The $2.3 billion acquisition bid by the parent company of Saks Fifth Avenue – Canada’s Hudson’s Bay Co. – of Neiman Marcus still needs to be approved by the boards of both companies, as well as the Federal Trade Commission. But if it goes through it is likely to result in significant changes for both retailers, the vendors who sell them, the people who work for them, and of course their customers.
Together the two luxury department store operations are estimated to do $10 billion in annual sales, which would make them among the leaders in the upscale end of the retail sector, which also includes Bloomingdale’s and, to a lesser extent, Nordstrom. Counting full-line department stores and off-price/outlet units that operate under the Saks Off Fifth and Nordstrom Rack nameplates, they would operate close to 200 locations across the country, primarily located in large regional malls.
Look for these changes if the acquisition deal goes through:
- There will likely be some store closings. The two brands are believed to overlap in eight malls and it’s likely even if the parent company keeps their customer-facing identities separate, they will close some locations. HBC is also known for monetizing real estate assets so other units might also be sold off to the highest bidder.
- Back-end departments will be consolidated. Look for things like marketing, accounting, and other operational areas to be merged. There may also be some integration of merchandising and sourcing, though HBC could keep those separate.
- Vendors will be pressed for better terms when selling the two brands since at least in theory the orders will be bigger. But if you’re a supplier who sells one of the stores but hasn’t been able to crack the other this could be your lucky day in getting business at both retailers.
- The Neiman buying operations may change. A lot depends on how HBC chooses to operate the two brands but it’s clear management at Saks will be calling the shots and whatever happens downtown in Dallas will take a backseat to New York.
- Finally, all of this could be moot if the Federal Trade Commission decides not to approve the deal. The current Biden administration has taken a hard line on mergers and not approved a number of big deals. Then again, a change in administration following the November election could result in a different outcome as Trump’s prior FTC was very lenient on these kinds of deals.
Whatever happens the luxury market is likely to see big changes and that will reverberate throughout the industry in the years ahead.