Saks Global estimated its assets and liabilities both fall within a range of US$1-billion to US$10-billion, according to court filings with the U.S. Bankruptcy Court for the Southern District of Texas.Brendan McDermid/Reuters
The U.S. department store company that was split off from Hudson’s Bay Co. a little over one year ago – just weeks before Canada’s oldest retailer began insolvency proceedings – has now filed for bankruptcy protection, compounding a retail industry catastrophe that has ravaged some of the sector’s biggest names.
Saks Global Holdings LLC, which owns luxury retailers Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, was created in December of 2024 when company HBC LP acquired Neiman in a US$2.65-billion deal. At the time, HBC spun off its American assets into Saks Global, a separate entity from Hudson’s Bay, which filed for court protection from its creditors last March and was forced to liquidate all its stores across Canada.
But under the continued stewardship of executive chairman Richard Baker – also the executive chairman of Hudson’s Bay – Saks Global struggled with the significant debt it took on in the Neiman deal. The stores fell significantly behind on payments to vendors, a common sign of trouble in the retail industry.
Late on Tuesday, Saks Global filed for bankruptcy protection. Then, on Wednesday, the company announced it had secured a US$1.75-billion financing package from its senior bondholders and lenders.
The fall of Hudson’s Bay: How Richard Baker presided over the failure of a retail icon
As part of that announcement Wednesday, Saks also said that Mr. Baker had stepped down as executive chairman and chief executive officer. He had held the latter title for less than two weeks, since the departure of former CEO Marc Metrick.
“We all saw this coming for a long, long time,” said Joseph Sarachek, a bankruptcy attorney who represents several vendors collectively owed millions of dollars by Saks. “They had too much debt, and not enough sales to service that debt.”
Saks Global estimated its assets and liabilities both fall within a range of US$1-billion to US$10-billion, according to court filings with the U.S. Bankruptcy Court for the Southern District of Texas.
Mr. Baker’s takeover of Neiman Marcus – which had previously gone through bankruptcy proceedings during the COVID-19 pandemic – united the three most prominent names in U.S. luxury department stores.
But the deal weighed Saks down with debt at a time when department store customer traffic was already in decline. Luxury brands that previously depended on such retailers have increasingly been building their own stores and embracing e-commerce, after years of seeing it as a déclassé environment that would damage their brands.
Some of the industry’s top luxury names have racked up significant unpaid bills from Saks, including Chanel Ltd.; LVMH Moët Hennessy Louis Vuitton SE, and Christian Louboutin.ANGELA WEISS/AFP/Getty Images
“Ultimately, it didn’t make any sense, because both companies were struggling,” David Swartz, a senior equity analyst who covers the department store industry with Morningstar Inc., said of the merger. “You don’t take two unhealthy retailers, put them together and create a healthy retailer.”
Some of the industry’s top luxury names have racked up significant unpaid bills from Saks. They include Chanel Ltd., which has a US$136-million claim; LVMH Moët Hennessy Louis Vuitton SE, which is owed roughly US$26-million; Christian Louboutin, which has a claim of US$21.6-million; and Brunello Cucinelli SpA, owed US$21.3-million, according to court filings.
Once suppliers stop being paid, some inevitably cut shipments to stores – further thinning out the product selection and hurting customer perceptions of the brand, a situation Mr. Swartz called a “death spiral” for any retailer.
On Dec. 30, Saks Global missed an interest payment of more than US$100-million that was owed to the bondholders. In a bid to generate cash, the company sold real estate – its Neiman Marcus store in Beverly Hills – a strategy the parent company has employed before. In 2023, after falling behind on payments to suppliers, HBC completed a series of real estate transactions worth US$340-million to fund its retail operations.
The Saks bankruptcy proceedings are designed to allow the company to come up with a plan to restructure its operations. The financing package includes $1-billion in debtor-in-possession financing from the bondholders, allowing stores to remain open while the company pursues “ongoing transformation” of the business amid U.S. Chapter 11 proceedings. Another US$500-million from the bondholder group will be available once Saks emerges from bankruptcy protection, expected later this year, according to the company. A further US$240-million in liquidity comes from the company’s asset-based lenders.
Opinion: Hudson’s Bay was a ‘zombie firm.’ Canada is full of them and they all need to die
“There’s no question the department-store genre was in a slow, miserable decline. The decline was countered, poorly, by consolidation,” said Mark Cohen, former CEO of Sears Canada and former long-time director of retail studies at Columbia Business School. Mr. Cohen believes Mr. Baker mismanaged the companies, monetizing real estate assets while the retail operations were allowed to decline.
“Did the Bay have to go down the drain? The answer is no. What the businesses required was strategy and skill to accommodate the fact that competition surrounded them,” he said.
The top 30 creditors in the Saks bankruptcy that have the largest unsecured claims – meaning they fall behind the company’s major lenders, whose secured debt must be paid back first – are owed just over US$700-million in total, according to court documents. That is the largest amount owed to a top 30 list that Mr. Sarachek said he had ever seen in a retail bankruptcy, and it does not include many suppliers that are deeply affected by the bankruptcy case.
“I asked what happens if they don’t get paid,” he said of one client, who is owed roughly US$600,000 and relies on Saks for the majority of their sales. “She said, ‘I go out of business.’”