"Saks Global," the parent company of the world-renowned luxury department store "Saks Fifth Avenue" in the United States, has decided to file for Chapter 11 bankruptcy protection after facing overwhelming debt from acquiring "Neiman Marcus," a competing luxury department store chain, in 2024 amid changing consumer behavior and the withdrawal of leading brand names from the market.
Saks Global filed a petition with the bankruptcy court in the Southern District of Texas, USA, on Tuesday (13 Jan) to enter the Chapter 11 restructuring process after enduring a prolonged financial crisis following its merger with Neiman Marcus, a luxury department store chain, in a deal worth more than $2.65 billion in 2024.
The main factor impacting Saks Global is the shift in behavior of American shoppers who have grown dissatisfied with rising prices of brand-name goods that do not correspond with quality. Additionally, high-income customers increasingly purchase products directly from brand websites or stores rather than through department stores acting as intermediaries.
Coupled with economic uncertainty, a slowing labor market, and continuously declining consumer confidence, traditional department stores have been severely affected. Reports indicate that Saks had begun to owe suppliers and manufacturers for several months before deciding to file for bankruptcy.
In a company statement, an immediate management restructuring was announced, with Richard Baker stepping down as CEO and Geoffroy van Raemdonck, a former Neiman Marcus executive, appointed as CEO to lead the company through the bankruptcy process.
Van Raemdonck said in a statement, "This is a pivotal moment for Saks Global and an opportunity to strengthen the foundation of our business for the future. We will continue focusing on serving customers and luxury brands consistently and are ready to restore the company as a leader in the luxury retail world."
Originally, the 2024 merger between Saks Global and Neiman Marcus was expected to create a powerful retail empire to negotiate better prices from brands and attract customers back to stores. However, in reality, it added enormous debt burden amid a tightening economy, leading to bankruptcy filing to preserve the business.
/sourceCNN