Saks Global, the largest luxury department store holding company in the United States, entered Chapter 11 bankruptcy protection. This momentous news was made suddenly available to the public on Wednesday. This iconic 159-year-old retailer, known for its high-end fashion offerings, faces a significant turning point amid a challenging retail landscape. The bankruptcy filing is just another sign that Saks and the rest of the department store industry are really having a tough time. They’re fighting changing consumer habits and intense competition from e-commerce.
Saks has now chosen to take the plunge and file for bankruptcy. That decision comes on the back of their debt-laden purchase of Neiman Marcus, which they completed in late 2024 for about $2.6 billion. This combination of burdensome debt from the acquisition and decreased sales is pushing the company under extreme financial distress. In the last year, sales at Saks fell by 1.5%, even as total retail sales increased by 3.3%. These figures paint a pretty compelling picture of how much better Saks is performing than the rest of the retail market.
Saks’ struggles are emblematic of the challenges facing traditional department stores. Shoppers are increasingly making purchases through online channels and direct-to-consumer sales channels that have exploded in recent years. Industry insiders point out that most luxury brands have pulled their focus into e-commerce sales, making this transition even harder on the department stores.
“There’s been growth in e-commerce — a different way for people to shop,” said Barbara Kahn.
In part, Saks’ implosion has been fueled by shifting consumer sensibilities around luxury pricing. Analysts are arguing that luxury prices have increased so drastically that it’s becoming outrageous enough for some customers to no longer see the value in it.
“Over the last five years, luxury prices have gone so high that there’s really a question of perceived value,” stated Marie Driscoll.
As consumers re-assess what they should be spending money on, countless other shoppers indicate they are wary of premium items.
“People are thinking, ‘This is not worth it,’” Driscoll added.
The innovative solutions to the enormous retail climate challenges Saks faces today are exactly what the flagging department store needs to find again. The U.S. Census Bureau recently reported a robust 0.6% increase in sales for November, yet this surge was insufficient to rescue Saks from its financial woes.
Saks bankruptcy filing last week reflects an increasing trend within the department store industry. While many have thrived under changing consumer spending habits, others have had heavy falls. Saks, meanwhile, is in the market for new ownership and looking at its options. According to industry experts, there’s a significant enough market segment still clamoring for ultra-luxury that it keeps the pipeline open.
“That ultra-luxury segment has gotten more appealing to consumers at the high end,” said Vanitha Swaminathan.
Geoffroy van Raemdonck, CEO of Saks Global, spoke to the company’s direction and outlook in light of these hardships. He focused on the opportunity for renewal and growth that lies before us, even in this moment of crisis.
“This is a defining moment for Saks Global, and the path ahead presents a meaningful opportunity to strengthen the foundation of our business and position it for the future,” van Raemdonck stated.
