Further consolidation of the luxury retail market to happen as the parent company of Saks Fifth Avenue has agreed to acquire Neiman Marcus. Saks Fifth Avenue and Neiman Marcus merger with a deal of $2.65 billion, creating the ultimate high-end department store behemoth, the companies announced on Wednesday.
This Saks Fifth Avenue and Neiman Marcus deal is expected to give the struggling luxury retailers more power to negotiate with vendors. Amazon will take small stake and so will Salesforce in the combined company, to be called Saks Global. Amazon and Salesforce stake in Saks Global is majorly to provide their technological expertise.
Saks Fifth Avenue and Neiman Marcus deal
Saks Fifth Avenue and Neiman Marcus merger comes at a time when luxury retailers are grappling with slowing demand. This a far cry from the boom seen after pandemic related restrictions easing in 2022, as U.S. customers have become more cautious about high-end purchases.
The boards of Saks parent HBC and Neiman Marcus have approved the transaction, and an announcement could come as soon as this evening. As per report Marc Metrick, CEO of Saks’s e-commerce business, will run the combined company.
Importance of the deal for Saks and Neiman Marcus
The deal, which had been rumored since Neiman Marcus filed for bankruptcy protection during the pandemic, comes just over four years after Saks bought the license for the Barneys name following the bankruptcy of that group. It also follows a wave of luxury e-tail failures, including those of FarFetch and Matches.com. Saks is owned by HBC, a retail conglomerate that bought the American chain in 2013 the year after HBC also acquired Lord & Taylor.
“Customers love to go to a store,” as per Richard Baker, the chief executive and chairman of HBC. “They love to touch a product and spend time with their personal shoppers.”
Baker said that he had been envisioning this deal since he bought Saks. “Part of what excited us about acquiring Neiman Marcus was acquiring their world-class sales force,” he said. “People have forgotten how important people are. When selling luxury products, you need beautiful stores and salespeople customers trust.”
Saks Global and Salesforce
Saks Global will have Salesforce assist it with the adoption of AI, and Amazon provide its technology and logistical expertise. This merger with Amazon will deepen the existing partnership with Saks, as per report. Same holds true for Salesforce
Amazon and HBC declined to comment. No immediate response was available from Saks Fifth Avenue, Salesforce and Neiman Marcus.
Will Saks Fifth Avenue and Neiman Marcus merger help?
Although the merger gives the combined high-end retail entity stronger negotiating power with small luxury brands, the chain would not match the heft and power of the global luxury conglomerates, which will still hold most of the cards, said Neil Saunders, managing director at retail consultancy GlobalData.
“There is a risk that the deal might end up creating an even bigger headache for Saks,” Saunders added.
The most coveted high-end brands such as LVMH have their own robust store networks.
Neiman Marcus has been in the red since it emerged from bankruptcy in 2020. It was one of the high-profile collapses among retailers forced to temporarily close stores in response to the COVID-19 pandemic.
The acquisition of Neiman Marcus makes Saks Global, as the new group will be called, the dominant player in its market, with a combined 75 stores, as well as 100 off-price outlets. The new group’s only real rivals in the U.S. will be Macy’s, which also includes Bloomingdale’s, and Nordstrom. It will be run by Marc Metrick, the current chief executive of Saks and Saks.com.
