Faced with more competition and debt incurred with its purchase of rival Neiman Marcus a year ago, officials at Saks Fifth Avenue are seeking bankruptcy protection.
Saks Global, which also operates Bergdorf Goodman, has secured roughly $1.75 billion in financing, the New York company said as it filed for Chapter 11 bankruptcy Wednesday in the Southern District of Texas.
The privately held Saks Global said its stores will remain open as it restructures company debt, meaning that it will honor the programs it has for customers. Suppliers and employees will be paid, Saks said.
There are about 33 Saks stores and 36 Neiman Marcus locations, according to the company, as well as two Bergdorf Goodman stores and roughly 70 Saks Off 5th discount stores.
“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,” Geoffroy van Raemdonck, who took over for CEO and Executive Chairman Richard Baker this week, said in a press release. Baker had assumed control after the company’s CEO Marc Metrick, who stepped down earlier this month.
The Associated Press reported that when Saks said that it would buy Neiman Marcus for $2.65 billion in the summer of 2024, the goal was to create a powerhouse in a luxury sector that had grown more fragmented. Online sellers have been siphoning customers, and big name brands had expanded the number of its own stores to sell its goods.
But the acquisition only added to an already onerous debt at Saks as luxury sales weakened. Saks was having trouble paying suppliers before and by last year it began to stretch out payment periods, angering brands and fraying relationships.
The debt-fueled acquisition of Neiman Marcus made bankruptcy a more likely possibility, Neil Saunders, managing director of GlobalData Retail, told the AP. But he was surprised by the speed at which it took place.
“Behind the glossy facade the deal was an entanglement of complex financial engineering that made it impossible for the group to execute their stated vision,” Saunders wrote Wednesday.
According to the bankruptcy filing, the company listed $1 billion to $10 billion in assets and liabilities. Chanel topped the list of its 30 largest unsecured claims that were not insiders, with an unsecured claim of roughly $136 million. Kering, which owns such brands as Gucci, Saint Laurent and Balenciaga, was ranked No. 2, with an unsecured claim of $59.9 million, according to the documents.
