HBC's definitive agreement to acquire Neiman Marcus Group (NMG) will bring together US departments stores Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman under a new technology-powered luxury retail company called Saks Global.
Saks Global will include the luxury retail and real estate assets of the department stores, however each of them will continue operations under their respective brands.
It will also include HBC’s US real estate assets and NMG’s real estate assets, creating a $7bn portfolio of well-located retail real estate assets in top-tier luxury shopping destinations.
Upon closing of the transaction, HBC’s Canadian business will be recapitalised as a standalone entity, separate from Saks Global.
The new conglomerate is said to be well-positioned to meet customers’ increasing demands for a highly personalised, seamless experience with greater opportunities for product discovery across all channels.
The overall aim is to better serve customers, employees and brand partners using a larger portfolio of prime retail real estate assets in top-tier luxury locations.
The purchase price is expected to be funded by a combination of equity capital from new and existing shareholders and debt facilities and US online retail giant Amazon will be an investor in and work with Saks Global to help with innovation after the close of the transaction.
Globaldata retail analyst Neil Saunders noted the deal comes as no surprise, however he believes Amazon potentially taking a share in the new entity is a "plot twist" that adds "a bit of spice" to an otherwise predictable deal.
Saunders highlighted the real win of the deal would be the ability of Amazon to streamline logistics and ecommerce, 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.
"Bringing Saks and Neiman Marcus together would be something of a marriage of convenience. Both chains have struggled with growth, and both have concerns about their prospects. The rationale is that, together, they would have more financial firepower to negotiate with luxury brands and to cut out duplicative costs," he said.
HBC executive chairman and CEO Richard Baker remains hopeful. He said: “For years, many in the industry have anticipated this transaction and the benefits it would drive for customers, partners and employees.
"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.”
Current Saks.com CEO Marc Metrick will become CEO of Saks Global and will lead Saks Global’s retail and consumer businesses and drive the strategy to advance the luxury shopping experience.
He said: “We have respect and admiration for NMG and the contributions its teams have made in the company’s evolution. Together, with our ongoing focus on innovation, we are primed to drive growth for our brand partners and create career development opportunities for the incredible talent across Saks Global.”
President and CEO of HBC Properties and Investments Ian Putnam will become CEO of Saks Global Properties and Investments, which will manage, maximise and enhance the company’s robust portfolio of assets. Both Metrick and Putnam will report to Baker.
NMG's CEO Geoffroy van Raemdonck added: "We believe this is a proactive choice in an evolving retail landscape that will create value for our customers and brand partners. Saks Fifth Avenue shares our passion for connecting customers with the world’s best luxury fashion. With our complementary capabilities and a new long-term capital structure, the combined group will position our iconic Neiman Marcus and Bergdorf Goodman brands for continued success.”
Saunders highlighted the merger does not resolve all the issues, especially those of the relevance of the chains in a market where more luxury players are pushing direct to consumer sales.
He believes a larger entity and negotiating power will be a little better with the brands, but he commented: "Even a combined chain would not match the heft and power of the global luxury conglomerates, which would still hold most of the cards. As such, there is a risk that the deal might end up creating an even bigger headache for Saks."
Amazon taking a stake in the business would 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 ecommerce, 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.
Before any deal goes ahead, Saunders shared it would be wise for the company to to "jump the hurdle of the Federal Trade Commission (FTC)".
He explained that while, in his view, there is no substantial competitive concern with the two companies coming together, the FTC could take a "different position given its recent aggressive stance on mergers".
How Saks Global plans to meet luxury consumers' needs
- Advance the luxury shopping experience: Saks Global will invest in the luxury shopping experience, ensuring that customers can access a broad fashion assortment through their channel of choice. Building on each retail brand’s history of innovation, Saks Global will drive further advancements in online functionality and fulfilment processes while providing greater access to merchandise.
- Serving customers through personalised interactions: High-touch, personalised experiences are fundamental to luxury shopping. Saks Global will bolster its technology-driven approach to personalisation, leveraging first-party data and AI to create individualised online shopping experiences and empower sales associates to better serve customers.
- Supporting established and emerging brands: For over 100 years, Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman have been committed to helping luxury consumers discover the latest fashion from established and emerging designers. Through its improved ecommerce experience and well-located store fleet, Saks Global will help emerging and established brands reach their target customers.
- Creating value for employees: Well positioned to succeed in the evolving and growing luxury industry, Saks Global will offer value and career development opportunities to employees.
