The parent company of Saks Fifth Avenue is buying rival Neiman Marcus as part of a massive $2.65 billion deal that is expected to retain wealthy shoppers from both brands.
Hudson’s Bay Company (HBC) will control 36 Neiman Marcus department stores, two Bergdorf Goodman locations and five Last Call outlets under the deal.
The deal highlights the challenges facing department stores today as brands like Macy’s scale back operations.
Amazon, which has long been trying to boost its luxury offering, will also have a minority stake, as will tech giant Salesforce.
Together, Neiman Marcus and Saks will become Saks Global.
Hudson Bay Co (HBC), the parent company of Saks Fifth Avenue, will acquire Neiman Marcus for $2.65 billion this year
Both Amazon and Salesforce have minority stakes in the new company, Saks Global.
Luxury retail shopping has been slowly declining over the years, with Neiman Marcus Group being one of the hardest hit companies.
The company filed for bankruptcy in 2020, and by September of that year, the company had planned to shed $4 billion in debt.
Neiman Marcus began exploring a merger with Saks amid concerns that shoppers no longer wanted to buy expensive items from designer brands.
Instead, they are increasingly turning to low-priced e-commerce retailers like SHEIN and Moda Operandi.
“Part of what excited us about acquiring Neiman Marcus was acquiring their world-class sales force,” said HBC CEO and President Richard Baker. The New York Times.
“People have forgotten how important people are. To sell luxury products, you need beautiful stores and salespeople that customers trust.”
Marc Metrick, CEO of Saks Fifth Avenue’s online operations, supports the merger and will become CEO of Saks Global.
The company will now control 36 Neiman Marcus department stores, two Bergdorf Goodman locations and five Last Call outlets.
HBC CEO Richard Baker told the New York Times that part of what excited the company was “its world-class sales force.”
“How do you ensure the future of a brand like Saks, Neimans or Bergdorf? It’s done through technology,” Metrick said in an interview with Bloomberg.
“We know how to attract customers. We have physical stores, which will always be an important part of the luxury ecosystem.”
This new combination will also give more power to the company’s employees who negotiate with the designers.
The merger is expected to help loosen control over physical and e-commerce stores while reducing logistics costs.
Marc Metrick, CEO of Saks Fifth Avenue’s online operations, fully supports the merger and will become CEO of Saks Global.
More than 20 percent of retail purchases are expected to be made online this year, and 23 percent of retail purchases are expected to be made online by 2027.
The merger comes four years after luxury retailer Lord & Taylor filed for bankruptcy due to a massive decline in sales during the peak of the COVID-19 pandemic.
Reuters reported that Lord & Taylor planned to clear inventory at its department stores once restrictions were lifted.
Lord & Taylor only had to survive the sales decline and by the following year the fashion retailer was operating exclusively online.
Macy’s is also experiencing declining sales and the company announced earlier this year that it would close 150 stores by 2026 as part of a restructuring plan.
“A Bold New Chapter is a powerful call to action. It challenges the status quo to create a more modern Macy’s, Inc.,” Macy’s CEO Tony Spring said at the time.
“We are taking steps to revitalize our customer relationships through enhanced shopping experiences, relevant assortments and compelling value.”
The merger comes four years after luxury retailer Lord & Taylor filed for bankruptcy due to a massive decline in sales during the peak of the COVID-19 pandemic.
Despite plans by all companies to focus on selling luxury goods to their consumers, more than 20 percent of retail purchases are expected to be made online this year, according to Forbes Advisor.
The number of digital orders has increased so much that 23 percent of retail purchases are expected to be made online by 2027.
Amazon is currently one of the most visited e-commerce websites, with nearly three billion visits per year worldwide.
It also accounts for more than 37 percent of e-commerce sales, the highest market share of all online retailers.
“Across our store business, customers have responded enthusiastically to our consistent focus on selection, value and convenience,” Amazon CEO Andy Jassy said in April.
‘We continue to have the broadest retail selection, with hundreds of millions of products available, tens of millions added last year alone, and several premium brands beginning to appear on Amazon.’
Jassy added that some of the retailers include Victoria’s Secret, Urban Decay, Clinique and Coach, a brand best known for its expensive handbags.