When a storied, century-old American department store chain sought bankruptcy protection this week, many observers might have assumed it was the beleaguered Macy's. In a surprising twist, it was the luxury conglomerate Saks Global – owner of Saks Fifth Avenue, Saks Off Fifth, and Neiman Marcus – that collapsed into Chapter 11 on Tuesday.
The Stark Contrast in Retail Strategies
This development lays bare the dramatically different paths taken by two iconic retailers facing identical industry pressures. For years, analysts had questioned Macy's future, citing its ageing stores and loss of customers to online rivals. Yet, while Saks unravelled, Macy's has been quietly engineering an unlikely comeback, returning to profit and posting sales growth.
Experts assert that Saks' downfall was not due to a broader abandonment of department stores or luxury goods, evidenced by growth at Macy's and its sister chain Bloomingdale's. Instead, the failure was self-inflicted, stemming from decisions made in its Manhattan headquarters. Retail analyst Neil Saunders of Global Data told Daily Mail the bankruptcy "doesn't say much about department stores or luxury." He stated, "The failure of Saks was self-inflicted and caused by having far too much debt. It's a tale of poor decision-making."
Debt, Deals, and Disastrous Decisions
The core of Saks' troubles was a $2.7 billion deal to acquire rival Neiman Marcus. Intended to create a luxury powerhouse, the move instead loaded the combined company with unsustainable debt just as the luxury market cooled. As sales slowed, Saks began struggling to pay suppliers, stretching payment terms and eventually stopping payments altogether.
Unpaid balances ballooned into hundreds of millions, including $136 million owed to Chanel, nearly $60 million to Kering (owner of Gucci), and $26 million to LVMH. Brands responded by halting shipments, leaving stores short of coveted items and making it impossible to generate crucial cash. Retail strategist Carol Spieckerman noted this was disastrous, especially for smaller designers who could not absorb delayed payments.
"Buying a struggling competitor doesn't make you stronger," Spieckerman said. "It makes you twice as vulnerable when the market turns."
Macy's Back-to-Basics Revival
While Saks focused on corporate deals, Macy's pursued a starkly different strategy. Instead of trying to grow its way out of trouble, it strategically shrank. In early 2024, it announced plans to close 150 underperforming stores, with just under 100 shuttered so far. It resisted private-equity buyers interested only in its real estate and stopped pretending every location could be saved.
Critically, Macy's refocused on the fundamentals of retail. It overhauled stores that had become disorganised and appointed Tony Spring, a long-time Bloomingdale's executive, as CEO to lead the turnaround. The mandate was clear: make Macy's feel like America's favourite shop again by improving stores and refining product assortments.
The results are promising, with the company heading toward what analysts expect will be strong earnings for 2025.
What Comes Next for Saks?
Chapter 11 offers Saks a chance to restructure rather than liquidate immediately. The process will likely mirror Macy's playbook: closing the worst-performing stores. The company operates roughly 100 Saks Off Fifth locations, 41 Saks Fifth Avenue stores, and 36 Neiman Marcus outlets. Restructuring experts expect around half of the Off Fifth chain to close, along with multiple flagship and Neiman Marcus locations, with closures typically beginning about 30 days after filing.
Saks must also negotiate with major creditors like Chanel and LVMH, hoping to secure discounts on the millions it owes. The question now is which century-old pillar of American retail – Macy's, founded in 1858, or Saks, tracing its roots to 1867 – has built a business fit for the next hundred years. Macy's has bet on fixing stores and winning back customers. Saks is simply hoping to survive bankruptcy.
