Today's Edition
The New York Times News Service
On Wednesday, Saks Global, the parent company of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman and the largest luxury department store group in the United States, filed for bankruptcy protection. Though it had been expected for a few months, the news still sent shock waves through the fashion industry. Here is what it could mean for you.
Is this the end of Saks and Neiman Marcus?
No. Saks Global has filed for Chapter 11 bankruptcy protection, not Chapter 7, which means it has too much debt to effectively run its business and is reorganising under new owners, but it is not liquidating. This is not a Barneys situation. (At least, not yet.)
But it may mean the end of the Saks and Neiman Marcus near you. Retailers often use bankruptcy to get out of expensive leases, and the new owners of the group are expected to close a number of Saks and Neiman stores, as well as about half the Saks Off Fifth stores. That usually doesn’t begin until about 30 days after the filing.
And it may mean the end of some small designers who sell their clothes directly to department stores like Neiman and Saks and rely on those sales for the bulk of their revenue.
Whose fault is this?
First, people blamed Marc Metrick, the Saks CEO who resigned this month, for being too high-handed in his relationships with the vendors. Now they are blaming Richard Baker, the man behind the creation of Saks Global.
When Saks acquired Neiman Marcus in late 2024, it took on lots of debt. Then management changed the payment terms for brands that supplied the stores, which meant the brands started sending fewer products, which meant there was less to sell, and thus less money coming in.
The biggest problem, however, may have been the fact that the whole retail business changed thanks to digital, social media and direct-to-consumer shopping - and department stores didn’t change with it.
Add in global uncertainty, which makes people less excited about spending lots of money, and you have a very bad situation.
Hang on. If they are closing stores, does that mean there will be giant going-out-of-business sales?
Yes. If anyone checked out the social media posts about the up-to-85%-off sale at Saks Off Fifth on 57th Street in December, you’ll have an idea of what you can expect if those stores close, though when that will happen is up in the air.
Will I still be able to find my favourite designers at the Saks stores that are left?
Again, it depends. The bankruptcy should not affect big luxury brands like Prada, Dior and Gucci, which generally operate concessions in department stores, meaning they rent their space from the store but own and manage their products. In fact, in a recent report by research firm Bernstein, Luca Solca, a luxury analyst, said he expected most luxury brands to reach the point where 95% of their sales were direct-to-consumer and only 5% were wholesale.
But what about the smaller brands?
For contemporary and small brands that own fewer (or no) stores, and are thus dependent on department stores to act as their conduit to shoppers, this could be a disaster.
According to Joseph Sarachek, a lawyer who has represented about 30 brands that are owed money by Saks, some are owed between $50,000 and $10 million. In bankruptcy, "secured creditors” are paid before unsecured ones, which essentially means that the most deep-pocketed investors in the company are remunerated before the poorest vendors. Those typically get "pennies on the dollar,” said Doug Hand, an attorney who represents brands like Todd Snyder.
Sachin Ahluwalia, who founded eveningwear label Sachin & Babi with his wife, Babi Ahluwalia, said that his company hadn’t been paid in months by either Saks or Neiman. "We’re starting off the year on the back foot,” he said. "It certainly creates a cash flow problem, which, combined with the tariffs, kind of creates a perfect storm for us.”
Why is no one speaking up about this?
Because Saks, Neiman and Bergdorf are likely going to exist in some form and will still be among the most storied luxury names, smaller brands will still need the exposure they offer. "There’s nowhere else to sell,” Sarachek said.
The Ahluwalias sounded frightened by the prospect of continuing to work with department stores, or of deciding not to work with them because of how necessary they remain to their business.
What does it mean for other department stores?
Bloomingdale’s and Nordstrom, the two other luxury national retailers left standing, are sensing opportunity. Nordstrom has hired a number of Saks and Neiman employees, and Bloomingdale’s has been wooing luxury brands like Chanel, Chloé and Burberry and increasing their floor space.
Perhaps the biggest winners will be smaller multibrand stores that essentially offer the opposite of algorithm-engineered shopping, like Maxfield in Los Angeles; Capitol in Charlotte, North Carolina; Ikram in Chicago; and Dover Street Market in New York and Los Angeles. These are boutiques that have become destinations because they are very local, very curated and reflect the environments around them.
They are often run by owners who have personal relationships with their customers and are willing to take a risk on unknown labels, so shoppers never know quite what they are going to find from one visit to the next.
Is there any upside?
The good news for anyone who noticed the increasingly empty shelves at some Saks and Neiman stores is that they may soon be filled.
Many brands stopped shipping new inventory to the stores back in October and November when it became increasingly clear that Saks Global might declare bankruptcy. (In a healthy situation, new inventory flows into the store every week.) Shoppers kept seeing a dwindling assortment of the same old stuff. The bankruptcy loan means Saks can start paying vendors again, and they can start shipping.
OK, but is it only a matter of time before department stores fully disappear?
An understandable question given that once-storied names like Barneys, Bonwit Teller and Lord & Taylor no longer exist. People still really like to shop in actual stores, however. Marigay McKee, a former president of Saks, called it "an American pastime.”
Andrew Rosen, the founder of Theory and now an investor and adviser to brands like Alice & Olivia, Veronica Beard and Rag & Bone, said that as far as he was concerned, nothing could replace the one-stop emporium where customers have access to a wide variety of brands under one roof and "see, feel and touch everything.”
He, at least, thinks rumours of the death of the department store are highly exaggerated. But to survive, the stores that remain will have to change.
How will they change?
The United States seems to be heading toward a European model, wherein department stores are more like tourist attractions in big urban centres than chains of transaction centres.
For example, see Harrods and Selfridges in London, Bon Marché and Printemps in Paris and Rinascente in Milan.
The idea is shopping as entertainment, with art exhibitions, limited-edition collaborations and hospitality. Think of them as shopping Disneylands contained in landmark buildings where visitors can experience the elite consumption habits of another time.
