Embattled retailer Neiman Marcus has been saved by the parent company of luxury rival Saks Fifth Avenue, with a surprise investment from Amazon.
Key Takeaways
- Saks Fifth Avenue’s parent company HBC is buying Neiman Marcus Group, the parent company of Neiman Marcus and Bergdorf Goodman, in a deal worth US$2.65 billion (AU$3.93 billion)
- Once the deal is complete, HBC will establish Saks Global to encompass its retailers, which include Saks Fifth Avenue, Saks OFF 5th, Neiman Marcus and Bergdorf Goodman. Each retailer will continue operations under their respective brands.
- The new company will also include HBC’s US real estate assets, as well as Neiman Marcus Group’s, to create a US$7 billion portfolio.
Key figures
HBC funded the deal using a combination of equity capital from new and existing shareholders and debt facilities, and says Amazon will be an investor in and work with Saks Global following the close of the transaction.
The parent company secured US$1.15 billion fully committed term loan financing from investment funds and accounts managed by affiliates of Apollo, and a US$2 billion fully committed revolving asset based loan facility from Bank of America (its lead underwriter), Citigroup, Morgan Stanley, RBC Capital Markets, and Wells Fargo.
Tangent
Department stores across the globe have been in a downward spiral as consumers make the ongoing shift toward online shopping and cost-of-living pressures force customers to superstores and lower-cost alternatives.
In the US, Macy’s announced it was closing 150 stores (nearly a third of its total) in February this year, after a drop in revenue that CEO Jeff Gennette attributed to customers “aggressively pulling back” on discretionary spending. Nordstrom flagged it’d like to go private, following a period of declining revenue.
On home soil, department store sales continue to decline, down 1.7% in May according to ABS data.
Crucial quote
“For years, many in the industry have anticipated this transaction and the benefits it would drive for customers, partners and employees” HBC executive chairman and CEO, Richard Baker, said.
“This is an exciting time in luxury retail, with technological advancements creating new opportunities to redefine the customer experience, and we look forward to unlocking significant value for our customers, brand partners and employees.”
Key background
It’s a lifeline for embattled retailer Neiman Marcus, which was lumped with a US$5 billion debt thanks to private equity takeovers and then forced to file for Chapter 11 bankruptcy in May 2020, in the thick of the COVID-19 pandemic. At the time, the retailer was forced to shut all 43 of its stores and its two Bergdorf Goodman stores and Last Call outlets, laying off about 14,000 staff.
It did emerge from bankruptcy later that year and by March 2021, had refinanced US$1.1 billion worth of debt, with new senior secured notes, due 2026.
At the time of writing, Saks Fifth Avenue had 39 stores across North America while Neiman Marcus had 36 stores plus two Bergdorf Goodman outlets. The combined Saks Global is expected to generate about US$10 billion in sales, but the deal hasn’t come before federal regulators yet, who may choose to block the merger on competition.
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