*

Merger saddled Saks with billions of dollars of debt,

leading to

financial struggles

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Saks delayed vendor payments, affecting product

availability and

sales margins

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Saks' real estate valued at $4 billion, future of Fifth

Avenue

flagship uncertain

By Juveria Tabassum and Arriana McLymore

NEW YORK, Jan 8 (Reuters) - The $2.7-billion marriage of

Saks and Neiman Marcus was meant to create a powerhouse in the

world of luxury department stores, helping it fight competition

from online players and rivals such as Bloomingdale's and

Nordstrom.

A year on, it has instead left the enlarged

company contemplating court protection under mounting debt and

sluggish store traffic.

Canada-based conglomerate Hudson's Bay Co, which had owned Saks

since 2013, bought rival Neiman Marcus along with storied ‌New

York retailer Bergdorf Goodman in July 2024 and spun off its

U.S. luxury assets to create Saks Global, crowning previous

merger attempts and bringing together three names that have

defined American high fashion for over a century.

Big names such as

Amazon ( AMZN ) and Salesforce ( CRM ) ​blessed the deal by

becoming equity investors.

Yet the merger, led by HBC chairman and NRDC Private Equity

founder Richard Baker, was built on shaky ground. Saks took on

about $2.2 billion of ‍debt to fund its acquisition of Neiman

Marcus, raising some concerns considering the company was

loss-making amid a global luxury sector slowdown.

Meanwhile, ⁠top brands started to sell more aggressively in

directly-controlled ⁠shops, giving consumers less reason to go to

Saks and Neiman, exacerbating the already frail debt structure,

according to a consumer and retail banker.

"The deal was built on aggressive earnings and cost-cut

assumptions that have not been achieved, while the ‌added

leverage has proven difficult to sustain in a structurally

shrinking retail sector," said Tim Hynes, Global Head ​of Credit

Research at financial intelligence firm Debtwire.

DOOMED FROM THE GET-GO

Saks targeted $600 million of annual cost savings over the

next five years thanks to the combined company's scale,

according to media reports citing the company's investor call in

October.

However, the luxury sector did not recover in 2025, and

servicing debt became harder, ⁠forcing the conglomerate to tap

investors for a further $600 million in June.

"I don't believe they ‍had enough capital initially ​put into the

company after the acquisition to ride out the period of time it

takes to actualize savings. So started to run out of cash," said

Gary Wassner, CEO of New York-based factoring firm Hilldun,

which buys unpaid invoices from retailers and is owed several

million by Saks Global.

By October, Saks Global had cut ‍its full-year adjusted core

earnings target to $140 million to $160 million, down from an

earlier $275 million to $325 million range, according to a

Bloomberg report, citing its investor call at the time.

Saks did not respond to multiple Reuters requests for comments

for this story. Amazon ( AMZN ) declined to comment on Saks' financial

troubles, while Salesforce ( CRM ) did not immediately respond.

The company was in talks for a $1 billion loan to help keep

things running, Bloomberg reported last week.

EMPTY SHELVES, PAYMENTS DUE

Without enough cash, Saks delayed payments to vendors, and

ended up receiving products nearly a month later than rivals,

affecting its ability to sell them at full price, Wassner and

former vendors told Reuters.

Over the past year, vendors began pulling back orders to

Saks, and as of January, over 100 brands had ​stopped shipping

product to the ‍company, and Hilldun paused approving orders in

early December, Wassner said.

A source at a ready-to-wear women's fashion brand, who

declined to be named because of confidentiality issues, said the

brand stopped sending merchandise to Saks in December, and

hasn't received a six-figure payment from the company since

August. A watch company which sold at Saks ​on Fifth Avenue told

Reuters it had ended the relationship because Saks was late on

paying it at least $70,000.

In the end, the cash ran out, despite trying to sell a

minority stake in Bergdorf Goodman in September, and Saks missed

a $100 million interest payment in December, raising the

prospect of a Chapter 11 filing.

The company has 30 days to make those payments, during which

it can try to work with creditors to formulate a plan to

restructure its finances, said Debtwire's Hynes.

Wassner said Hilldun would submit claims to the trustee of

the bankruptcy court to be on Creditors Committee if the company

does file for bankruptcy protection.

Real estate mogul Baker replaced veteran Marc Metrick as

Saks Global's new CEO late in December. He also owned Canada's

300-year-old department store chain Hudson's Bay and

Manhattan-based Lord & Taylor. Both folded, joining a long list

of luxury ​retail chains which have crumbled in the last decade.

Baker also owns Germany's Galeria Karstadt Kaufhof.

Despite the sector's struggle, investors continue to value

prime real estate. Saks Global's property portfolio, which

includes nearly 13 million square feet of gross leasable area in

the U.S., is worth nearly $4 billion, according to S&P Global

estimates.

"The big question will be the future of the iconic Fifth

Avenue flagship. While it may survive an initial restructuring,

the highest value for that land is certainly ‍not as a retail

store," Debtwire's Hynes said.