Saks Global’s plan to wrap up its Chapter 11 restructuring received approval from the U.S. Bankruptcy Court for the Southern District of Texas on Friday, slashing the luxury giant’s debt by almost 75% to roughly $1.2 billion.
The company, which runs upscale department stores Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, will get $500 million in fresh financing when it exits bankruptcy. (Saks Global cut back its off-price operation to almost nothing in order to prioritize full-time sales.)
Its post-bankruptcy goals are bold, and the next year will be critical.
By fiscal year 2030 the company said it aims to generate $9 billion in total gross merchandise value and reach double-digit adjusted EBITDA, a goal that goes well beyond stabilizing the business, according to Glenn McMahon, managing partner at MAC Advisory and Consulting.
“Those are growth targets,” he said by email. “They imply that the company believes it can not only recover from bankruptcy but emerge as the dominant multi-brand luxury retailer in America. That’s a big ‘if’.”
“The question is no longer whether brands will participate. The question is whether customers will."
Glenn McMahon
Managing Partner, MAC Advisory and Consulting.
While the Chapter 11 proceeding helped stabilize the company financially, it still faces a commercial challenge in an era when luxury retail has changed, he also said. Saks Global has largely fixed its vendor problem – all last year unpaid bills meant the company didn’t carry enough inventory, which sank sales and ultimately made bankruptcy unavoidable. But its problems are hardly over.
“The question is no longer whether brands will participate,” McMahon said. “The question is whether customers will. Ten years ago, department stores were gateways to luxury. Today, most major luxury houses have built their own direct relationships with consumers.”
The test of that has begun, in the form of the spring, fall and winter selling seasons, according to Krishan Sutharshana, senior distressed debt analyst at Octus. The next year or so is pivotal, he said, speaking by video conference.
“If they can't turn things around this year, we could see Saks Global falling back into bankruptcy once they emerge, or even liquidating if they can't restore not only vendor trust, but customer trust,” he said.
Saks Global’s liquidity is much improved compared to the months following the $2.7 billion acquisition of Neiman Marcus Group in the final weeks of 2024, but the pressure isn’t much different.
“The concept is the same because these businesses require so much working capital ahead of peak seasons,” Sutharshana said. “If you miss on one of these seasons – you've bought up a lot of inventory, and you miss, demand isn't there – as we saw, you can burn through liquidity really quickly, and you can face a spiral of losing vendor trust again and not having enough demand. And so things can get out of hand really quickly.”
