Saks’ Bankruptcy and the Future of Luxury Retail

0:07Hello and welcome to The Debrief from the Business of Fashion, where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler-Young. And I'm executive editor Brian Baskin. On Wednesday, the owner of Sachs, Neiman Marcus, and Bergdorf Goodman filed for bankruptcy, saying it owed at least$3.4 billion to creditors, including more than$100 million to Chanel alone. Sachs also named former Neiman Marcus CEO Geoffroy Von Ramdong to lead it through the bankruptcy process, the company's third CEO in two weeks. With us to discuss these developments and unpack what they mean for the future of luxury retail is BOF retail editor Kat Chen, who has been following the SAC story for quite some time.

0:54Kat, welcome to The Debrief. Hey guys, I'm really amped on caffeine right now, so let's talk SACs. So we should start with what is probably obvious to a lot of industry insiders. This bankruptcy filing is not a huge surprise. It has been much anticipated, and I mean that for better or worse, right? No, not at all. Definitely not a surprise. Even before the merger, which literally just closed a year ago, there were cracks. I've been hearing from vendors about delayed payments from Sachs since 2023. And that's where Sachs acquired Neiman Marcus and Bergdorf Goodman. And even at the time, people said there's some issues with this combined company.

1:34Yes, exactly. So the merger between Sachs, Neiman Marcus and Bergdorf, it closed in December of 2024. And at the time, there was hope that the scale of Sachs and Neiman Marcus Group combined would generate savings for the retailer and that those savings would eventually create greater cash flow to serve purchase orders from vendors, that the decaying relationship between Sachs and its vendors would improve. But what actually happened was that it got worse. Even after SACS created these new payment terms in February of last year, they weren't able to stick to their installments, their monthly installments to vendors.

2:17There were still many outstanding invoices that they essentially ignored. A lot of vendors had some success in badgering Saks to pay them again and again. But by this point, and I mean by spring of 2024, a number of labels have stopped shipping to Saks entirely. And this created what a lot of people were calling a death spiral to Saks, where Saks wasn't getting inventory or good inventory, and this hurt their ability to attract customers, which hurt their sales. But really, the big picture, even beyond this vendor crisis now, this understanding that we have in hindsight is that Sachs and Neiman going into the merger, they were ill-fated because both were extremely levered businesses to begin with, meaning that a chunk of whatever sales that they were able to generate, whatever savings they were able to generate, would be going toward interest payments.

3:17Instead of investing in stores, right? Investing in stores, investing in vendor relationships, investing in customer service. They have been serving debt for years, both of these retailers. And there were some pretty big problems that this combined company had to solve. I mean, every penny that was going toward paying debt wasn't going toward solving this larger problem with multibrand retail. Exactly. And you guys have to understand, multi-brand retail is already a notoriously difficult business model with super thin margins, like between 2 % to 10 % single-digit profit margins that Sachs Global would be generating in profits.

4:00And all of that cash was probably going to debt. So there was something interesting in the story. One of your sources, in fact, said that they believe that Sachs and Neiman use this merger to buy time. Essentially, what's behind that? At the time of the merger, Saks Global, even in their press releases, they named$500 million in cost savings. And we usually see this as synergistic savings or this is the synergy in the merger that they were pitching. The idea was that with the savings that they would both have more cash flow, one to serve their vendors and serve their businesses, which was the face value of this merger.

4:44But people in the financial community understood that their merger together with the savings generated would help these companies serve their debt together in tandem and that this would create a more financially healthy entity. But what we've seen is that Sachs Global took on more debt, right,$2.2 billion in bonds. And that means more interest payments that they were serving. Sachs was already facing a huge interest payment in June. And in June, they already had to restructure their bond in order to meet that interest payment. And so basically since spring of this year, since early 2025, Sachs has been on this downward trajectory.

5:32And then things really came to a head in December with an interest payment that Sachs simply wasn't able to meet. Yes, exactly. It was more than$100 million in interest. And that was the catalyst of this Chapter 11 filing. All right. And that brings us to the bankruptcy filing, which you've actually read. Why don't you tell us what's in it? What does it tell us about who Sachs owed and how much? Yes. So the bankruptcy filing from this morning, the details were pretty interesting. Basically, Saks now has$1.75 billion in restructuring finance. This is money that Saks did not have yesterday. And so in many ways, you know, this is welcome news for the industry.

6:18This is welcome news for its vendors. However, Saks owes a ton of money,$3.4 billion, like you said, including$136 million to Chanel, which is its biggest unsecured creditor. Now, I want to put this in context because I wanted to see previous retail bankruptcy filings. You know, we have Barneys, we have Neiman Marcus. The top 30 creditors, the top 30 unsecured creditors to Sachs are all owed double digit millions. When Barneys filed for bankruptcy in 2019, its biggest unsecured creditor was the Roe, which it owed less than$4 million. And when Neiman Marcus filed in 2020, it owed Chanel around$8 million.

7:06Oh, my goodness. Yeah. So it's$8 million for Neiman versus$136 million now in Sachs' bankruptcy. And Sachs has said on that filing that it has between 10 to 25 ,000 creditors. And how likely are these brands that are unsecured, like emphasis on unsecured creditors, likely to be paid? Because obviously the banks have to be paid first, right? Exactly. That's what unsecured means. Now, my understanding is that these big conglomerates that Saks owes money to Chanel, Caring, Avimech, Mehula, all of these players are going to be fine. It's really the smaller independent brands that might be owed less money, but the amount that they're owed are just so much more critical to their business operations.

8:01These are the players that are the most vulnerable right now. Because what's going to happen is that in bankruptcy proceedings, SACS will now create a list of what's known as critical vendors. And these are the vendors that will have first priority in getting the money that they're owed. And critical vendors are exactly what that term sounds like. These are brands that are essential to Sachs' business. And then the bankruptcy court would sort of sign off on this arrangement in the priority of the creditors that are owed money. Obviously, the bigger the vendor, the more critical the vendor, right, to a multi-brand retail player.

8:45And so this means that if you're a small to medium-sized brand, let's say that you're owed$50 ,000, let's say that you're owed$100 ,000, the case that you can make to be a critical vendor is difficult. It's not impossible, but it's more difficult. And again, the bankruptcy court has to sign off on it. So a bankruptcy judge is going to be deciding which brands get paid in which order. I hope they have really good fashion sense because that's a really critical decision. Exactly. Exactly. I was just on a call with Susan Scafidi with the Fashion Law Institute, and she was able to break this down for me.

9:24But she did say something that was very important, which is that the size of the vendor ultimately isn't the deciding factor in becoming a critical vendor. In the sense that if you are a large multi-brand retailer like Saks Global, yes, you need the Chanel's of the world. You need the Balenciaga's. You need the Cartier's. But you also need maybe more obscure brands. You need the smaller brands because you need to create a sense of discovery in the experience that you're offering shoppers. And so hopefully the bankruptcy court will understand that. Well, it'll be quite the challenge to pick which of those smaller, what is it, 20 ,000 creditors?

10:05Like which one of those make that critical list? Or is it 10 ,000, something along those? 10 to 25 ,000. And it's not just brands, right? I also spoke to a model this morning. She does catalog. So like the product listings on Bergdorf Goodman's website. So when you're browsing, you know, for shoes, for trousers, she's the model that you would see on these product listings. She was telling me that she is owed$46 ,000 by Bergdorf and that she can't pay rent now. $46 ,000 for an individual, that's probably, that could be, you know, a third of her annual earnings or maybe more. I want to talk about, because you said it earlier in the episode, we talked about Sachs troubles being sort of mounting for a while.

10:50And you did a lot of reporting earlier in 2025 about the vendor issue. Can we talk about how much of this could have been prevented, where they are today? How much of this was preventable and how much of it reflects this broken sort of multi-channel retail model? Well, so this is where it gets tricky because theoretically a retailer can and should pay their brand partners in time. And a lot of retailers are doing this, right? From what I hear in the industry, Nordstrom is a great partner. I hear that Bloomingdale's always pays on time. And I'm sure Saks wanted to pay on time. I'm sure Saks wanted to pay their vendors, but it was a matter of prioritizing where their cash was going.

11:32Was it serving debt in order to avoid default? Or was it going toward brand partners who really don't have that much recourse in recouping what they're owed by a retailer? every time a brand ships to a retailer, it's a risk. It's a gamble, right? And these are not legally protected transactions. And for Sachs, they needed to serve their interests. They needed to serve their debt. And so a lot of people have asked, is this bankruptcy a death knell for multi-brand retail, for wholesale, for this model? And I personally think that the answer is no. So if anything, this bankruptcy is a death knell for private equity meddling in department stores and meddling in maybe fashion in general.

12:25We'll be back with more of The Debrief right after this.

12:32Let's talk about the way forward and specifically the man who is now going to be overseeing sex as it works its way through bankruptcy. C. Tell us who is Jafois Van Ramdonk and what is his reputation in the industry? So Jafois is a very well-seasoned veteran in luxury fashion. He served as the CEO of Neiman Marcus from, I think, 2018 to when the Neiman Marcus merger happened with Sachs. Before that, he held executive roles at St. John, at LVMH, and he is very well regarded in the industry, he took Neiman Marcus in and out of bankruptcy, and he was able to cultivate a lot of great relationships with brands during that entire process.

13:23And so he has a lot of trust. In fact, earlier today, Brunello Cuccinelli sent out a press release after the news broke about Saks about how they look forward to working with Saks under this new leadership team, which also includes longtime Neiman Marcus executives, Darcy Penick and Lana Todorovic. They're seasoned, seasoned merchants in the industry. So their appointment is also able to garner some goodwill in the industry and with the brands that currently work with Saks. Yeah, I'd imagine that signals a lot of steadiness and the way forward. But also, how does one go through three CEOs in two weeks?

14:02We never address that elephant in the room. What happened there? Why were there three CEOs in two weeks at Saks? You know, honestly, it's just trouble at Saks, period. I think when Sachs was preparing for bankruptcy and that marked Mark Metric's departure, it was a matter of finding the right CEO for this particular chapter of a company, the company in distress. And then when Richard Baker exited, I think that was the creditor's decision. That was this new slate of soon-to-be Sachs owners saying, hey, we don't want a real estate private equity guy in charge anymore. You know, this is the man who sort of generated this mess to begin with.

14:52We want to show the industry that Saks has a path forward. And I think this new leadership team with Jeff Waugh and Darcy and Lana, I think, signals a viable future for Saks to continue existing as one of the largest luxury retailers in the world. Because this is the team that was leading Neiman Marcus before the merger, and it's who a lot of people wanted running this company all along, right? Exactly. I was actually shocked when the news broke in 2025 that this team would exit Saks Global altogether. So you just mentioned Saks' new owners, but that's probably not who's going to be running Saks in the long term.

15:35Eventually, someone does have to take ownership of Saks and all of its debts and its long-term problems with multi-brand retail and figure out what to do with this company. Who might that be? What are the possibilities here at the other end of the bankruptcy process? Well, it very well could be the creditors. That was what happened with the Neiman Marcus bankruptcy. In a bankruptcy proceeding, basically the entire equity structure is wiped out. And so, for instance, Amazon and Authentic Brands Group, who invested in Saks Global last year, it could be that their equity is also wiped out as investors.

16:19And the question really isn't who will own the company. I think the question is who will lead the company. Ideally, after restructuring, after bankruptcy, Sachs will have less debt in general. And so bankruptcy will hopefully wipe out some debt. And then from there, the question really is, what will this giant entity look like? Whether it will be under Jeff Ross' control or a new leader? I think that is where this question of reinvention comes in, because right now this model for Saks is unsustainable. What might Saks be able to do if it has some money freed up to invest in its stores, in its relationship with brands, in internal leadership?

17:08What could they do to turn around this department store model? They're certainly not the only ones suffering here, as we've talked about. Absolutely. I think the answer actually lies in the question that you just asked, Brian. So philosophical. Yes, but they have to free up money first, right? And so, you know, this year after the merger closed, there were a lot of industry critiques on Sachs deciding to close redundant stores. They were looking to close a couple of Neiman Marcus flagships. And the industry was really precious about it, you know, like, oh, no, this is this is the history of Neiman Marcus being erased.

17:44But the reality is that after bankruptcy, were Saks Global to have a real future, the first thing they need to do is scale back and focus on profitability. And that often means closing stores. That often means just becoming a much leaner operation. And I think that this is a reality that the industry will need to contend with. I think that Saks Global will have to shrink in order to grow. Well, that addresses that they will have more money, but then what's the best way to spend it? I mean, how do they make people feel special when they go into these stores again? Yeah, absolutely. So I think once they have their cash flow situation in check and they're running a more profitable, a leaner operation, I think first thing is discounting, discount culture.

18:35I mean, discounting is also why so many of its predecessors in trouble met their demises. It's where essence is also sort of existing now. And it's this existential problem that we've had in this industry, which is that especially American shoppers are shopping online to choose the best deals possible and not necessarily choosing to be loyal to certain retailers. And I think that this is an area that Saks can really redefine, at least for itself. I think by being super disciplined in markdowns, even if it means leaving sales on the table, I think is number one, because this will create a better pool of customers.

19:23This is why My Teresa is doing so well. They don't have discount customers. And I think Saks need to move into that direction. And from there is customer service. So in lieu of the lowest prices, Saks could be delivering instead the best customer service. Whether this means VIP trips and events and really decked out events with their brand partners, inviting their top 1 % VICs to attend. I think this is an alternative to discounting that some of the best retailers are prioritizing today. Which, again, is something Neiman Marcus was well known for and Saks maybe less so. Exactly. Are there other examples of what good looks like right now that like Saks can model or use as inspo as it moves forward?

20:13So there are independent sort of boutique specialty retailers. You know, Dover Street Market comes to mind. Elise Walker comes to mind. These are chains, but these are chains with very few stores. And they're good partners and they are great retailers because they really know their customer and they really have trusting relationships with the brands they work with. They have a super tight edit and they rarely discount. And then on the e-commerce side, and maybe these are better models for Essence, but there's MyTeresa, which I hear is killing it by really investing in clienteling, really investing in high-touch customer service.

21:01There is Forward, which is owned by Revolve Group, sort of making the same investments despite both of these players being e-commerce. And so are there amazing third party retail companies out there offering discovery, offering customer service and creating a blueprint for how retailers and brands can work together? Yes. But the question is, will Saks Global be able to pull it off as so much bigger than these players? Well, you will be very busy in the next few months seeing how Saks does this from scratch. Because like you just said, they have a lot of inspo to draw from, but they will be building something from the ground up, essentially.

21:46Kat, it's always a pleasure to have you. Thank you so much for breaking this down. Yes, of course. It was my pleasure. Please be sure to check out Kat's coverage of Saks bankruptcy at businessoffashion.com. Her reporting and other stories are available to BOF professional subscribers only, and you can find the links in the episode notes. you've been listening to The Debrief produced and edited by Olivia Davies and Eric Bria I'm Sheena Butler-Young and I'm Brian Baskin we'll be back next week with a new episode thanks so much for joining us and be sure to follow us wherever you get your podcasts