Saks Global Files for Bankruptcy

Saks Global, the parent company of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, filed for bankruptcy protection on Wednesday. This marks a low point for the nation's biggest luxury department store conglomerate.

The firm filed for Chapter 11 bankruptcy, which indicates a need for new ownership as debt impedes operations. Stores will remain open, but some locations may close as part of the reorganization.

"This is a defining moment for Saks Global, and the path ahead presents a meaningful opportunity to strengthen the foundation of our business and position it for the future," Saks Global CEO Geoffroy van Raemdonck, who took the position Wednesday, said in a statement.

What Went Wrong

An overlapping set of factors led to the bankruptcy. A debt-fueled acquisition of Neiman Marcus. The rise of online purchases. Direct-to-consumer sales outside department stores. A waning appetite for sky-high luxury prices among some shoppers.

"There has been a transformation in the retail environment," Vanitha Swaminathan, a professor of marketing at the University of Pittsburgh, says.

Saks, the 159-year-old company synonymous with luxury style, faced a shifting business landscape along with many department-store competitors in recent years.

Online shopping made it easier for customers to directly purchase goods from preferred brands instead of seeking out luxury handbags or jewelry at department stores. Social media influencers helped customers find options that previously may have been discovered on the shop floor, Barbara Kahn, a professor of marketing at the University of Pennsylvania, says.

"There's been growth in e-commerce — a different way for people to shop," Kahn said. "A lot of the big luxury brands have gone direct to consumers."

Alongside those alternative shopping avenues, prices soared for luxury goods. This caused some middle-income customers to think twice about splurging on products with little apparent improvement in quality, Marie Driscoll, a professor at The New School who studies luxury retail, says.

"Over the last five years, luxury prices have gone so high that there's really a question of perceived value," Driscoll said. "People are thinking, 'This is not worth it.'"

The Neiman Marcus Mistake

Such trends set the stage for a devastating misstep at Saks Global.

The firm acquired Neiman Marcus in late 2024 in a $2.6 billion deal funded by debt. In an effort to pay off the debt, Saks Global altered its agreements with vendors, moving to take in a larger share of the proceeds from sales, Driscoll said.

Some vendors cut back on their supply of goods provided to Saks Global-owned stores. This limited the offerings on shelves and hurt business.

"Saks didn't have the merchandise customers wanted, and customers went elsewhere," Driscoll said.

What This Says About Shoppers

Saks Global filed for bankruptcy the same day fresh monthly sales data showed stronger-than-expected U.S. retail sales. Sales climbed a robust 0.6% in November, accelerating from the previous month, U.S. Census Bureau data found.

Sales at U.S. department stores shrunk though. Over the past year, department-store sales fell 1.5%, well below overall sales growth of 3.3% over the same period.

Consumer spending accounts for about two-thirds of U.S. economic activity.

The disparity between resilient consumer spending overall and sluggish performance at Saks Global reflects industrywide pain across department stores, as well as a growing divide between affluent and lower-income shoppers.

"That ultra-luxury segment has gotten more appealing to consumers at the high end," Swaminathan said. "The middle-of-the-road, slightly-above-average-income consumers may be trading down."

The Bottom Line

Saks Global made a bad bet. They bought Neiman Marcus for $2.6 billion using debt. Then they tried to squeeze vendors for bigger cuts of sales to pay off that debt. Vendors responded by sending less merchandise. Shelves got emptier. Customers went elsewhere.

The very wealthy still shop at ultra-luxury stores. Middle-income people who used to stretch for luxury items are trading down. Department stores like Saks that served the middle got squeezed from both ends.

Saks Fifth Avenue is 159 years old. Survived the Great Depression, multiple recessions, countless retail trends. But they couldn't survive debt from a poorly timed acquisition combined with fundamental shifts in how people shop.

Stores will stay open during bankruptcy reorganization. Some locations will probably close. New ownership will likely emerge. But the days of department stores dominating luxury retail are clearly over.

Chapter 11 means restructuring, not liquidation. But it's still a dramatic fall for a company that was the pinnacle of American luxury retail for over a century.

Did you find this information useful? Feel free to bookmark or to post to your timeline to share with your friends.