Saks Closes Neiman Marcus Headquarters And Tells Vendors Payments Will Be Late

Saks has decided to close Neiman Marcus’ Dallas headquarters office in a cost-saving move, the Dallas Morning News reported. It wasn’t unexpected after privately-owned HBC closed the $2.7 billion Saks-Neiman Marcus Group merger under Saks Global late last year.

In more cost-cutting news, Saks will also close its Bryant Park office in New York City and bring employees back to Saks uptown headquarters. This comes after laying off some 100 Saks employees last year in preparation for the merger.

So far no layoffs at Neiman Marcus have been announced with headquarters employees expected to work from home, but one wonders how long they will still be on the payroll.

Rumors have been swirling for some time that Saks was in trouble, and vendors have not been paid. Those rumors were confirmed last Friday when Saks Global CEO Marc Metrick sent a memo to vendors saying they’ll have to wait until July to receive the first of 12 installments for over-due bills, though he reassured vendors that they would receive payment for new orders within 90 days of receipt, according to the Wall Street Journal. That’s small consolation, given that retailers typically pay for merchandise within 60 days.

Given its current financial challenges, it feels like HBC may have bit off more than it could chew after it had to turn to the junk bond market to close the Neiman Marcus merger deal.

In something of an understatement, GlobalData managing director of retail Neil Saunders shared with me, “Behind closed doors, there appear to be issues at Saks. They seem to be hit harder by the luxury slowdown than some rival chains.” And that’s not all their issues.

New research from Placer.ai just emerged that shows how weak Saks is compared to Neiman Marcus and its two rivals in the luxury department store business, Bloomingdale’s and Nordstrom.

Foot Traffic Falls

In each successive quarter in 2024, Saks’ share of foot traffic visitors to its stores dropped. Saks attracted 7.8% share of visitors in the first quarter across the total of all four department stores, and it dropped to 6.9% in the fourth quarter. Further, Saks’ share of foot traffic trailed all other competitors throughout the year.

Nordstrom left the three other competitors in the dust. During the year, Nordstrom averaged 68% share of quarterly luxury department store visitors, compared with 15% to Bloomingdale’s, 10% to Neiman Marcus and just 7% to Saks.

Nordstrom also holds a wide lead in online visits with 44.4 million hits in January, according to Similarweb. But the mix is slightly different online. Bloomingdale’s trails at 17.7 million visits, while SaksFifthAvenue.com is stronger (16.5 million) than NeimanMarcus.com (12 million). However, Saks website visits dropped 11% from January 2024 and Neiman Marcus visits rose 5%.

Yes, with the addition of Neiman Marcus, Saks Global stands about even with Bloomingdale’s in store visits and exceeds it in online traffic. Yet, there is no disputing that Saks is the weakest in the bunch.

And with Nordstrom going back under family control, one suspects it’s got the right stuff to tighten bonds with its loyal customer base and shave off more customers from the competitors.

Department Stores Still Have Sway

Saunders also observes that all luxury department stores face the same pressure from luxury brands going direct-to-consumer via their flagship boutiques and online websites.

However, a recent survey by EMarketer conducted by Bizrate Insights among 1,000 U.S. adults found that their first choice to shop for luxury goods is at a department store (45%) and next on the department store’s website or app (33%). Luxury brand-owned stores (20%), websites (21%) and outlet stores (21%) trail behind.

At a department store, customers can choose from a wide selection of luxury brands and can personally compare and contrast like offerings from different brands, which has become increasingly important since luxury brand prices have risen so dramatically while quality, in many cases, has remained the same or even eroded. Then luxury department stores’ loyalty programs give a little something back to customers for their patronage.

All luxury department stores like to tout the quality of their customer service. Truth be told, it varies on a case-by-case basis but the general consensus is Nordstrom leads the field.

Nordstrom ranks number 97 among the top 100 global customer-rated brands, according to Comparably. Neiman Marcus barely measures and Bloomingdale’s and Saks don’t make the list.

Small Reassurance

In his memo to vendors, Saks’ Metrick hoped to reassure vendors and keep new merchandise coming. “We are committed to fulfilling all of our obligations to our brand partners and ask that you continue to partner with us, including by shipping merchandise, so that we can grow our business together.”

However, if vendors don’t believe in Saks and Metrick admits it has an 18-month track record of “challenges regarding payments,” its stores will be short on spring and summer merchandise to get customers ready for the season.

“Luxury department stores are expensive to operate and it seems like Saks isn’t on the front foot,” GlobalData’s Saunders concluded. “The merger with Neiman Marcus provides more scale, but it doesn’t solve any of the underlying issues,” which are getting scaled as well.

Note: Saks Global did not respond to a request for comment.

See Also:

ForbesWhat Happens To Neiman Marcus After The Saks Merger?By Pamela N. DanzigerForbesNordstrom Family Regains Control Of Namesake Company With Help From Mexican Retail Giant LiverpoolBy Pamela N. Danziger