By Ananya Mariam Rajesh and Greg Roumeliotis
(Reuters) – The parent company of Saks Fifth Avenue agreed to buy rival Neiman Marcus, a person familiar with the matter told Reuters on Wednesday, a move expected to give struggling luxury retailers more power to negotiate with suppliers .
Amazon (NASDAQ:) and Salesforce (NYSE:) will take minority stakes in the combined company, to be called Saks Global, and offer their technology expertise, according to the Wall Street Journal, which announced the deal earlier today valued at 2.65 billion dollars reported.
The deal comes as luxury retailers struggle with declining demand, a far cry from the boom that occurred after pandemic-related restrictions were eased in 2022, as U.S. shoppers have become more cautious about high-end purchases.
The boards of Saks parent HBC and Neiman Marcus have approved the transaction and an announcement could come as early as this evening, the WSJ report said, adding that Marc Metrick, CEO of Saks’ e-commerce business, will lead the combined company.
While the merger gives the combined high-end retail entity stronger bargaining power with small luxury brands, the chain would not be able to match the weight and power of global luxury conglomerates, which will still hold most of the cards, said Neil Saunders, managing director director at retail consultancy GlobalData.
“There is a risk that the deal will cause further headaches for Saks,” Saunders added.
The most coveted high-end brands like LVMH have their own robust store networks.
Saks Global will have Salesforce assist with artificial intelligence adoption, and Amazon will provide its technology and logistics expertise, deepening their existing partnership with Saks, the WSJ report said.
Amazon and HBC declined to comment, while Saks Fifth Avenue, Salesforce and Neiman Marcus did not immediately respond to Reuters requests for comment.
Neiman Marcus has been in the red since it filed for bankruptcy in 2020. It was one of several high-profile bankruptcies among retailers forced to temporarily close their stores in response to the COVID-19 pandemic.
AMAZON’S BREAK INTO THE LUXURY WORLD
A minority stake in the combined company will give Amazon a foothold in the luxury market, where there is steady demand from higher-income consumers.
“Amazon would take a stake in the company as it has ambitions to play more heavily in the luxury sector and this would give it a foothold,” Saunders said.
According to the Wall Street Journal, there are no plans to close stores after the deal is completed. There are 39 Saks Fifth Avenue stores and 95 Saks Off 5th discount stores. Saks.com operates as a separate company owned by HBC.
Neiman has 36 department stores, two Bergdorf Goodman stores and five Last Call discount stores. According to Green Street, a real estate research firm, there are eight malls with both a Saks Fifth Avenue and a Neiman Marcus store.
“Amazon is also interested in luxury and is trying to get more luxury on Amazon’s website…always looking for opportunities to get involved in different types of retail…even more brick-and-mortar retail like we have here with Saks and Neiman Marcus ,” said Morningstar analyst David Swartz.
HBC is financing the deal with $2 billion it raised from existing investors, the report said.
Existing investors include Rhone Capital, the Abu Dhabi Investment Council and NRDC Equity Partners, a private equity firm run by HBC executive chairman Richard Baker and his son Jack Baker. Apollo Global Management (NYSE:) APO provides $1.15 billion in debt financing.
Richard Baker and his son Jack Baker were not immediately available for comment.
