By:  Hal C Clasrke

Luxury retailer Neiman Marcus is reportedly considering a potential sale to its rival Saks Fifth Avenue, a surprising move that would merge the two prominent players in the US luxury retail industry. Neiman Marcus, headquartered in Dallas and the owner of Bergdorf Goodman in New York, has been exploring options for a buyer due to business challenges it has been facing recently, NY Post reported

The 107-year-old retailer is estimated to be valued at over $2 billion, significantly lower than the $5.1 billion it was worth in 2005 when it was acquired in a series of debt-fueled buyouts that strained the company’s finances. Neiman’s current private equity owners, including Pacific Investment Management Co. (PIMCO), Davidson Kempner Capital Management, and Sixth Street Partners, have disagreed over the timing of a potential sale. While minority investors advocated for an immediate sale, PIMCO was initially willing to wait, citing expectations of business improvement.

However, Neiman Marcus’s persistent decline in performance has reportedly prompted PIMCO to reconsider and explore a potential sale. Recent disappointing financial results led to a July board meeting where all three owners, including PIMCO, aligned in considering a possible bid from Hudson’s Bay, the owner of Saks Fifth Avenue. Hudson’s Bay has entered into exclusive due diligence to assess Neiman’s business.

This is not the first time Saks has considered acquiring Neiman Marcus; previous attempts failed due to disagreements over valuation. Neiman’s CEO, Geoffroy van Raemdonck, who has faced criticism for his compensation and cost-cutting measures during the pandemic, could stand to gain around $40 million depending on the final sale price to Saks.

The merger of the two luxury retailers, Neiman Marcus with 38 stores and Saks Fifth Avenue with 40 stores, could potentially face antitrust scrutiny. The companies might argue that their market dominance in luxury has diminished over the past decade due to the rise of online luxury shopping.

Neiman Marcus’s sales have cooled off after a pandemic-driven surge, leading to layoffs and financial challenges. Recent leaked financial information indicated that Neiman’s EBITDA for the quarter ended April 29 dropped 25% compared to the previous year, with revenue declining by 9% to $1 billion.

Neiman Marcus has engaged Lazard and JPMorgan for the sales process, while Hudson’s Bay is represented by Morgan Stanley and Bank of America. The potential merger and acquisition would likely undergo rigorous regulatory review and scrutiny due to its potential impact on the luxury retail landscape.

Saks Fifth Avenue, established in 1924 by Horace Saks and Bernard Gimbel, has evolved into an iconic American luxury department store. Originally located on New York City’s Fifth Avenue, Saks quickly gained prominence for its high-end fashion offerings and exceptional customer service. Over the decades, Saks expanded its presence, becoming a symbol of luxury retail. It introduced innovations such as personal shopping services and designer boutiques. Acquired by Hudson’s Bay Company in 2013, Saks continued its legacy as a premier destination for luxury shopping, maintaining a reputation for opulence, quality, and elegance in the fashion world.