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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.”