Dive Brief:
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S&P Global Ratings Wednesday downgraded Saks Global because the luxury department store conglomerate defaulted on a debt payment due Dec. 30. Its issuer credit rating on Saks Global is now “selective default,” down from CCC.
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The analysts don’t believe the company will make the payment within its 30-day grace period because of its liquidity issues, according to their note. The payment due was about $100 million, per Debtwire and other sources.
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Saks Global didn’t immediately respond to a request for comment.
Dive Insight:
Saks Global will continue to struggle — not only to make this payment, but also to achieve the hundreds of millions of dollars in efficiencies that were foundational to last year’s $2.7 billion acquisition of Neiman Marcus Group, according to S&P Global Ratings analysts Frederico Carvalho and Amanda O'Neill.
Saks Global targeted annualized cost reductions of $600 million over the next few years.
“In our view, operational challenges, [a free operating cash flow] deficit, and unsustainable capital structure have prevented Saks Global from fully realizing synergies from the acquisition of NMG Parent LLC (Neiman Marcus) completed in December 2024,” Carvalho and O'Neill said Wednesday.
The analysts summarized the dismal picture that has emerged throughout 2025, including the domino effect triggered by overdue payments to suppliers that “resulted in vendors withholding inventory, disrupting Saks Global’s supply chain and leaving it with insufficient in-stock inventory to operate successfully.”
All that sent revenue down more than 13% in Q2, pressured margins significantly and intensified what is now, year to date, a free operating cash flow deficit of $410 million, per S&P Global.
The $600 million in funding from lenders when Saks Global restructured its debt in August “was insufficient to fully reestablish its inventory flow and achieve a meaningful operational turnaround,” S&P Global analysts said.
Saks Global sold Neiman Marcus’ Beverly Hills, California, flagship a few days before Christmas for an undisclosed amount and is reportedly mulling the sale of a stake in Bergdorf Goodman. But “its inability to monetize assets in a timely manner have exacerbated liquidity issues,” the analysts also said.
The company’s troubles have led several observers to see a bankruptcy this year as inevitable and probably imminent, and Saks Global hasn’t ruled it out. Just before the new year, Saks Global Executive Chairman Richard Baker replaced Marc Metrick — a 30-year Saks veteran who had led Saks Global since the merger — as CEO.
“Saks’ acquisition of Neiman Marcus a year ago was billed as a once-in-a-generation opportunity to create the world’s largest luxury retailer,” Tim Hynes, Global Head of Credit Research at Debtwire, said in emailed comments. “However, large-scale retail mergers rarely succeed and often end in bankruptcy. The deal was built on aggressive earnings and cost-cut assumptions that have not been achieved, while the added leverage has proven difficult to sustain in a structurally shrinking retail sector.”
