Good morning. The current travails of Saks Global, the one-year-old holding company of Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman, are a reminder that the key to success in business is often quite simple: focus on your core business, not on financial engineering.
The Saks-Neiman tie-up was the culmination of a plan Baker hatched in 2005 to snap up retailers with valuable real estate. Over the years, different iterations of the company, known for years as HBC, have included Lord & Taylor (his first big acquisition), and Canada’s Hudson’s Bay.
His bet was that the value of iconic properties like the Saks and Lord & Taylor flagships in Manhattan or The Bay in Toronto could be monetized so long as the underlying retail business remained steady.
But nothing about retail, especially department stores, has been stable. Lord & Taylor shut all its stores in 2019 after HBC sold the weakened retailer, and Hudson’s Bay in Canada liquidated last year, ending its 355-year run.
But a constant churn of financial maneuvers (spinning off Saks’ e-commerce, creating co-working spaces in underutilized stores, all while being highly leveraged) brought some benefit but never obviated the need to invest more in basics. Saks Global has said it has poured tons of money into its retailers, but it has not been enough. Its cash crunch has led some vendors to stop shipping to Saks: it’s very hard to sell merchandise you don’t have, ergo a 13% drop in sales last quarter.
