Luxury Retail Merger: Saks Fifth Avenue Parent Acquires Neiman Marcus with Amazon’s Support

The parent company of Saks Fifth Avenue, Hudson Bay Co, is set to acquire Neiman Marcus for $2.65 billion, a move announced to the New York Times that will merge two national and upscale retailers.

The newly formed entity, to be named Saks Global, will boast a total of 75 stores, including two Bergdorf Goodman locations, in addition to 100 off-price outlets, as reported by the Times.

«Part of what excited us about acquiring Neiman Marcus was acquiring their world-class sales force,» stated Richard Baker, HBC’s chief executive and chairman, in an interview with the newspaper. «People have forgotten how important people are. When selling luxury products, you need beautiful stores and salespeople customers trust.»

Amazon is playing a crucial role in facilitating the deal by taking a minority stake in Saks Global, as per the newspaper’s report.

The acquisition is being financed with $2 billion raised by HBC, along with affiliates of Apollo Global Management offering $1.5 billion in debt.

The blending of the luxury department store chains comes as no surprise, with retail analyst Neil Saunders from GlobalData noting that Saks and Neiman executives have been exploring a potential merger for some time.

It’s worth mentioning that Amazon‘s involvement adds an interesting twist to the union, potentially granting the online retailer a position in the luxury retail sector.

«The real win here would be the ability of Amazon to streamline logistics and e-commerce, potentially giving the new entity an edge in a market where remote shopping has gained prominence,» said Saunders.

The investment in Neiman Marcus marks Amazon‘s first foray into a brick-and-mortar retailer since its acquisition of Whole Foods in 2017.

Herbert Marcus Sr., Carrie Marcus Neiman, and her husband A.L. Neiman founded the first Neiman Marcus store in Dallas, Texas, in 1907, setting the stage for the retailer’s expansion beyond Texas.

The retailer was previously under the ownership of the conglomerate Harcourt General, which also had interests in publishing textbooks and owning movie theaters.

In 1999, Harcourt General spun off Neiman Marcus stores and Bergdorf Goodman, with private equity firms TPG Capital and Warburg Pincus acquiring the company in 2005 for $5.1 billion.

Currently, Neiman Marcus operates 36 stores in the U.S., along with two Bergdorf Goodman locations and five Last Call outlets.

Saks, headquartered in New York City, was established in 1924 and presently operates 41 stores.

Hudson Bay Co, owning Saks Fifth Avenue, is also the parent company of the Canadian department store chain Hudson’s Bay, widely known as HBC and tracing its origins back to 1670.

The acquisition of Saks by HBC, which also owns the department store chain Lord & Taylor, was completed in 2013 for $2.9 billion, including debt.

Despite the benefits of a larger entity for negotiations with brands, the combined company may still face challenges in competing with global luxury conglomerates such as Kering and LVMH, potentially creating additional hurdles for Saks, as Saunders pointed out.

Kate Gibson is a reporter with CBS MoneyWatch in New York, where her coverage spans business and consumer finance.