Shotgun wedding for Saks and Neiman Marcus?

A news report says private-equity firm KKR is angling for the luxury retailers to merge.

By Jonathan Berr May 23, 2013 1:02PM
Saks Fifth Avenue store in Tampa, Florida; Neiman Marcus in King of Prussia, Penn. (© Daniel Wallace/ZUMA Press, Inc./Alamy; B.O'Kane/Alamy)Picture this: Saks (SKS) which sells a $3,400 convertible hobo backpack, and Neiman Marcus, where customers can buy a $595 designer iPad case, may be pushed into a shotgun wedding by private-equity firm KKR (KKR).

According to Bloomberg News, KKR, whose retail holdings include Dollar Tree (DLTR) and Toys R Us, is "weighing an investment in Saks," parent of Saks Fifth Avenue, with an eye toward pushing the company to merge with Neiman Marcus, which owns Bergdorf Goodman. It isn't clear how much of a stake KKR may buy in Saks or whether it has even approached the company, which is based in New York.

Nonetheless, shares of Saks closed sharply higher on Wednesday, up 13%, on the Bloomberg report. Neiman Marcus was taken private in 2005 by TPG Capital and Warburg Pincas at a cost of $5.1 billion.

Both Saks and Neiman have reportedly hired financial advisers to assist them in exploring their strategic options. Joining Saks and Neiman Marcus would create the second-largest U.S. luxury department store chain behind Nordstrom (JWN), according to the news service.

The two companies would be able to save money by closing stores and melding back-end systems and supply chains. However, assuming both brands survived, differentiating them would be a challenge, one that dissuaded the companies from merging a few years ago,  Bloomberg says.

Things have changed since then. Although luxury retailers fared better during the recession than chains catering to more cost-conscious shoppers did, many so-called aspirational shoppers are keeping a tight grip on their wallets because they're concerned about incurring high amounts of debt.

Competition for luxury consumers has intensified, and companies are struggling.

Nordstrom (JWN) recently reported worse-than-expected quarterly results and slashed its sales forecasts. Sales were also soft at LVMH, parent of Louis Vuitton and Donna Karan.   

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.


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8Comments
May 23, 2013 3:16PM
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Saks used to be a wonderful store, but over the years the quality if their merchandise has decreased while the prices continue to increase. I have said for years, there is a difference between having money and being stupid even to waste it. I am not about to buy an ugly swaeter for $400 and I do not care who wears it. Neimans was a nice place as well, but they are not the same either. Von Mauer is one of the worst "high end" stores I have ever seen. Not much in the way of inventory and what is there is unappealing. Marshall Field's was the finest store, and it was a department store, not just a clothing boutique. Going to Marshall Field's was more than a shopping experience, it was a pleasure to see how the interiors were decorated, the staff was always top-knotch and there used to be a bargain basement for those who had a tighter budget. I miss them. Macy's killed Field's and unless someone with a great deal of genuine business acumen is willing to invest in it, we will never see the likes of Field's again. The rest of these luxury stores have seen there best days, and the entire retail sector has shifted, as it will constantly will in the future. Saks and Neimans will been gone soon. Nordstrom is also struggling, but at least they still have some decent inventory. Sad but true, the beautful stores of the past are gone, and we have Old Navy and Walmart instead.
May 23, 2013 1:57PM
May 23, 2013 2:09PM
May 23, 2013 3:53PM
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New name of Saks Neiman Marcus...SnM...Snobby and Masochistic.
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