Neiman Marcus has reportedly turned down a $3 billion deal from Saks Fifth Avenue. (Photo by Smith ... [+]
The wedding of the year is off, at least for the moment, with upscale department store group Neiman Marcus reportedly spurning the advances of suitor Saks Fifth Avenue.
A pretty healthy dowry of $3 billion was not, it would appear, enough to woo Dallas-based retail group Neiman Marcus as it turned down a takeover bid after negotiations that have been ongoing throughout much of the year.
According to The Wall Street Journal, the luxury groups have so far been unable to agree on the terms of a potential merger, although that doesn’t mean a deal is permanently off the table as negotiations are continuing. However, any deal is now unlikely to be agreed before early next year.
So what could a merger bring to two famous U.S. luxury department store chains, both of which have been through their own well-documented travails over recent years?
Firstly, a merger between Saks and Neiman Marcus could potentially allow both companies to negotiate harder for better terms with their suppliers and at the same time reduce duplicate costs, especially given that the big luxury groups have become far more powerful in recent times – and connected directly with their consumers.
Secondly, it may help to shore up their finances on a greater scale. Both Neiman Marcus and Saks have faced a number of serious challenges in their recent past.
Neiman Marcus filed for bankruptcy in 2020 in the wake of the pandemic, although it successfully emerged from Chapter 11 in Sept. 2020 having eliminated more than $4 billion of debt and $200 million of annual interest expense.
Saks And Neiman Marcus
Meantime, HBC-owned Saks has delayed payments to suppliers to smooth its cash flow. HBC recently raised $340 million through the sale of real estate assets so that it could plug that money into its retail operations.
At the heart of the motivation to combine forces is the way that the luxury retail landscape has transformed over recent years, with brands increasingly connecting directly with consumers through their own stores and online platforms.
The rise of global luxury brands has impacted groups such as Saks Fifth Avenue, seen here in its ... [+]
The global luxury powerhouses have bolstered their market power, have opened international flagship stores in the US, Europe and around the world and established a presence across media and online channels, diminishing the once pivotal importance of department stores as a sales channel.
Rumors of a possible merger between the luxury department store giants have been swirling for some time. In August reports emerged that while a merger of Neiman Marcus and Saks would probably face antitrust scrutiny, the companies would be able to argue that the power of the luxury brands had seen their dominance fade.
Investors Move Towards Merger
Neiman Marcus had been weighing a possible deal — in addition to its eponymous luxury chain, it also owns Bergdorf Goodman in New York — seeking a buyer for much of 2023.
The 107-year-old retailer fetched $5.1 billion in 2005 in the first of a series of debt-fuelled buyouts and its current private equity owners have been considering a potential exit. Neiman’s two minority investors — Davidson Kempner Capital Management and Sixth Street Partners — had been urging an immediate sale but majority investor Pacific Investment Management Co. (PIMCO) was understood to be prepared to wait longer, for market conditions to improve.
However, this year both Neiman Marcus and Saks have seen a decline in sales compared with 2022.
Neiman Marcus reported an 8% decline in sales to $948 million in the quarter ending Oct. 28, while Saks also saw its sales drop off, with gross merchandise value down 11% across its Saks.com website and stores in the three months ending July 30.
