Saks’ bankruptcy filing creates uncertainty for iconic stores, suppliers and shoppers

Luxury Retail Giants Navigate Bankruptcy Amid Supplier Woes and Amazon Tension

The bankruptcy protection filing by the operator of Saks Fifth Avenue, Bergdorf Goodman and Neiman Marcus has created ripples throughout the luxury retail industry, leaving suppliers with unpaid bills and straining relationships with key stakeholders, including Amazon.

Saks Global announced last week it had secured approximately $1.75 billion in financing to help steer the company toward profitability. The retailer pledged to honor customer loyalty programs, pay employees, and compensate vendors while seeking court approval for its plan to address outstanding liabilities ranging from $1 billion to $10 billion according to court documents.

Though stores remain open, industry experts warn the bankruptcy and restructuring could significantly impact the selection of designer brands customers find at Neiman Marcus or Saks locations. Many brands halted shipments weeks ago as Saks Global’s financial troubles became increasingly apparent and bankruptcy seemed inevitable. A recent visit to Saks Fifth Avenue’s Manhattan flagship revealed noticeable merchandise gaps, with handbags and shoes sparsely displayed on shelves.

“If Saks or Neiman Marcus are not offering that good assortment including trendy items from small niche brands, those customers will find somewhere else to shop,” noted Neil Saunders of research firm GlobalData Retail.

The bankruptcy comes just over a year after Saks Fifth Avenue’s parent company acquired its upscale rival Neiman Marcus Group for $2.65 billion. Amazon took a minority stake in the deal, which burdened the new holding company with substantial debt amid increasing competition and declining luxury spending.

Suppliers Face Uncertain Future

Major luxury conglomerates like Chanel and Kering (parent company of Gucci and Saint Laurent) top the list of creditors owed the most money. While these industry giants will likely weather the storm, bankruptcy lawyers and industry executives express serious concerns for small and medium-sized brands already financially squeezed by Saks.

“This is very painful,” said Joseph Sarachek, a lawyer representing approximately 30 brands owed money by Saks. “A lot of these guys are going to go out of business.” Sarachek, who declined to name his clients for fear of retribution, said they’re owed between $600,000 and $10 million. For some, Saks had been their only major retail account.

Even before the Neiman Marcus merger, suppliers struggled with missed payments from Saks, creating tension and mistrust. The situation deteriorated over the past year as management altered payment terms for brands supplying the stores.

Gary Wassner, CEO of Hildun Corp., which provides credit guarantees to roughly 120 brands selling to Saks, advised his clients to stop shipments starting December 19. For some brands, Saks Global represented 40-50% of their business. Wassner expressed hope that shipping could resume once acceptable payment terms are negotiated.

Amazon’s Contentious Involvement

Amazon invested $475 million in Saks’ purchase of Neiman Marcus in December 2024, expecting to sell Saks products on its platform through a “Saks at Amazon” shop. The partnership was meant to help Amazon attract more luxury brands to its site.

However, in a court filing opposing Saks’ financing plan, Amazon argued, “That equity investment is now presumptively worthless.” The e-commerce giant claimed “Saks continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year, and ran up additional hundreds of millions of dollars in unpaid invoices owed to its retail partners.”

Amazon contended that Saks’ financing plan would burden the retailer with additional debt and potentially favor certain creditors at Amazon’s expense. The company threatened more “drastic remedies” including the appointment of an examiner or trustee if the matter remained unresolved.

Despite Amazon’s objections, Saks Global prevailed in court a week ago, securing an initial $500 million from its broader $1.75 billion financial package.

Store Closures Anticipated

Saks had already announced plans in November to close nine Saks Off 5th locations starting this month, bringing the total of Saks Off 5th stores to 70. The company currently operates 33 Saks stores, 36 Neiman Marcus locations, and two Bergdorf Goodman stores.

Retail experts anticipate more closures as Saks recently stated it was evaluating its “operational footprint” to ensure investment in areas with the best growth opportunities.

David Tawil, president of ProChain Capital and former bankruptcy lawyer, believes Saks Off 5th locations are particularly vulnerable, having struggled against competitors like T.J. Maxx. Potential beneficiaries of Saks’ troubles include Nordstrom, Bloomingdale’s, luxury brands’ own stores, and online luxury platforms like the RealReal.

Shoppers currently find substantial discounts at all three retail chains – up to 70% off at Saks, 75% off at Neiman Marcus, and 85% off at Saks Off 5th. While the retailer hopes to generate sales and buzz, industry analysts note these deep discounts will likely diminish once the court approves plans for store closures and vendor payments.

However, shoppers shouldn’t expect 75% markdowns on premier luxury items like Chanel or Louis Vuitton handbags. Many major brands have bankruptcy clauses limiting the discount levels permitted on their merchandise.