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Luxury retailer Sax Global, the
parent company of Saks Fifth Avenue, Neiman Marcus and
Bergdorf, announced that it was
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filing for bankruptcy, and as
part of that, the CEO of the company, Marc Metrick, resigned
from his role. The company has
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been awash in debt the last
couple of years, since it acquired Neiman back in 2024. So
how do legacy companies like
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this recover and rebuild
themselves? Pleasure to be joined by Barbara Kahn,
Professor of Marketing here at
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the Wharton School, and also co-
host of the <i>Marketing Matters</i>
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podcast on the Wharton Podcast
Network. Barbara, great to talk to you. How are you today?
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I'm fine. How are you? Well, I guess let's get your thoughts on the
bankruptcy itself in the first
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place, and just what happened
with this company. Well, you know, there's a few
things that were unique to Saks,
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and there's a few things that
were unique to the luxury industry and department stores
in general. Unique to Saks. When
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Hudson Bay took over Saks a while
ago, they— the first thing they did, which a lot of industry
experts thought was a bad idea,
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was they separated out their
online and their physical store. And a lot of people know retail
now is omnichannel, so that was
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kind of an interesting thing,
that a play that was made for financial reasons, not for
what's best for retail. Now, I
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think in 2024, they reunited it
when they did that Neiman acquisition, but that wasn't a
good instinct. And then, you
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know, the other thing is,
recently, they've had some— like you mentioned, they had some
debt issues, and they acquired
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Neiman, and that was supposed to
make things better, but it didn't make things better. They
had trouble paying out their
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bills to suppliers, which made
suppliers not want to give them more inventory, which is not
good for a department store. Then
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they made some funny tactical
decisions. Like in the flagship New York City store, they took
their beauty department, which
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is always on the main floor of a
department store, because it encourages traffic to come in,
and it's big for impulse
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purchases, and they put it
upstairs on the second floor. Now, it's a beautiful— they did a
beautiful job with it. But
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having that department on the
second floor doesn't really seem so smart to me. So there, it
looks like a lot of little
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things and then some bigger
things. And they just kept not doing things right, I think.
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So on the surface, when the Neiman
deal comes down, was it thought to be a good deal? Or was there
kind of trouble— you know, was
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there— was there leaks in the
boat as soon as this deal started to occur? You know, I think it was
supposed to be a good deal.
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There was supposed to be
synergies. They were going to be the preeminent luxury company,
etc. But instead of making
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things better, it did make the
debt issues and make money issues worse. And then it just
kept getting worse. And like I
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said, it wasn't just Saks. You
know, I'm— they did some things right. I don't— you know, I'm
actually a big fan of Marc
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Metrick. He was a good CEO. He's
with the company for a long time. So I don't mean to, you
know, say that they did
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everything wrong. But there were
some things that, you know, maybe in hindsight, they shouldn't
have done. But on top of a lot
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of other things, you know,
luxury has been soft for the last couple years. The
high end buyer is still buying
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luxury. But there— it was
softness in the aspirational luxury buyer. And there have
been a lot of, you know, people
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turning away from department
stores. People are going to e- commerce. A lot of the luxury
brands that Saks was famous for
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opened up their own flagship
stores. And even when they sold at Saks, they leased the
space instead of selling it
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through Saks. So the industry has
been transformed. And I think there are ways to win as a
luxury department store, and I'm
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still very optimistic and
hopeful about Saks. But it's been a tough time. The element of luxury and e-
commerce. How are those two
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working together right now? Is
it, you know, fairly synergistic, or is it a little
bit more of a challenge? Because
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I'm wondering if people think
about e-commerce more along the lines of everything, maybe
almost but luxury in some
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instances. Now, I think luxury does need
the physical experience more than anything else, because a
lot of what you're selling in
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luxury, especially to the very
high end consumer, is the whole experience. Which, by the way,
is kind of why I thought
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separating out the online and
physical store wasn't such a great move. You know, I thought
that there was something to be
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there, because you want your
relationship with these very high spenders to be one on one,
and you want to be able to offer
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them whatever they want, where
they want it. So I thought that was kind of a miss.
But I do think luxury is
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something that, when it's done
right, your in store experience, that in store, one on
one, personalized, customized
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relationship matters a lot. So as the bankruptcy was getting
ready to take hold, there
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seemed to be issues of the
financing coming forward, and entities within that wondering
whether or not this company had
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kind of the structure to
reorganize and to rebuild. Do they? And I guess the other
question is, the former Neiman
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CEO is coming on to run this
operation. Is he the guy? Can he be the guy to— you know, to get
this right?
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Yeah, I don't know. I mean, going
into bankruptcy, chapter 11, helps with this whole debt situation,
because that's part of the
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reason they do it. And the ex-CEO of
Neiman, who's now taking over, as you noted, was the one who
led Neiman out of bankruptcy.
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And I think he did a good job.
I've heard— you know, I don't know him personally, but I've
heard him speak in podcasts and
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things like that, and he's
pretty impressive, I think. So I personally think that was a very
good choice.
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How, then, does he go about
that? And because the brand of Saks and of Neiman and of
Bergdorf are just so legendary
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within the retail sector. Well, you know, I think the
model to look at is some of the
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amazing department stores in
Europe. So some of those department stores are doing a
really wonderful job, and I
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think it would be a model that
Saks could think about copying. So, like, some of the— like Le Bon
Marché in Paris, it really caters
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to the very high ultra net worth
person. And they have wonderful in store experiences and one on
one relationships. They position
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their store as a place you might
want to spend your whole day. You know, they have beautiful
restaurants. They have suites
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upstairs where they cater to
exactly what you need. You know, it's just very, very high end.
And then the other thing that's
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amazing about some of those
department stores in Europe is that they're just beautiful
palaces that attract tourists.
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So a lot of tourists, you know,
even people who would go to Paris, one of the sites they
might want see is Galeries
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Lafayette or some— or Le Printemps.
They're just amazing, amazing department stores that attract a
lot of tourists, which are— they
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don't spend a lot, but a lot of
them spending a little bit brings in revenue. And then at
the high end, if they have very,
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very deep relationships with
people who are very loyal and very wealthy, I think that model
together works. And I don't
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think Saks has been doing a
great job on either end of those. But maybe in the future, they
can.
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So does that model then work
here in the United States? I think it can. Like, I think New
York City is certainly a tourist
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place, and the flagship
store can be amazing. And so they can attract the tourist
business. You know, Saks, it's
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interesting because it's right
across the street from Rockefeller Center, you know, in
Christmas time. And two years
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ago, they stopped the Christmas
lights, which everybody was so miserable about. You know, but
that's a tourist play. That
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brings people to Saks. It's a
place that people want to go to. And then there they are at
Rockefeller Center, looking at
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the tree. And you know, last
year there was no lights. Now they did bring them back this
year, but that's what I mean
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about, like, little missteps that
probably didn't play well. And maybe they'll be— these things
will be corrected now.
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And then, when you have several
missteps put together, they all add up to a bigger misstep.
- Yeah.
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And I— you know, a lot— I know
Neiman because I— like I said, I saw some of the stuff when they
were coming out of bankruptcy—
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were talking about, like, 90% of
their revenues came from 10% of their ultra, ultra wealthy
customers. And I think that was
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even more so for Neiman than for
Saks. But that might be a model that will help bring Saks up, if
they can develop those
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relationships. I don't know if
it's too little, you know, too late, or if those relationships
really can be developed and help
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bring it back to profitability. Can those stores, or do they try
to then connect more with the
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high, ultra net worth
individual, but at the same time, still try and get a
segment of the general public as
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a component of their bottom line
as well? Yeah, that's what I'm saying.
Like, if you make it a very
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experiential, beautiful store,
you can bring in the tourists. You can bring in people going to
New York City for— you know, I'm
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just thinking of the New York
one, but they do have a couple other flagships. But in
particular, that New York store
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is really an amazing place. And,
you know, the problem with luxury recently is the
aspirational shopper. That's
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where it's been weak. But I
think if you go at this tourist level, and then go at
the upper level, that's been
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stronger. The travel has been
better recently. And they may be able to win on those two pieces.
I don't know.
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Barbara, great to talk to
you as always. Thanks very much. Sure. Thank you. You got it.
Barbara Kahn, Marketing
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Professor here at the Wharton
School, and co-host of the <i>Marketing Matters</i> podcast on the
Wharton Podcast Network.