February 24, 2025
iStock.com/Anne Czichos
Should Vendors Reject Saks’ New Payment Structure?
Saks Global, which has been slow in paying bills for the last two years, irked many vendors even more by announcing that old bills would be paid off on an installment plan and they’d now have to wait longer to receive payment for new orders.
The new terms follow Saks’ parent HBC’s closure of its acquisition of Neiman Marcus in late December for a total enterprise value of $2.7 billion. Saks Global’s banners include Saks Fifth Avenue, Saks OFF 5TH, Neiman Marcus, and Bergdorf Goodman.
Under Saks’ new payment plan, effective March 1:
- Vendors will be paid 90 days for new orders from receipt of inventory as part of new go-forward payment terms. That compares to Neiman Marcus’ previous practice of paying net 30.
- All past-due balances will be paid in 12 installments beginning July 2025.
WWD said Saks is believed to owe “hundreds of millions of dollars” to vendors.
“I understand and am sympathetic to the last 18 months and the challenges regarding payments,” Marc Metrick, CEO of Saks Global, wrote in the memo sent out to vendors on Valentine’s Day and attained by the Wall Street Journal and other media outlets. “Our expectation is that this provides the clarity and certainty you have been seeking. To that end, we are looking forward to seeing the flow of merchandise return to normal levels.”
“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 businesses together over the long term,” he added.
Metrick also noted that with the closing of the Neiman Marcus acquisition, “our financial position is strong and our leverage is reduced, which will allow us to make investments to be better partners with brands.”
The late payments over the last year prompted complaints from vendors, with some holding back on shipments. Some smaller suppliers have even sued the retailer to recoup overdue payments, according to the WSJ.
Last August, Metrick and Richard Baker, executive chairman of HBC, held a conference call with Saks’ vendors to apologize for the payment delays while promising more transparency once the Neiman Marcus transaction went through.
However, the new payment terms led four brands to tell Business of Fashion (BOF) that they will no longer sell to Saks Holdings while others look to reduce their exposure.
“We were hoping to grow our business with Neiman this year, but after the acquisition, it looks like that won’t be happening,” said the founder of a Los Angeles-based contemporary brand. “It’s just too much of a risk right now.”
One executive at a New York-based fashion brand told BoF of the new payment structure, “It is so arrogant and disrespectful.”
Some vendors told WWD that they’ve been continuing to ship to Saks despite not being paid for several seasons, as the retailer has gained ever more leverage thanks to the merger with Neiman Marcus.
One veteran retail executive told WWD that vendors are “willing to take some near-term pain” to eventually benefit by growing with the $10 billion luxury empire created through the merger of Saks and Neiman Marcus.
“It’s really about Saks Global trying to do the best they can for vendors and balancing that with what they can afford to do in the near term,” said the executive. “I’m sure the company doesn’t feel good about it, but they feel they did what they had to do. Saks had to buy time. It’s clear the company was very stretched. Had they not done the deal, they probably would have gone bankrupt.”
Saks is also reducing its vendor count by 25% over the next year — which is equal to around 750 of its 3,000 vendors — and plans to close the Neiman Marcus flagship in downtown Dallas in other moves to right-size the business amid changing dynamics in wholesale retailing and a challenging luxury space. The retailer may also close its Saks Fifth Avenue flagship in Toronto, according to WWD, though Saks did not confirm the rumor.
“The model doesn’t work,” Metrick told BoF last week. “You can take cash in but you’re paying people fast and building beautiful shops and the price of advertising has doubled… The amount of competition has increased, the verticalization of the brands themselves opening their own stores has increased.”
“For a year and a half I heard, ‘We just need clarity,’” added Metrick. “And so, I sent a letter and I said here’s what’s going on. But I have a business to run. Customers to satisfy… If this is not enough clarity, or if you don’t like this, then tell me so I can fill your space with other stuff.”
BrainTrust
Bob Phibbs
President/CEO, The Retail Doctor
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Allison McCabe
Director Retail Technology, enVista
Recent Discussions
Discussion Questions
Are Saks Global’s new vendor terms likely more about a broken wholesale luxury model or leverage gained from the Neiman Marcus merger?
What advice would you have to brands on continuing to ship or pulling back from Saks Global?
Poll
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Ninety days is a long payment time. It works for Saks as it means they can probably pocket the cash from sales long before they pay for the inventory. However, it’s very harsh on vendors, especially smaller ones, whose cashflow will be disrupted. The payment terms of Neiman Marcus were more reasonable, usually around 30 days, so those vendors will have some significant adjustments to make.
As for paying overdue invoices over 12 monthly installments, at least vendors now have some clarity – but really Saks should pay up what they owe. The problem is their own finances suggest they are not in a position to do so.
The problem is their own finances suggest they are not in a position to do so.
It’s almost like a company that can’t afford to pay its bills has no business acquiring a competitor (Tho I’m guessing the ….bankers who advised on the merger won’t be waiting 12 mos for payment!)
Whether it’s “fair” or not depends a lot on whther these terms are imposed before the transaction or after them (if the latter, IMHO it’s really a form of fraud, and its unfortunate our legal system draws erratic lines b/w civil litigation and criminal behavior). While I certainly applaud the quartet who told Saks to go and do something that’s anatomically impossible, not every vendor, of course, has the luxury to put principles before profits…if not simple survival.
And for the record, Saks claims the Dallas flagship closure is due to a landlord dispute, not “right sizing” (believing this, of course, is optional)
The new terms set a very dangerous precedent. On the positive side, from a vendor perspective getting the past due invoices, paid in full, in a year is much more money than they would get in bankruptcy. Vendors would have much more confidence if the payments started next month instead of in July. I would expect many vendors to hold goods to see if the cash actually starts flowing. On the go forward front, department stores have one of the longest AP to cash life cycles. Often having paid for merchandise 6 to 8 months before they are able to turn the merchandise into cash. Setting terms at 90 days could be a very bad president for other retailers with a very low turn. Many vendors will have to think long and hard about the trend they will be setting if they continue to ship.
Vendors of Saks take an increased financial risk due to delayed payments, which can strain their cash flow and operational stability.
Additionally, the new payment structure might lead to a reduction in their negotiating power, as they may feel compelled to accept less favorable terms to maintain their business relationship.
Vendors could also face increased administrative burdens as they adapt to new billing and payment processes.
And of course, the issue of cash flow affects vendors, as they must pay for their own production, operations, employees, transportation, logistics, and much more. Many vendors have shareholders of their own.
Clarity is important, and I’m sure this is a positive outcome for Saks, it’s not quite the stellar outcome vendors are looking for. Getting paid for merchandise long since delivered over a 12 month (let’ s call it 1 year) and only starting 5 months from now does not seem very appealing if your a vendor. I expect many vendors wil not want to continue delivering goods to Saks, and perhaps this is Metrick’s ultimate goal as Saks has stated they plan to reduce their vendor count by 25%. Long payment delays, and Net 90 going forward certainly will incentivize that reduction. Larger brands may have the ability to stomach these terms, but I wonder about smaller brands ability to do so. Often times it’s those smaller brands that deliver the most unique and differentiated products in luxury so it’s not clear to me this is a winning strategy for the long term.
And vendors who have the muscle to absorb Net 90 are much more likely to build out their own DTC capabilities, both online and brick-and-mortar. Great way to encourage more competition!
Exactly. In Luxury, the small brands (now) may be the next hot trend of the 1%. Where exclusivity and in-the-know are positives.
Then again, maybe zero differentiation between Saks & NM is a goal of the CEO.
You don’t screw over your vendors whose products you need to maintain exclusive offering. It’s outrageous that they purchased Neiman Marcus and went further in debt and now are pleading poor and making vendors who’ve already waited 90 days, a year to get payment in full. This is a brand in crisis, What an opportunity for other luxury stores to pick up these brands offering simply to do the right thing and pay within 30 days
Creative terms arguments are typically determined before the PO is placed. At one time, a retailer changing the terms after the fact was a breach of contract. In this case, we have vendors who are probably just happy there is a plan in place for them to get paid, and I expect they’ll go along with the plan. Great for Saks for this season. The bad news is that this has sent a message to the market about Saks viability and the risk of doing business with them.
Maybe Chapter 11 is a realistic alternative at this point.
If I am a vendor and they are telling me 90 days, I am wondering what they will say to me in 90 days
Exactly. Continuing to push out payment dates is no indication of a turnaround strategy. More like prolonging the inevitable. Very concerning for vendors in this level of business as they have fewer and fewer options, especially the small and highly innovative.
That is what history tells us.
This is just another nail in the Department store segment coffin. They are trying to live to fight another day, and in the end all they did was irritate their vendors. This sad march has been going on for decades now, ever since the decline of malls with anchor stores on each end. Iconic stores like Marshall Fields in downtown Chicago will be forever missed, however sentimentality has proven to be not nearly enough to keep these stores open.
Sad.
This is one giant Catch 22 for vendors. If they push back and complain, Saks will cut them off as their options to sell elsewhere continue to diminish. And if they just bend over and say, “Please sir, may I have another” they risk destroying their company — not to mention opening the door for other retail customers to pull the same kind of crap. This is not going to end well for anybody.
There is another interesting conversation happening on social media about Saks withholding payment on returned items. Customers are having to jump through hoops to chase payment from Saks. That’s a red flag for sure.
We can assume it’s the vendors who mean the least are owed the most. Advising them is futile as each situation is different.
If history is a lesson, Saks will carefully move to lower-priced products to expand their customer base. They’ll also reinforce their current HNW clients who don’t always buy luxury.
Positioning is delicate. Yet, the void between Macy’s ‘mass’ and Saks ‘luxury’ is substantial. Let them fill it.
Opportunities for Nordstrom or Bloomingdale’s… large enough to help launch small lux brands. (as long as these 2 don’t hyper focus on owned-labels).
Paying past due invoices on the “installment plan” is a big red flag. The problem for vendors is that they lack leverage — Saks and N-M are the only true luxury game in town, at least in a department store format.
It never ceases to amaze me how arrogant some retailers can be. If suppliers are late with shipments, retailers demand discounts or outright cancelations. And suppliers know that going in. But if the retailer is late, or ridiculously late, with payments are the suppliers getting some kind of vig on the balance? Of course not. Does the retailer even offer that kind of remedy? Of course not. Clarity and certainty? I don’t think so. What’s clear is that there is no certainty. This remains very much a ‘seller beware’ scenario. Sak’s would be doing everybody a favor, especially themselves, if they accelerated this schedule whenever possible. I think the vendor community would love a little confidence that Sak’s has the financial bandwidth to survive.
“But I have a business to run.”… and the vendors don’t?
“Saks is also reducing its vendor count”… as vendors quit/ have to move on.
“Customers to satisfy…”… does not happen without the vendors
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Has Fiddelke noted the right priorities to turn Target around?
Ninety days is a long payment time. It works for Saks as it means they can probably pocket the cash from sales long before they pay for the inventory. However, it’s very harsh on vendors, especially smaller ones, whose cashflow will be disrupted. The payment terms of Neiman Marcus were more reasonable, usually around 30 days, so those vendors will have some significant adjustments to make.
As for paying overdue invoices over 12 monthly installments, at least vendors now have some clarity – but really Saks should pay up what they owe. The problem is their own finances suggest they are not in a position to do so.
It’s almost like a company that can’t afford to pay its bills has no business acquiring a competitor (Tho I’m guessing the ….bankers who advised on the merger won’t be waiting 12 mos for payment!)
Whether it’s “fair” or not depends a lot on whther these terms are imposed before the transaction or after them (if the latter, IMHO it’s really a form of fraud, and its unfortunate our legal system draws erratic lines b/w civil litigation and criminal behavior). While I certainly applaud the quartet who told Saks to go and do something that’s anatomically impossible, not every vendor, of course, has the luxury to put principles before profits…if not simple survival.
And for the record, Saks claims the Dallas flagship closure is due to a landlord dispute, not “right sizing” (believing this, of course, is optional)
The new terms set a very dangerous precedent. On the positive side, from a vendor perspective getting the past due invoices, paid in full, in a year is much more money than they would get in bankruptcy. Vendors would have much more confidence if the payments started next month instead of in July. I would expect many vendors to hold goods to see if the cash actually starts flowing. On the go forward front, department stores have one of the longest AP to cash life cycles. Often having paid for merchandise 6 to 8 months before they are able to turn the merchandise into cash. Setting terms at 90 days could be a very bad president for other retailers with a very low turn. Many vendors will have to think long and hard about the trend they will be setting if they continue to ship.
Vendors of Saks take an increased financial risk due to delayed payments, which can strain their cash flow and operational stability.
Additionally, the new payment structure might lead to a reduction in their negotiating power, as they may feel compelled to accept less favorable terms to maintain their business relationship.
Vendors could also face increased administrative burdens as they adapt to new billing and payment processes.
And of course, the issue of cash flow affects vendors, as they must pay for their own production, operations, employees, transportation, logistics, and much more. Many vendors have shareholders of their own.
Clarity is important, and I’m sure this is a positive outcome for Saks, it’s not quite the stellar outcome vendors are looking for. Getting paid for merchandise long since delivered over a 12 month (let’ s call it 1 year) and only starting 5 months from now does not seem very appealing if your a vendor. I expect many vendors wil not want to continue delivering goods to Saks, and perhaps this is Metrick’s ultimate goal as Saks has stated they plan to reduce their vendor count by 25%. Long payment delays, and Net 90 going forward certainly will incentivize that reduction. Larger brands may have the ability to stomach these terms, but I wonder about smaller brands ability to do so. Often times it’s those smaller brands that deliver the most unique and differentiated products in luxury so it’s not clear to me this is a winning strategy for the long term.
And vendors who have the muscle to absorb Net 90 are much more likely to build out their own DTC capabilities, both online and brick-and-mortar. Great way to encourage more competition!
Exactly. In Luxury, the small brands (now) may be the next hot trend of the 1%. Where exclusivity and in-the-know are positives.
Then again, maybe zero differentiation between Saks & NM is a goal of the CEO.
You don’t screw over your vendors whose products you need to maintain exclusive offering. It’s outrageous that they purchased Neiman Marcus and went further in debt and now are pleading poor and making vendors who’ve already waited 90 days, a year to get payment in full. This is a brand in crisis, What an opportunity for other luxury stores to pick up these brands offering simply to do the right thing and pay within 30 days
Creative terms arguments are typically determined before the PO is placed. At one time, a retailer changing the terms after the fact was a breach of contract. In this case, we have vendors who are probably just happy there is a plan in place for them to get paid, and I expect they’ll go along with the plan. Great for Saks for this season. The bad news is that this has sent a message to the market about Saks viability and the risk of doing business with them.
Maybe Chapter 11 is a realistic alternative at this point.
If I am a vendor and they are telling me 90 days, I am wondering what they will say to me in 90 days
Exactly. Continuing to push out payment dates is no indication of a turnaround strategy. More like prolonging the inevitable. Very concerning for vendors in this level of business as they have fewer and fewer options, especially the small and highly innovative.
That is what history tells us.
This is just another nail in the Department store segment coffin. They are trying to live to fight another day, and in the end all they did was irritate their vendors. This sad march has been going on for decades now, ever since the decline of malls with anchor stores on each end. Iconic stores like Marshall Fields in downtown Chicago will be forever missed, however sentimentality has proven to be not nearly enough to keep these stores open.
Sad.
This is one giant Catch 22 for vendors. If they push back and complain, Saks will cut them off as their options to sell elsewhere continue to diminish. And if they just bend over and say, “Please sir, may I have another” they risk destroying their company — not to mention opening the door for other retail customers to pull the same kind of crap. This is not going to end well for anybody.
There is another interesting conversation happening on social media about Saks withholding payment on returned items. Customers are having to jump through hoops to chase payment from Saks. That’s a red flag for sure.
We can assume it’s the vendors who mean the least are owed the most. Advising them is futile as each situation is different.
If history is a lesson, Saks will carefully move to lower-priced products to expand their customer base. They’ll also reinforce their current HNW clients who don’t always buy luxury.
Positioning is delicate. Yet, the void between Macy’s ‘mass’ and Saks ‘luxury’ is substantial. Let them fill it.
Opportunities for Nordstrom or Bloomingdale’s… large enough to help launch small lux brands. (as long as these 2 don’t hyper focus on owned-labels).
Paying past due invoices on the “installment plan” is a big red flag. The problem for vendors is that they lack leverage — Saks and N-M are the only true luxury game in town, at least in a department store format.
It never ceases to amaze me how arrogant some retailers can be. If suppliers are late with shipments, retailers demand discounts or outright cancelations. And suppliers know that going in. But if the retailer is late, or ridiculously late, with payments are the suppliers getting some kind of vig on the balance? Of course not. Does the retailer even offer that kind of remedy? Of course not. Clarity and certainty? I don’t think so. What’s clear is that there is no certainty. This remains very much a ‘seller beware’ scenario. Sak’s would be doing everybody a favor, especially themselves, if they accelerated this schedule whenever possible. I think the vendor community would love a little confidence that Sak’s has the financial bandwidth to survive.
“But I have a business to run.”… and the vendors don’t?
“Saks is also reducing its vendor count”… as vendors quit/ have to move on.
“Customers to satisfy…”… does not happen without the vendors