Analysis-To survive, Saks must court the slightly-less-wealthy

Saks Global's Challenges and Strategies

By Nicholas P. Brown

Broader Customer Base

NEW YORK, Jan 15 (Reuters) - Saks Global, the iconic and now-bankrupt luxury retailer, may have to broaden its consumer base if it wants to survive in the increasingly fickle luxury retail world.

Rethinking Store Operations

Following its Chapter 11 filing on Tuesday, Saks will begin the months-long process to restructure its $3.4 billion in secured debt and emerge from bankruptcy. Surviving after that will be a bigger challenge, as high fixed costs and thin margins limit retailers' ability to make fundamental business changes. Many stores, including Forever 21 and Rite Aid, survived one bankruptcy only to end up liquidating within a few years.

Investing in Technology

Avoiding that fate might mean appealing to a slightly less-affluent client - as unappealing as that may be to the white-glove store adored by the rich and famous.

"They need to turn the enterprise into a high-margin curation machine," said Eric Schiffer, chairman of private investment firm Patriarch Organization, "and not a sprawling monument to nostalgia ... The only path forward is brutal."

Skeptics include Amazon.com, one of the company's primary investors. The e-commerce giant's attorney, Caroline Reckler, said at a Wednesday bankruptcy hearing she has "little to no confidence" Saks can successfully emerge from bankruptcy. 

Saks Global did not comment for this story.

BROADER CUSTOMER BASE

Department stores have been losing ground in retail for years, compounded recently by tariffs and inflation. "Margins for department stores have been terrible," said Morningstar analyst David Swartz.

But Saks Global, which comprises Saks, Neiman Marcus and Bergdorf Goodman under its umbrella, has been particularly hard-hit. Revenue fell 13.6% in the fiscal year ended February 2025, it said in court filings, adding that 2025 calendar-year earnings before interest, taxes, depreciation and amortization project to be negative. 

Saks has traditionally relied on a well-heeled sliver of the public to drive earnings. Its top 3% of customers - who spend more than $10,000 annually - generate some 40% of total annual sales, according to the company's bankruptcy filing. 

The fix starts with the "need to compete better for the affluent, not just the wealthy," retail consultant Steve Dennis said. 

Yet expanding its consumer base has its own challenges, putting Saks into competition with stores like Bloomingdale's and a growing number of luxury brands operating their own stores, said Morningstar's Swartz.

It could also risk alienating the ultra-loyal clients for whom exclusivity is the draw, he said.

If broadening the base is part of Saks' strategy, Tuesday's bankruptcy filing did not suggest it. The company plans to liquidate the e-commerce component of Saks Off Fifth, the company's only off-price brand, "unless a superior alternative emerges," the court papers said. 

RETHINKING STORES

Saks' 125 U.S. stores - most of them enormous - fit awkwardly with a business model based on big purchases and little foot traffic. Experts see an opportunity for Saks to reduce its footprint without greatly reducing the scope of its business, by merging Saks and Neiman Marcus under one roof.

"It's a lurking question, whether they still need to operate as separate stores," said Patrick Collins, a bankruptcy attorney at Farrell Fritz, which is not involved in the case.

Still, Saks must also invest in the stores it is left with, said Dennis, in part through technological advancements "like AI, fulfillment automation, and clienteling systems."

The company said in its bankruptcy filing it has been using a unified merchandising platform since August, "which allows its teams to buy and sell inventory across Saks Fifth Avenue and Neiman Marcus to optimize inventory buys."

Saks missed an interest payment in December, and had been struggling to pay vendors, some of whom are struggling, too. Capri Holdings, for example, which lists a $33.3 million claim against Saks, has seen steady revenue declines amid weak demand for its Michael Kors brand. 

In addition, cost cuts could be tough to come by. Ridding its stores of glitz and glam, or cutting staff, may not sit well with clients. Saks' decision in 2024 to cancel its annual Christmas light show met with disappointment.

"You can't turn yourself into TJ Maxx," Swartz said, "because then you're not luxury anymore." 

(Reporting by Nicholas P. Brown in New York; Editing by David Gaffen and Matthew Lewis)