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Saks-Neiman Marcus Deal Creates Sprawling $7 Billion Property Portfolio

See the Map of the Properties in Deal Involving Amazon and Salesforce
Neiman Marcus is being acquired by the parent company of rival Saks Fifth Avenue to create a new luxury behemoth. (Getty Images)
Neiman Marcus is being acquired by the parent company of rival Saks Fifth Avenue to create a new luxury behemoth. (Getty Images)

The purchase by the parent of Saks Fifth Avenue of rival Neiman Marcus Group is expected to create a $7 billion portfolio of luxury retail properties in upscale shopping areas across the United States that will get support from two technology giants.

The proposed deal to combine the Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman is expected to bring the new company, Saks Global, more negotiating power with luxury brands and the ability to cut duplicated costs as the retailers struggle with slowing sales. The move includes Amazon and Salesforce as minority investors to help Saks Global improve logistics, e-commerce operations and the analysis of data on customers.

The two retailers had been discussing combining businesses for some time, with Amazon's financial stake in the acquisition being a "plot twist" outside of what would otherwise be a predictable deal to join brands and store networks under one owner, Neil Saunders, managing partner at GlobalData and retail analyst, told CoStar News.

"Amazon taking a stake in the business would make sense, as it has ambitions to play more heavily in the luxury space and this would give it a toehold," Saunders added. "However, the real win here would be the ability of Amazon to streamline logistics and e-commerce, giving the new entity an advantage in a market where remote shopping has become more important to shoppers — especially younger ones, which both chains need to do more to attract."

HBC, the parent company of Saks Fifth Avenue that's based in Toronto and New York City, announced the $2.65 billion deal this past week without mentioning any plans for closing stores. Representatives for Saks Fifth Avenue and Neiman Marcus did not respond to requests to comment from CoStar News.

There are 39 Saks Fifth Avenue stores in North America, as well as 95 Saks Off 5th discount stores. Neiman Marcus has 36 department stores, two Bergdorf Goodman stores and five Last Call discount stores.

Some Store Clusters

The combined U.S. real estate portfolio has 11 areas where a Saks Fifth Avenue, Neiman Marcus or Bergdorf Goodman store is located within a mile of each other.

They include the country's top luxury shopping destinations such as New York City's Fifth Avenue, Wilshire Boulevard in Beverly Hills in the Los Angeles area and the Magnificent Mile in Chicago. Other locations with an apparent overlap include San Francisco, Atlanta, Boston, St. Louis, Las Vegas and Houston.

There are eight malls that have both a Saks Fifth Avenue and a Neiman Marcus store, and plans call for each brand to continue to operate under its name once the deal closes.

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July 05, 2024 06:06 PM
The company's Canadian business will become a standalone entity owning its retail real estate.

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Ever since Neiman Marcus exited bankruptcy in 2020, the century-old luxury retailer has been seeking to bring its high-end fashions to a more digital runway.

That includes help from a $200 million investment from one global retail platform and a commitment to bring more of its retail sales outside of its real estate with the help of online sales and other platforms.

That push could continue in the combined Saks Global entity, Saunders said, with more luxury players focusing on direct-to-consumer sales.

Portfolio Revisit Expected

Saks Global is likely to revisit its real estate portfolio, a necessity in the aftermath of any acquisition or merger, said Bob Young, an executive managing director at Dallas-based Weitzman, a retail real estate services firm, who has tracked Neiman Marcus throughout his decades-long career.

But Young said he doesn't expect any major shakeup, given the company will want to cater to its affluent customer base tied to specific regions of the United States.

"Their real estate will reflect the culture and brand they seek to project to their customers," Young told CoStar News. "The underpinning of the retailers has to do with their loyal base of customers, and they will continue to accommodate and court their customers.

Young, who is not involved in the deal, added that "there could be some consolidation in their real estate, but it's also clearly possible for them to coexist, even in the same market, as separate entities."

The purchase is being funded by a combination of equity capital from new and existing shareholders and debt facilities. In addition to Amazon and Salesforce, other investors in Saks Global include Rhône Capital and Insight Partners.

A timeline for the deal to close was not disclosed.

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