What the Saks bankruptcy means for you

On Wednesday, Saks Global, the parent company of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman and America’s largest luxury department store group, filed for bankruptcy protection. Even though it had been expected for several months, the news still caused shock waves in the fashion industry. Here’s what this could mean for you.

Is this the end of Saks and Neiman Marcus?

No. Saks Global filed for Chapter 11, not Chapter 7, bankruptcy protection, meaning it has too much debt to run its business effectively and is reorganizing under new owners but not liquidating. This is not a Barneys situation. (At least, not yet.)

But it could mean the end of Saks and Neiman Marcus near you. Retailers often resort to bankruptcy to get out of costly leases, and the group’s new owners are expected to close a number of Saks and Neiman stores, as well as about half of Saks Off Fifth stores. This usually doesn’t start until about 30 days after filing.

And it could mean the end of some small designers who sell their clothes directly to department stores like Neiman and Saks and rely on them for the bulk of their revenue.

Whose fault is it?

Early people criticized Marc Metrick, the Saks chief executive who resigned earlier this month, for being too authoritarian in his dealings with sellers. They now accuse Richard Baker, the man behind the creation of Saks Global.

You see, when Saks acquired Neiman Marcus in late 2024, the company took on a lot of debt. Then management changed the payment terms for the brands that supplied the stores, which meant the brands started sending out less product, which meant there was less to sell, which meant there was less money coming in.

Perhaps the biggest problem, however, is that all of retail has changed thanks to digital, social media and direct-to-consumer shopping – and department stores haven’t changed with them. Add to that global uncertainty, which makes people less inclined to spend a lot of money, and you have a very bad situation.

Hang in there. If they close stores, does that mean there will be giant sales going out of business?

Yes. If anyone has looked at the social media posts about the up to 85% off sale at Saks Off Fifth on 57th Street in December, you’ll have an idea of ​​what you can expect if these stores close, although it’s uncertain when that will happen.

Will I still be able to find my favorite designers in the remaining Saks stores?

Again, it depends. The bankruptcy is not expected to affect major luxury brands like Prada, Dior and Gucci, which typically operate concessions in department stores, meaning they rent their space to the store but manage and own their own products. In fact, in a recent report from research firm Bernstein, luxury analyst Luca Solca said he expected most luxury brands to aim to reach the point where 95 percent of their sales will be direct-to-consumer and only 5 percent will be wholesale.

But what about smaller brands?

For smaller, contemporary brands that have fewer (or no) stores and therefore rely on department stores to serve as their conduit to shoppers, this could be a disaster.

According to Joseph Sarachek, a lawyer who has represented about 30 brands owed money by Saks, some owe between $50,000 and $10 million. In bankruptcy, “secured creditors” are paid before unsecured creditors, which essentially means that the wealthiest investors in the company are paid before the poorest sellers. These typically receive “pennies on the dollar,” said Doug Hand, a lawyer who represents brands like Todd Snyder.

​​Sachin Ahluwalia, who founded the evening wear brand Sachin & Babi with his wife, Babi Ahluwalia, said his company has not been paid in months by either Saks or Neiman. “We’re starting the year on the back foot,” he said. “It certainly creates a cash flow problem that, combined with the tariffs, creates somewhat of a perfect storm for us.”

Why is no one talking about it?

Given that Saks, Neiman, and Bergdorf are likely to exist in some form and still be among the most well-known luxury names, smaller brands will always need the exposure they provide. “There’s nowhere else to sell,” Mr. Sarachek said.

The Ahluwalias seemed afraid to continue working with department stores or decide not to work with department stores because of their importance to their business.

What does this mean for other department stores?

Bloomingdale’s and Nordstrom, the two other national luxury retailers still standing, sense an opportunity. Nordstrom has hired a number of employees from Saks and Neiman, and Bloomingdale’s is courting luxury brands like Chanel, Chloe and Burberry and increasing their floor space.

Perhaps the biggest winners will be small, multi-brand stores that essentially offer the opposite of algorithm-designed shopping, like Maxfield in Los Angeles, Capitol in Charlotte, North Carolina, Ikram in Chicago, and Dover Street Market in New York and Los Angeles. These are shops that have become destinations because they are very local, very curated and reflect the environments around them. They are often run by owners who have personal relationships with their customers and are willing to take risks on unfamiliar labels, so buyers never really know what they’ll find from one visit to the next.

Is there any benefit?

The good news for anyone who has noticed the increasingly empty shelves at some Saks and Neiman stores is that they may soon be restocked.

Many brands stopped shipping new inventory to stores in October and November when it became increasingly clear that Saks Global might declare bankruptcy. (In a healthy situation, new inventory arrives in the store every week.) Shoppers keep seeing a shrinking assortment of the same old products. The bankruptcy loan means Saks can start paying suppliers again and they can start shipping their products.

Okay, but is it only a matter of time before department stores disappear completely?

An understandable question given that once-famous names like Barneys, Bonwit Teller and Lord & Taylor no longer exist. However, people still like to shop in real stores. Marigay McKee, former president of Saks, called it “America’s pastime.”

Andrew Rosen, founder of Theory and now an investor and advisor to brands like Alice & Olivia, Veronica Beard and Rag & Bone, said that as far as he’s concerned, there’s no substitute for the one-stop shop where customers have access to a wide variety of brands under one roof and “see, feel and touch it all.”

He, at least, thinks the rumors about the death of the department store are greatly exaggerated. But to survive, the stores that remain will have to change.

How will they change?

The United States appears to be moving toward a European model, in which department stores look more like tourist attractions in large urban centers than chain transaction centers.

For examples, see Harrods and Selfridges in London, Bon Marché and Printemps in Paris, and Rinascente in Milan. The idea is shopping as entertainment, with art exhibitions, limited-edition collaborations and hospitality. Think of them as commercial Disneylands located in iconic buildings where visitors can experience the spending habits of elites from another era.