New York
CNN
—
Saks Fifth Avenue and Neiman Marcus are merging to create a luxury department store empire. And Amazon wants to help.
Saks owner HBC announced a deal Thursday to acquire Neiman Marcus for $2.65 billion, establishing a luxury behemoth called Saks Global that has the two namesake department stores plus Saks Off 5th discount store and the upscale Bergdorf Goodman.
“We’re thrilled to take this step in bringing together these iconic luxury names, Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman,” said HBC CEO Richard Baker in a release.
The two companies have been linked to merger talks for years, and the deal gives them more leverage to negotiate with luxury brands for lower costs. Saks has 39 stores, while Neiman Marcus, which filed for bankruptcy in 2020, has 36 stores. Neiman Marcus also owns Bergdorf Goodman.
Several leadership changes were also announced. Current Saks.com CEO Marc Metrick will become the CEO for the Saks Global business. Current HBC Properties and Investments CEO Ian Putnam will become CEO of Saks Global’s property and investments business. Both of them will report to Baker, who becomes the executive chairman of Saks Global.
The merger means that HBC’s Canadian business, which includes Hudson’s Bay department stores and $2 billion in property across the country, will operate separately from Saks Global. The unit “will be well positioned to support future growth, while continuing to serve its loyal Canadian base,” the release said.
The chains are responding to industry shifts, including the decline of department stores, and the growing power of luxury brands.
Brands such as Louis Vuitton parent LVMH are getting bigger and shifting their distribution strategy to direct-to-consumer sales, away from department stores. The planned Saks-Neiman Marcus merger seeks to wrest back some control. It also comes on the heels of Coach parent Tapestry’s proposal to buy Michael Kors owner Capri.
“As a larger entity, negotiating power will be a little better with the brands, but even a combined chain would not match the heft and power of the global luxury conglomerates, which would still hold most of the card,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients Wednesday.
Saks’ deal could face regulatory scrutiny, however. The Federal Trade Commission sued to block Tapestry’s merger with Capri, saying it would harm competition.
“The proposed merger threatens to deprive millions of American consumers of the benefits of Tapestry and Capri’s head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing and advertising,” the FTC said.
Amazon also is investing in the merger, working with Saks Global to “innovate on behalf of customers and brands partners following the close of the transaction,” the release said.
Amazon has tried to grow in physical retail. In 2022, it opened Amazon Style clothing stores in Glendale, California, and Columbus, Ohio, but closed them last year.
Saunders added that Amazon’s stake does “make sense, as it has ambitions to play more heavily in the luxury space and this would give it a toehold.”
“However, the real win here would be the ability of Amazon to streamline logistics and e-commerce, giving the new entity an advantage in a market where remote shopping has become more important to shoppers — especially younger ones, which both chains need to do more to attract,” he said.