Neiman Marcus Rejects $3 Billion Takeover Bid by Saks
Luxury downturn adds urgency to long-simmering deal talks, but the chains haven’t been able to agree on terms
Saks Fifth Avenue wants to buy rival Neiman Marcus. Neiman is open to a deal. But the two luxury retailers can’t agree on the terms of a marriage.
This week, Neiman rejected Saks’s most recent takeover offer, which valued the upscale chain at close to $3 billion, according to people familiar with the situation. Neiman objected to the deal’s structure, a significant portion of which wasn’t in cash, some of the people said.
The two companies have been negotiating for months, the latest round of on-again, off-again talks that date back more than a decade. A combination would give the luxury department store chains more clout with designer brands as consumers curtail spending on pricey goods.
The talks are continuing, but a deal, if one is reached, is unlikely to come before early next year, the people continued. Both companies are controlled by investor groups.
Both companies have also had recent struggles. Neiman filed for bankruptcy in 2020 but is on stronger footing since emerging from court protection with far less debt. Saks, which is owned by HBC, has delayed paying some suppliers to help manage its cash.
HBC, which also owns the Hudson’s Bay department-store chain in Canada, recently raised $340 million by selling real estate—cash that will help fund its retail operations.
“HBC is committed to its vendor partners and to ensuring that we fulfill all financial obligations,” a spokeswoman said. “Any delayed payments are due to HBC managing through the challenging environment that is impacting the wider retail industry, particularly in Canada.”
The world of retailing has changed dramatically since the two companies were founded more than a century ago. They introduced European luxury brands to well-heeled American shoppers. These days, brands are increasingly calling the shots. They sell directly to consumers with their own stores and ecommerce sites, creating fresh competition for the department stores that carry their wares.
The brand owners are getting so big, they wield tremendous power. LVMH Moët Hennessy Louis Vuitton, a conglomerate that includes Louis Vuitton, Celine and Fendi, has a market capitalization of roughly $385 billion. LVMH Chief Executive Bernard Arnault has competed with Elon Musk for the title of the world’s richest person.
Gucci owner Kering earlier this year said it was buying a stake in Valentino, adding the Italian luxury label to a portfolio that includes Balenciaga and Saint Laurent. And in the U.S., a recent deal will put the Coach, Michael Kors, Kate Spade, Versace, Jimmy Choo and Stuart Weitzman brands under one roof.
A merger of Saks and Neiman could help the chains negotiate better terms with suppliers and allow them to strip out duplicate costs. Saks has 39 stores; Neiman has 36 department stores, two Bergdorf Goodman stores and five Last Call discount stores. There are eight malls that have both a Saks and Neiman Marcus store, according to Green Street, a real-estate research firm, raising the potential of closing some overlapping locations.
Saks and Neiman discussed merging in 2017, but Neiman’s $5 billion in debt from two successive private-equity buyouts made a deal untenable at the time.
Neiman’s bankruptcy in 2020 and the restructuring helped the retailer shed $4 billion in debt. It emerged from court protection later that year with new owners, including Pacific Investment Management, Davidson Kempner Capital Management and Sixth Street Partners.
Both chains rode a pandemic wave of luxury-goods purchases, but the retailers and some brands are reeling from shifts in spending among affluent shoppers. A string of European luxury brands earlier this year reported declining U.S. sales, including Kering, Burberry and Prada.
Neither Saks nor Neiman report financial results publicly. But sales at both companies are down from their rapid pace of a year ago, according to people familiar with the matter.
Neiman’s sales declined 8% to $948 million in the three months ended Oct. 28. Earnings before interest, taxes, depreciation and amortization were $95 million, compared with $112 million in the same period a year ago, according to a presentation reviewed by The Wall Street Journal that the retailer shares with investors.
“U.S. consumers have continued to ease their spending on luxury goods,” wrote Saks.com CEO Marc Metrick in a letter to suppliers dated Sept. 6. “While we don’t foresee a significant change in these spending behaviors in the near term, we expect our comparable performance to improve versus the second half of last year, when spending among these shoppers first began to soften.”
For the three-month period that ended in July, gross merchandise value—which measures the total value of merchandise sold—declined 11% at Saks.com and the physical stores.
In 2021, HBC split the Saks ecommerce business from the stores.
A survey conducted by Saks in late July found that 58% of luxury consumers planned to spend the same or more on luxury goods over the next three months, the first increase since the survey asked this question in May 2022.