cost-cut assumptions that have not been achieved," stated Tim Hynes, Global Head of Credit Research at Debtwire. The promised $600 million in annual cost savings over five years failed to materialize as the luxury market did not recover in 2025. By June, the struggling conglomerate was forced to raise an additional $600 million from investors.
Gary Wassner, CEO of factoring firm Hilldun, highlighted the capital misstep: "I don't believe they had enough capital initially... So [they] started to run out of cash." By October, Saks Global slashed its full-year adjusted core earnings target to a range of $140-$160 million, down dramatically from earlier projections of $275-$325 million.
Empty Shelves and a Broken Supply Chain
The cash crunch had immediate and devastating effects on operations. To conserve funds, Saks began delaying payments to its vendors, the brands that stock its shelves. This created a destructive cycle: delayed payments led to delayed shipments, putting Saks at a severe competitive disadvantage.
Vendors reported receiving products nearly a month later than other retailers, forcing Saks to sell items at a discount. The situation deteriorated rapidly. By January, over 100 brands had stopped shipping products to Saks Global. Hilldun itself paused approving new orders in early December. One women's fashion brand revealed it halted shipments in December and was owed a six-figure sum since August. A watch company severed ties after Saks failed to pay at least $70,000 on time.
Despite attempts to sell a minority stake in Bergdorf Goodman in September, the cash ran out. In a critical warning sign, Saks missed a $100 million interest payment in December, triggering a 30-day grace period to negotiate with creditors or face a potential bankruptcy filing.
Uncertain Future: Real Estate Assets and Leadership Changes
In a last-ditch effort, Richard Baker replaced veteran Marc Metrick as CEO of Saks Global in late December. Baker's track record with department stores is mixed, having overseen the closure of both Hudson's Bay and Lord & Taylor in the past.
A potential silver lining is the company's valuable real estate portfolio. S&P Global estimates Saks Global's properties, including nearly 13 million square feet of leasable space in the U.S., are worth nearly $4 billion. This asset could be key in any restructuring. However, the fate of crown jewels like the iconic Saks Fifth Avenue flagship store in Manhattan is uncertain.
"The highest value for that land is certainly not as a retail store," noted Debtwire's Hynes, suggesting the property's future may lie beyond luxury retail. As Saks Global navigates talks for a potential $1 billion loan and restructuring plans, the story serves as a cautionary tale of a high-stakes merger that amplified risks in a challenging market instead of creating the promised fortress.
