Two of the most prominent names in the luxury retail industry are currently engaged in discussions to merge.
Saks Fifth Avenue has made a $3 billion bid to acquire Neiman Marcus, as reported by The Wall Street Journal. Although the initial offer was turned down, negotiations between the two companies are ongoing.
The rejection was due to the specific terms of the deal, particularly the proportion of the offer that consisted of cash. While discussions are continuing, it is unlikely that a deal will be finalized until sometime in 2024.
This potential merger comes at a time when the luxury retail sector is facing challenges, with consumers prioritizing bargain-hunting and economic uncertainties. Neiman Marcus filed for bankruptcy in 2002 but has since improved its financial position by reducing its debt. Saks has faced payment delays to vendors, resulting in some temporarily halting shipments.
Hudson Bay Company, the parent company of Saks, recently sold off real estate assets, raising $340 million to meet its financial obligations.
Saks CEO Marc Metrick explained to Fortune in January that the brand’s customers have remained loyal, potentially due to the difficulty of transitioning to non-luxury retailers after becoming accustomed to a certain level of quality.
“Luxury can serve various roles in a consumer’s life,” he said. “Some of it is aspirational, some is about rewarding oneself, and during the pandemic, it was also about self-care. It’s challenging to give up luxury once you’ve become accustomed to it.”
A potential merger between the two companies could enhance their ability to negotiate with suppliers. Currently, Saks operates 39 stores, while Neiman Marcus has 36 stores (as well as seven under different brands).
While the two companies initially considered a merger in 2017, they were unable to reach an agreement at that time.
